Report on Definitional and Statistical Issues Relating to Informal Economy


The National Commission for Enterprises in the Unorganised Sector (NCEUS) was set up in 2004 by the United Progressive Alliance (UPA) government as an advisory body and a watchdog for the informal sector. The government asked the NCEUS to suggest measures to increase competitiveness in the unorganised sector and generate large-scale informal employment.

The Commission reviewed definitions of the sector and those of informal employment – and recommended new ones. It also looked at the sector’s size, the nature of its enterprises, the magnitude of employment, and estimations of employment/unemployment. It reviewed India’s statistical system for the sector and offers recommendations to strengthen it.


  1. The NCEUS recommends the following definition of the informal sector: [It] consists of all unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services operated on a proprietary or partnership basis and with less than a total of 10 workers.

  2. Informal workers include all ‘casual and contributing’ family workers, self-employed persons working in the unorganised sector and in private households, and all other employees not eligible for advance dismissal notices, paid sick or annual leave, or any social security benefits provided by employers.

  3. The NSSO’s 55th round (1999-2000) and 61st round (2004-2005) surveys on Employment-Unemployment estimated that there were 342.64 million and 394.9 million informal sector workers, in the two surveys. That is, more than 86 per cent of all workers in both rounds were from the informal sector.

  4. Between 1999-2000 and 2004-05, the total employment in the unorganised sector grew annually by 2.88 per cent. In 1999-2000, informal workers in agriculture constituted 67.77 per cent of the total unorganised workforce; this figure fell to 64.02 per cent in 2004-05.

  5. Between 1999-2000 and 2004-2005, the number of informal workers grew by 3.16 per cent and this trend was true across sectors such as agriculture, industry and services.

  6. The percentage of informal workers in the industry and services sectors grew in the same period – from 13.08 to 15.28 per cent in the industry sector and 19.15 to  20.69 per cent in the services sector. In these sectors, informal work grew significantly in mining, manufacturing, real estate, renting and business services as well as education and health.

  7. In 2004-05, 79.79 per cent of informal sector workers were in rural areas. Around 90.33 per cent of all rural male workers and 94.50 per cent of all rural female workers were employed in the informal sector. There were more female workers in the informal sector (34.21 per cent) than in the formal sector (20.68 per cent). 

  8. As per the NSSO’s 61st round survey on Employment-Unemployment, 8.04 million under-14 children worked in the unorganised sector. Of all informal workers, 64.02 per cent were in agriculture, 8.68 per cent in retail trade, 4.98 per cent in construction, and 3.55 per cent in transportation and storage.

  9. Informal workers were mostly illiterate (42.4 per cent), or literate but with less than a primary-level education (11.6 per cent). Around 35.6 per cent of rural male informal workers were illiterate as compared to 67.5 per cent of rural female workers.

  10. Male dominance prevailed among the self-employed in the informal sector. Among unpaid family workers, 47.48 per cent were women but only 16.59 per cent were men.

  11. The Scheduled Castes and Scheduled Tribes constituted about 10.27 per cent and 20.16 per cent of all informal workers in 2004-05. Among female informal workers, 13.2 per cent were STs and 21.3 per cent were SCs.

  12. Uttar Pradesh had the highest share of informal sector workers (15.52 per cent) in the country, followed by Maharashtra (10.11 per cent), Andhra Pradesh (9.04 per cent), West Bengal (7.35 per cent) and Madhya Pradesh (6.53 per cent). States that were considered to be the least developed had the highest percentage of workers in the unorganised sector.

  13. The percentage of women in informal employment was higher than that in formal employment in most states and union territories except Kerala, Tripura, Chandigarh, Delhi and Lakshadweep.

  14. The NCEUS recommended annual surveys of non-manufacturing enterprises and that its definitions of the informal sector and informal employment be used in all statistical operations. It also said that while estimating employment in the formal and informal sectors, the annual as well as five-year Employment-Unemployment Surveys of the NSSO should replace estimates by Directorate General of Employment and Training.

    Focus and Factoids Rohit James Joseph.


National Commission for Enterprises in the Unorganised Sector, New Delhi

The Commission had the following members: Dr. Arjun K. Sengupta, Dr. K.P. Kannan, Dr. R.S. Srivastava, V.K. Malhotra, Dr. T.S. Papola and B.N. Yugandhar.


National Commission for Enterprises in the Unorganised Sector, New Delhi


Nov, 2008