FORMALIZING ECONOMY : ECONOMY

NEWS: The Transition of India's Economy Towards Formalization

WHAT’S IN THE NEWS?

India’s economic formalization is shifting workers to formal jobs with benefits like job security and social protections through EPFO. Rising EPFO registrations reflect increased workforce stability and inclusion, particularly for youth and women.

Formalization of the Economy and EPFO’s Role

Formalization of Economy: Transitioning workers from informal to formal employment with job security, contracts, and social benefits, enhancing workforce stability and economic inclusion.

Benefits of Formalization:

  • Legal protections (e.g., fixed salary, healthcare, paid leave).
  • Coverage under social security systems (e.g., EPFO, insurance, pensions).
  • Economic stability and resilience during crises (e.g., COVID-19 pandemic).

Employee’s Provident Fund Organisation (EPFO):

  • Government body managing provident fund and pension schemes for salaried employees.
  • Provides retirement security, life insurance, pensions, and emergency withdrawal options.

Indicators of Increased Formalization:

  • Rising EPFO registrations signify a shift to formal jobs with social benefits.
  • Increased registrations highlight economic organization and support for employees.

EPFO Data Insights (up to July 2024):

·         6.91 crore members joined from 2017 to 2024.

·         1.38 crore new members joined in 2022-23, showing formalization growth.

·         June 2024 data: job switching with fund transfers, youth and female participation.

·         Monthly increase in registrations, with 20 lakh new members in July 2024.