oppn parties Formalize the Informal Sector

News Snippets

  • In a first, the Supreme Court recognizes marital rape, although for the limited purpose of allowing married women the right of abortion up to 24 weeks if they conceived as a result of forced sex by their husbands
  • Air India cuts discounts on base fare to students and senior citizens from 50% to 25%
  • Mallikarjun Kharge and Digvijay Singh are being touted as frontrunners to take on Shashi Tharoor in the elections for the post of Congress president
  • Sonia Gandhi will decide who will be Rajasthan CM if she feels there is a need to change guard after the near-rebellion by MLAs in the state
  • Ashok Gehlot bowed out of the race for being Congress president after meeting Sonia Gandhi
  • India has moved to the 40th spot in the innovation index, up 6 spots from last year
  • DGGI has alleged that top insurance companies, banks and NBFCs has committed a fraud of Rs 800cr by claiming input tax credit without underlying supplies
  • The Centre will borrow Rs 10000cr less than planned earlier due to good revenue collections
  • At $23.9bn, India's current account deficit widened to 2.8% in Q1, the worst in four years
  • Stocks continue to flounder on Thursday: Sensex sheds 188 points to 56409 and Nifty 40 points to 16818
  • The 36th National Games were declared open on Thusrday by PM Modi in front of a record crowd in Motera near Ahmedabad
  • Jasprit Bumrah most likely to miss T20 World Cup due to recurrence of back injury
  • PFI's political wing, the SDPI is on EC radar and action will follow soon if discrepancies are detected
  • Ashok Gehlot to meet Sonia Gandhi today, says all issues will be sorted out soon
  • Referring to the PFI ban, most Muslim organizations ask the government to take similar action against right wings organizations like the RSS, Bajrang Dal, VHP and the like
In a landmark order, Supreme Court rules that all women, married or unmarried, are entitled to safe and legal abortion up to 24 weeks of pregnancy as per the MTP Act
oppn parties
Formalize the Informal Sector

By Sunil Garodia
First publised on 2017-01-09 17:58:39

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.
Indian economy is said to be oiled by the informal or unorganized sector. This sector provides support to the organized sector in the form of supplies and logistics. To that end, its importance cannot be discounted. This sector is extremely cash dependent and has been hit hard by demonetization. But it also has to be recognized that there is a very thin line between being informal or unorganized and being illegal.

There is no harm if one conducts business in cash, as long as all transactions are accounted for in books of accounts, transactions are carried out through purchase and sales invoices, relevant taxes are paid, returns are filed and no laws of the nation are broken. If any of the foregoing is not adhered to, then the business is operating illegally. With several restrictions in place for payment in cash, it is clear that most of the informal sector units operate illegally. In that case, the importance it holds to the organized economy is immaterial – the said businesses must adopt legal means or close down.

Apart from causing huge revenue loss to the nation by not paying taxes, these businesses are guilty of providing unfair competition to those entrepreneurs who operate legally. Since they pay no taxes, source their raw materials from the underground market and pay labour wages at much reduced rates, these units can supply at a much lesser cost than those who operate by sticking to the law. If these units are not brought in line, it will continue to act as a disincentive for small entrepreneurs to operate legal businesses. After all, how long can a businessman tolerate loss of orders and reduced profitability by operating legally when he sees illegal units mint money?

If demonetization has hit these units hard, as a follow up, the government must do all to ensure that they enter the mainstream. Continued evasion of taxes is hurting the nation. The government should expand banking services and ensure that these units shift to transactions through banking channels. Cash leaves no trail and doing business in cash makes it easy to avoid paying taxes. This state of affairs cannot be allowed to be continued any longer. Unscrupulous businessmen continue to live a life of luxury by robbing the nation of its rightful share of taxes. For the informal sector, not less-cash but no-cash should be the mantra.