International Journal of Management (IJM)
Volume 7, Issue 1, Jan-Feb 2016, pp. 61-68, Article ID: IJM_07_01_006
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ECONOMIC PROBLEMS OF INFORMAL
(UNORGANIZED) SECTOR
PROFESSIONALS IN NAGPUR DISTRICT
Prof. Anantkumar D. Gadre
M.Com, M. Phil., Net, B.Ed., M.ed,
Assistant Professor, Suwalal Patni’s Art & Commerce College,
Pulgaon, Wardha, Maharashtra.
Dr. Rajiv M. Jadhao
M.Com, M. Phil., Ph.D,
Associate Professor and Head, Department of Commerce,
Lok Mahavidyalaya, Wardha, Maharashtra
Cite this Article: Prof. Anantkumar D. Gadre and Dr. Rajiv M. Jadhao.
Economic Problems of Informal (Unorganized) Sector Professionals in
Nagpur District. International Journal of Management, 7(1), 2016, pp. 61-68.
http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=7&IType=1
1. INTRODUCTION
Indian retail is dominated by a large number of small retailers consisting of the local
kirana shops, owner-manned general stores, chemists, footwear shops, apparel shops,
paan and beedi (local betel leaf and tobacco) shops, hand-cart hawkers, pavement
vendors, etc. which together make up the so-called "unorganized retail" or traditional
retail. The last few years have witnessed the entry of a number of organized retailers
opening stores in various modern formats in metros and other important cities.
Unorganized retailers normally do not pay taxes and most of them are not even
registered for sales tax, VAT, or income tax. (Zia and Azam, 2013)
Retailing in India is predominantly unorganized. According to a survey by AT
Kearney, an overwhelming proportion of the Rs. 400,000 crore retail markets are
unorganized in India. In fact, only a Rs. 20,000 crore segment of the market is
organized. The sector is highly fragmented with 97% of its business being run by the
unorganized retailers like the traditional family run stores and corner stores. The
sector is the largest source of employment after agriculture, and has deep penetration
into rural India generating more than 10% of India’s GDP. Indian retail is dominated
by a large number of unorganized retailers consisting of the local kirana stores,
chemists, footwear shops, apparel shops, paan and beedi shops, hand-cart hawkers,
pavement vendors, etc. Retailing in unorganized sector is thus not a profit oriented
vocation but a mere source of livelihood. Naturally, the capital investment is very low
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61
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Prof. Anantkumar D. Gadre and Dr. Rajiv M. Jadhao
and the infrastructure is rudimentary. It is estimated that less than 4% of Indian
retailers have shops larger than 500 square feet. There has been considerable growth
in organized retailing business in recent years Concerns have been raised that the
growth of organized retailing may have an adverse impact on retailers in the
unorganized sector. (Thenmozhi and Dhanaoal, 2011)
National Commission for Enterprise in the Unorganized Sector (2007) reported
that out of total nonagricultural unorganized workers 63 percent workers are selfemployed. Only about 0.4 per cent of the unorganized sector workers were receiving
social security benefits like Provident Fund, and this proportion had not changed since
1999-2000.(NCEUS, 2007). This indicates the unawareness of unorganized sector
professionals towards government schemes. Employees of enterprises belonging to
the unorganized sector have lower job security and poorer chances of growth, and no
leaves and paid holidays, they have lower protection against employers indulging in
unfair or illegal practices. (Gupta, 2009)
In the light of above information this paper tries to investigate economic status of
unorganized sector professionals in Nagpur District, by considering below objectives:
2. OBJECTIVES

To know monthly personal and family income of unorganized professionals




To study the savings strategies of unorganized professionals
To know the information regarding loans taken by unorganized professionals
To know information regarding sources of loan taken by unorganized professionals
To study the economic problems of unorganized professionals
3. REVIEW OF LITERATURE
Nandal (2006) reported that a vast majority of India's labour force is
in unorganized sector. In the absence of economic opportunities in their own states,
many workers migrate across the other states of India to seek employment.
