Which of the following statements is correct about informal sector?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Informal sector includes self-employed who do not have any hired workers
Everyone outside the formal sector is in the informal sector, and that includes the self-employed with no hired workers.
Option (1) Those who are working in the informal sector enjoy social security benefits — Incorrect. Social security benefits go to formal sector workers. Informal sector workers do not get them.
Option (2) Informal sector includes self-employed who do not have any hired workers — Correct. The informal sector also takes in farmers, agricultural labourers and owners of small enterprises and their workers.
Option (3) Employ 10 hired workers or more — Incorrect. A private establishment with 10 or more hired workers is a formal sector establishment.
Option (4) It includes all the public sector establishments — Incorrect. All public sector establishments belong to the formal sector.
NCERT (2026-27): “6.7 Informalisation of Indian Workforce … All the public sector establishments and those private sector establishments which employ 10 hired workers or more are called formal sector establishments and those who work in such establishments are formal sector workers. All other enterprises and workers working in those enterprises form the informal sector. Thus, informal sector includes millions of farmers, agricultural labourers, owners of small enterprises and people working in those enterprises as also the self-employed who do not have any hired workers. It also includes all non-farm casual wage labourers who work for more than one employer such as construction workers and headload workers… …Those who are working in the formal sector enjoy social security benefits. They earn more than those in the informal sector…” |