The finance ministry has asked the labour and employment ministry to conduct a study and share the findings at the earliest, they told ET.
The idea is to take remedial policy measures, based on the findings, to ensure gains from the formalisation and digitisation lead to more inclusive economic development and social security for workers, as India aims to transition to a developed nation by 2047, they said. The Employees’ Provident Fund Organisation (EPFO) has been tasked with overseeing the study, proposed to be conducted through the state-run Pandit Deendayal Upadhyaya National Academy of Social Security, a senior finance ministry official said.
In recent years, government initiatives, especially the implementation of the goods and services tax regime in July 2017 and aggressive digital push, and changing consumption patterns have aided the economy’s formalisation.
The informal sector, however, continues to employ more than 90% of the country’s workforce while accounting for around 45% of the gross domestic product. The welfare of informal sector employees, thus, remains a crucial barometer of inclusive development, officials said. The brisk pace of the country’s formalisation is reflected in the record incorporation of companies and limited liability partnerships in recent years.
The net payroll addition under the EPFO, a proxy for formal sector employment, increased more than 54% between April and July 2025 from a year before to 6.9 million. The government launched the eShram portal in 2021 to create a national database of unorganised workers, seeded with Aadhaar credentials, making it easier for policymakers to plan targeted steps. The expanding digital infrastructure has also spurred a large-scale adoption of digital payment systems.