Why do you think that after the reforms of 1991 there was a decline in the number of workers in the formal sector ?

As a consequence of the strategy for development adopted by India since 1991, India witnessed a fall in the employment in the formal sector. Key elements included in the Economic reforms thatwere introduced in 1991 were 'Liberalisation. Privatisation and Globalisation'.

With the process of growth and development it is expected that the percentage of the formal workers rises in the workforce while that of the informal workers falls. However, India saw a reversal of the trends. Estimates reveal that in India nearly 93% of the workers are engaged in the informal sector and only 7% are engaged in the formal sector. It is said that this informalisation in India is a result of the reforms of 1991 which transformed India from a 'Socialist' to a 'Market' economy. The conversion of Indian economy into a market economy has increased the extent of informalisation.

Under the reform process, MNCs played an important role in India‚Äôs economic growth. However,they favoured the employment of only the educated and specialised workforce. These MNCs relied on the modern and efficient technology rather than labour for the production of goods and services. As a result, the employment in the formal sector remained low and that in the informal sector increased. 

Thus, it can be said that after the reforms of 1991, there was a decline in the number of workers in the formal sector. 


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