what are the steps to be taken by the government to increase the formal sector
Answers
Answer:
Government can take following steps for formalization:
- Reform labour laws and tax laws: Current stringent laws force employers to avoid formalization.
- Improving access to formal sources of credit: It will help firms in increasing business and becoming formal.
Explanation:
Large section of Indian economy falls in informal or unorganized sector. This has lead to various institutional and structural impediments in targeting them by the govt. and providing various benefits of schemes and programmes. Govt. also is not able to protect them from various economic exploitation.
Govt can increase the size of formal economy by:
1. Infrastructure development: Govt can put efforts to improve infrastructure in the rural framework. Building roads and better transport and communication standards will increase connectivity and therefore interactions.
2. Financial support: Govt under its financial inclusion schemes have done a lot to provide banking to workers in informal sector, but there is much more to be done in improving accessibility to formal credit facility.
3. Social security: Increasing investment in social security schemes like Atal pension yojna, PM jevean Jyoti Yojna, PM beema yojna will go a long way in stabilizing the lives of various workers. The introduction of Universal Basic Income in the formal debate by Eco-survey 2016-17 is indication of moving in this direction.
4. Skilling the Youth: Proper management of demographic dividend by providing jobs and skills that can help in securing the potential of youth. this is a challenge as there is increased automation in industries.