incentive. Govt should support honest taxpayers by tweaking the system: SBI Ecowrap

The Government should ensure that the existing tax structure is favourable to the 11.4 crore tax paying population that constitutes only 8.5 per cent of the population but cross-subsidises 91.5 per cent of the population, according to State Bank of India’s economic research report, Ecowrap.

The report assessed that of the total population, 8.5 per cent contribute to ₹75 lakh crore or 65 per cent of the private final consumption expenditure.

“Hence it is important and ethical that even as we formalise, we must support honest tax-paying households through a better designed tax structure, particularly indirect taxes on items like fuel,” said Soumya Kanti Ghosh, Group Chief Economic Advisor.

Formalisation of economy

SBI’s economic research department (ERD) estimated that currently, the size of the informal economy is possibly at maximum 15 to 20 per cent of formal GDP. There is wide variation across sectors, though, with formal sectors like finance and insurance expanding post pandemic.

India has a large informal economy with around 93 per cent of its total workforce earning their livelihoods as informal workers (NSSO 2014).

“Though the pandemic has led to huge devastating impact on all the sectors of the economy, the impact has been felt more by the informal sector. While the formal sector is now back to its pre-pandemic level, the informal sector still continues to bear the brunt. However, there has been a positive development in the economy amidst the pandemic. Owing to the various efforts of the Government, there has been an increase in the formalisation of the economy,” Ghosh said.

Based on EPFO data, ERD estimates almost 36.6 lakh jobs have been formalised till August 2021.

Referring to e-Shram portal data, ERD said 5.7 crore unorganised workers (October 30 and counting) have registered in the first two months after its launch, with 62 per cent of workers belonging to the age-group of 18-40 years and 92 per cent registered workers having monthly income of less than ₹10,000.

Based on specific examples, at least ₹13 lakh crore has come under the formal economy through various channels over the last few years, including the recent scheme on e-Shram portal, Ghosh said.

e-Shram

The ERD noted that e-Shram is a big step towards the formalisation of employment as its calculation indicates that till date, the rate of formalisation of unorganised labour due to e-Shram is around 17 per cent/₹6.8 lakh crore/3 per cent of GDP in just 2 months.

e-Shram portal, developed by the Ministry of Labour & Employment, is a national database of unorganised workers including migrant workers, construction workers, gig and platform workers, etc.

It has details pertaining to name, occupation, address, educational qualification, skill types and family details etc. for optimum realisation of their employability and extends the benefits of the social security schemes to them. State-wise data shows that top four States accounted for 72 per cent of total registration on e-Shram, with West Bengal on the top followed by Odisha and Uttar Pradesh.

Occupation-wise, workers from the agriculture sector account for 55 per cent of registration followed by construction sector (13 per cent). Of the 5.7 crore registered workers, 81.2 per cent or 4.6 crore have bank accounts but only 24 per cent or 1.1 crore workers have Aadhaar-linked bank accounts.

SBI’s ERD observed that even in agriculture, the usage of KCC (Kisan Credit Cards) has increased significantly and it estimates ₹4.6 lakh crore formalisation only through KCC route, with more marginalised farmers coming under the banking sector ambit through such usage.

KCC is issued by banks to farmers to meet their short term credit requirements for cultivation of crops, post harvest expenses, produce marketing loan, consumption requirements of farmer household among others.

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