Q20.How globalization has led to the reduction of employment in the formal sector of the Indian economy? Is increased informalization detrimental to the development of the country?

Globalization, characterized by increased cross-border trade, capital flows, and technological exchange, initially promised job creation in India. However, it has significantly impacted formal sector employment.

How Globalization Reduced Formal Employment

• Increased global competition forced domestic industries to cut costs, leading to job losses or a shift to informal contracts.
• Technological advancements and automation, driven by global integration, reduced demand for specific formal labor.
• Global business practices influenced flexibilization of labor laws and outsourcing, moving employment from formal to informal arrangements.

Is Increased Informalization Detrimental?

• Informalization leads to lack of social security, poor working conditions, low wages, and increased income inequality.
• It hinders human capital development, reduces the government's tax base, and impedes overall inclusive economic development.

Addressing informalization through skill development, robust social security nets, and policies promoting formal sector growth is crucial for India's sustainable and equitable development.