New Delhi, 1 Nov (KNN) As per a study by SBI Research, that India’s informal sector fell around 15-17 per cent in 2020-21 from 52.4 per cent in 2017-18 which cuts down the sector to more than a half in just 3 years.

The reasons stated for this drastic fall are digitisation and gig economy.

Aditi Nayar, Chief Economist, ICRA said, “The large and the formal players are gaining at the cost of smaller and less formal entities from various sectors.”

After 2016, formalisation of sectors in India happened faster than other nations, the study said.

The informal sector in Indian consist of enterprises that are own account enterprises.

According to recent annual reports on Micro, Small and Medium Enterprises (MSMEs), it indicates that the sector contributes to around 30% of India’s GDP, and based on conservative estimates, employs around 50% of industrial workers.

Over 97% of MSMEs can be classified as micro firms (with an investment in plant and machinery less than ₹25 lakh), and 94% are unregistered with the government.

Hence, it’s important to gauge the impact of the shrinking informal sector on micro firms and its consequences as they are spread across rural and urban areas.