Construction industry depends almost entirely on migrant workers, majority of which
are women. The main object of this paper is to shed light on the
socio‐economic problems being faced by a section of the women workers in
construction industry. These women workers have a very tough life. In spite of being
actively involved in economic activities for survival, bearing and rearing of children
remain their prime responsibility, and thus they end up with playing roles in both
production and reproduction.
According to Sengupta (2008) emergence of modern retail in India is not just a
result
of
increasing
consumer
buying
power
–
manufacturers
and unorganized retailers also have an important role to play in this process at the
macro‐level. At the micro‐level, the trigger came from diverse angles like
entrepreneurial desire to provide better service to consumers, social desire to provide
relief to the masses in the form of lower prices, desire to capitalize on emerging
business opportunities being provided by the changing business environment, etc.
Fajana (2008) addressed the issue of unionization of the largely non‐unionized
informal economic activities as a strategy for achieving decent work and pay as well
as promoting national development in Nigeria. It was found that decent work and pay,
which would assist poverty minimization and thus national development, would be
furthered by unionization of the informal sector. At the same time, there are many
barriers faced by unions in seeking to organize in the latter area.
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Economic Problems of Informal (Unorganized) Sector Professionals in Nagpur District
Agarwala (2009) provide an internationally comparative measure of India's
informal workforce, illustrate informal workers’ social conditions relative to those of
formal workers, highlight the expansion of the informal workforce since the
government enacted liberalization reforms, and expose the unique political action
strategies Indian informal workers are launching against the state.
Sagheer et al., (2009) has attempted to create a common ground where the two
theories of Value Chain Analysis and competitiveness are able to meet. An empirical
validation of the framework can encourage more future research on this topic. This
paper can also be used by researchers as a reference point for studies
on Indian agrifood sector. The proposed framework can be used as an analytical tool
by researchers to study similar industries from developing economies like textiles,
leather, etc. that are unorganized.
Vershinina and Rodionova (2011) discussed the issues in studying hidden
populations, with particular focus on methodology used to investigate ethnic minority
entrepreneurs who illegally run their businesses in the UK. In this paper, on reflection,
the authors look at what issues should be considered before engaging with such
communities, as we identify current approaches and evaluate their merits. The authors
analyze the ethical considerations, problems and issues with access to such data,
discuss early and more recent sampling methodologies and the ways to estimate the
size of hidden population. This paper, hence, establishes the state‐of‐the‐art
approaches in this field and proposes potential improvements in achieving
representativeness of the data. Using the Ukrainian illegal self‐employed
construction workers as an example, this paper evaluates the choices made by the
researchers.
D’souza (2013) discussed on role of entrepreneur and Challenges before the
present youth in taking up such job in unorganized sectors as self- employment .It
highlight about present scenario of unorganized sector, Status, role of entrepreneur in
creating interest for self-employment, Challenges and problems faced in selecting
self- employment.
Kahre (2014) pointed out that the Indian consumers’ prefer small retailers due to
assortment, service, store facility and relationship. The older and younger populations
differ in their reasons for preferring small retail stores. Author observed that service
and assortment influence consumer-small retailer relationships.
Joshi (2015) found that although there are studies which try to point out
measurability problems of services in developed European economies, however,
studies related to service sector statistics problems in India are far less in number. The
study mainly focus on the service sector statistics problems in India and point out the
way forward.
It is evident from the above literature that studies were carried out on unorganized
sector but these were limited only up to labour force. No study was observed to
conduct on the economic status of professionals doing small businesses in
unorganized sector. Hence the study is important to find out the actual economic
condition of unorganized sector professionals.
4. METHODOLOGY
By considering the aim and objectives of the study, a sample survey was conducted in
Nagpur district. For the study purpose total 500 unorganized sector professionals
doing different small businesses (hawkers, Peddlers and street vendors etc.) were
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Prof. Anantkumar D. Gadre and Dr. Rajiv M. Jadhao
selected from all 14 tehsils of Nagpur district. The data was collected through selfprepared interview schedule.
5. DATA ANALYSIS
Descriptive analysis was used to analyze the primary data obtained from the 500
individual samples. The frequency and percentage method was used to generate
results from data obtained from unorganized sector professionals. The frequency of
answer was shown by providing a frequency table for responses to each of the
relevant questions in the questionnaire.
It is observed that monthly income from business of 44.8% unorganized sector
professionals is between Rs. 2000 and Rs. 50000 (Table 1), whereas only 9.6%
professionals earned more than Rs. 9000 from their business. The monthly family
income of 35.8% professionals is between Rs. 50001 and 10000 followed by less
than Rs. 5000 (34%) (Table.2).
Furthermore 54.4% unorganized sector professional have taken loan for business
(Table. 3) out of which 74.6% and 40.4% professionals have taken loan from bank
and their relatives however 36% professional taken loan from money lenders (Table .
4). 77.6% unorganized sector professionals make return payment of loan taken by
them on monthly basis (Table 5). Unorganized sector professionals reported various
problems while taking loan out of which 48.5% respondents have to take loan from
money lenders on high interest rate in case of urgency, 44.1% respondents suffered
from avoidance of the bank employees for approving their loan, 22.8% respondents
were unable to fill the loan form, whereas 19.9% respondents have to visit banks
frequently for approving their loan as well as12.1% respondents have to give bribe for
approving their loan (Table 6).
It is observed that 72.8% respondents make regular savings at multiple sources
(Table 7), out of which 42.9% respondents make their savings at credit institutions
while only 4.1% respondents make their savings at private sector banks (Table 8).
66.4% respondents made financial planning in a view of business development
(Table 9). Out of which 49.1% respondents made financial planning by making
regular savings followed by 48.8% respondents who use insurance for financial
planning (Table 10).
Respondents faced various problems while making financial adjustment in
business, 66% respondents faced problem of buying low quality goods whereas
48.9% respondents faced problem such as lack of capital due to unstable price of
goods (Table 11). They also faced different problems while raising capital for
business, 51.5% respondents faced problem of inadequate capital due to rise in
inflation, whereas 46.8% respondent faced problem of lack of financial help on time
(Table. 12). Daily needs of 66.8% respondents were fulfilled from the income they
received from their business.
6. CONCLUSION
Unorganized sector business systems have important contribution in Indian economy.
In a view to carry the goods from factory to consumer and by generating employment,
unorganized sector business system provides its important contribution to Indian
economy. The informal sector plays a significant role in the economy in terms of
employment opportunities and poverty alleviation. This sector generates incomeearning opportunities for a large number of people. In India, a large section of the
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64
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Economic Problems of Informal (Unorganized) Sector Professionals in Nagpur District
total workforce is still in the informal sector, which contributes a sizeable portion of
the country's net domestic product. The unorganized sector has a crucial role in our
economy in terms of employment and its contribution to the National Domestic
Product, savings and capital formation. The conclusions were drawn on the basis of
study results obtained after analysis of data collected from unorganized sector
professionals, which are as follows1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Majority of unorganized sector professionals in Nagpur District personally earned
Rs. 2000 to Rs. 5000 per month from their business.
The monthly family income of majority of unorganized sector professionals in
Nagpur District is between Rs. 5000 and Rs. 10000.
Majority of unorganized sector professionals in Nagpur District have taken loan for
their business.
Majority of unorganized sector professionals in Nagpur District have taken loan
from bank.
Majority of unorganized sector professionals in Nagpur District pay installment
against their loan on monthly basis.
Majority of unorganized sector professionals in Nagpur District faced problems
while arranging loan
Majority of unorganized sector professionals in Nagpur District faced problems
such as unable to fill up the loan form, corruption at bank, frequently visiting to
bank for loan approval, taking loan from money lenders on high interest rate at the
time of financial problem and non-cordial behaviour of bank employees. However
majority of professional face problem of taking loan from money lenders on high
interest rates.
Majority of unorganized sector professionals in Nagpur District make savings on
regular basis.
Majority of unorganized sector professionals in Nagpur District made savings in
credit institutions.
Majority of unorganized sector professionals in Nagpur District planned their
savings in view of development of business.
Majority of unorganized sector professionals in Nagpur District planned their
finance by performing regular savings and insurance.
Majority of unorganized sector professionals in Nagpur District faced problem
while making daily financial adjustment for business.
Majority of unorganized sector professionals in Nagpur District problem of
purchasing goods if their business was not going well
Majority of unorganized sector professionals in Nagpur District faced problem
while raising capital for their business.
Majority of unorganized sector professionals in Nagpur District faced problem of
inadequate capital due to rise in inflation while raising capital.
Daily needs of majority of unorganized sector professionals in Nagpur District are
fulfilled from their income.
7. RESEARCH IMPLICATIONS
Government should provide social security to unorganized sector professionals under
these scheme facilities such as pension, health services, educational opportunity of
children and low cost houses etc. should be provided to them. A special bank should
be created under municipality or Municipal Corporation to provide easy loan services
to unorganized sector professionals.
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Prof. Anantkumar D. Gadre and Dr. Rajiv M. Jadhao
ANNEXURE
Table 1 Monthly professional income of unorganised sector professional
Monthly Income from Profession
Less than Rs. 2000
Rs. 2000 to 5000
Rs. 5001 to 9000
More Than Rs. 9000
Total
Frequency
47
224
181
48
500
Percentage
9.4
44.8
36.2
9.6
100
Table 2 Monthly family income of unorganised sector professional
Monthly Family Income
Less than Rs. 5000
Rs. 5001 to 10000
Rs. 10001 to 15000
More Than Rs. 15000
Total
Frequency
170
179
106
45
500
Percentage
34
35.8
21.2
9
100
Table 3 Responses about taking loan for business
Response
Yes
No
Total
Frequency
272
228
500
Percentage
54.4
45.6
100
Table 4 Source of loan taken for business
Source of loan
Bank
Private Sector (Money Lender)
Relatives
Frequency
203
98
110
Percentage
74.6
36.0
40.4
Table 5 Mode of loan Payment
Mode of loan payment
Fortnightly
Monthly
Quarterly
Other
Total
Frequency
10
211
10
41
500
Percentage
3.7
77.6
3.7
15.1
100
Table 6 Type of problems faced while applying for loan
Type of Problems
Unable to fill-up loan form
Giving bribe for approving loan
Frequent visit to bank for approving loan
Taking loan from money lenders on high interest
rates at the time of urgency
Avoidance of bank employees for approving loan
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66
Frequency
62
33
54
Percentage
22.8
12.1
19.9
132
48.5
120
44.1
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Economic Problems of Informal (Unorganized) Sector Professionals in Nagpur District
Table 7 Responses about regular savings
Response
Yes
No
Total
Frequency
364
136
500
Percentage
72.8
27.2
100
Table 8 Place where savings are made by respondents
Place of Savings
Government Bank
Private Bank
Credit Institutions
Saving Groups
Others
Frequency
91
15
156
54
70
Percentage
25
4.1
42.9
14.8
19.3
Table 9 Financial Planning in a view of business development
Response
Yes
No
Total
Frequency
332
168
500
Percentage
66.4
33.6
100
Table 10 Nature of financial planning
Nature of Financial Planning
By regular savings
Fixed Deposit
Insurance
Others
Frequency
163
33
162
2
Percentage
49.1
9.9
48.8
0.6
Table 11 Problems faced while making financial adjustment in business
Problems
Lack of capital due to unstable rate of goods
Buying low quality goods
Difficulty while purchasing goods due to poor business
Yes
No
Total
N
%
N
%
177 48.9 185 51.1 362
239 66.0 123 33.9 362
64 17.7 298 82.3 362
N= Frequency; %= Percentage
Table 12 Problem faced while raising capital for business
Problems
Inadequate capital due to rise in inflation
Lack of financial help on time
Taking loan from private sector on higher interest rate
Mortgaging precious object
Yes
N
%
188 51.5
171 46.8
71 19.5
68 18.6
No
N
177
194
294
297
%
48.5
53.2
80.5
81.4
Total
365
365
365
365
N= Frequency; %= Percentage
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Prof. Anantkumar D. Gadre and Dr. Rajiv M. Jadhao
Table 13 Fulfilment of daily needs of family of unorganized sector professionals from their
professional income
Response
Yes
No
Total
Frequency
334
166
500
Percentage
66.8
33.2
100
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