NCEUS Recommendations: Strategies to Strengthen India’s Unorganised Sector

Imagine a daily wage worker who wakes up each morning uncertain about finding work, earns barely enough to feed their family, and falls sick without any health insurance to fall back on. This is the reality for millions working in India’s unorganised sector, which employs approximately 85 to 90 percent of the country’s total workforce. Recognizing the urgent need to protect these vulnerable workers, the National Commission for Enterprises in the Unorganised Sector was established in 2004 to study this segment and recommend comprehensive strategies for its strengthening. The commission’s recommendations offer a roadmap for transforming the lives of hundreds of millions of workers through employment expansion, social security measures, and skill development initiatives.

Creating a social floor for unorganised workers 🔗

The NCEUS envisioned creating what it called a “social floor” below which no worker should fall. This comprehensive framework rested on three fundamental pillars designed to ensure basic dignity and economic security for all informal workers.

The first pillar focused on establishing a statutory national minimum wage based on basic needs rather than arbitrary calculations. According to expert committees, this national minimum wage should act as a floor level for any sectoral or state-wise minimum wages fixed from time to time. The commission understood that millions of workers were earning wages far below what they needed for basic survival, with data showing that over 90 percent of agricultural laborers and more than half of casual non-agricultural workers received wages below the national minimum.

The second pillar addressed social security through a package covering sickness, accidents, death insurance, and provisions for old age. For workers who could contribute, the commission recommended a Provident Fund scheme, while those without the capacity to contribute would receive an old age state pension. This dual approach recognized the varying economic capacities of different worker groups.

The third pillar involved enacting laws governing minimum conditions of work. The commission developed two comprehensive bills for agricultural and non-agricultural workers that would regulate working hours, rest periods, safety standards, and protection from discrimination. These bills proposed an eight-hour work day with breaks, one day of paid rest, timely payment of wages, and protection from workplace harassment.

Employment expansion through targeted policies 🔗

The NCEUS recognized that creating more jobs, especially quality jobs with decent working conditions, was essential for strengthening the unorganised sector. The commission’s strategy went beyond simply generating employment numbers to focus on creating sustainable livelihoods and eliminating both unemployment and underemployment.

A key recommendation involved expanding public employment programs. Building on the foundation of the National Rural Employment Guarantee Act of 2005, the commission suggested extending the scope of coverage, relaxing the cap of 100 days of employment per household to a per-person basis, and extending public employment opportunities to urban areas. Think of a construction worker who can only find work for a few months each year; such extended employment programs could provide year-round livelihood security.

For the agricultural sector, which employed the majority of unorganised workers, the commission developed a focused strategy for marginal and small farmers who constituted 84 percent of all farmers. This included promoting farmer groups, ensuring greater access to institutional credit, providing training and capacity building, supporting non-farm activities, and implementing gender-focused initiatives. The approach recognized that many farming households needed both better agricultural support and alternative income sources.

Supporting micro-enterprises and informal producers 🔗

The commission proposed establishing a National Fund for the Unorganised Sector as a statutory body to provide credit to micro-enterprises with investments of not more than five lakh rupees. This addressed a critical gap, as existing refinancing institutions primarily served larger agricultural and industrial enterprises while neglecting the millions of small informal businesses.

The commission also recommended a cluster-based approach to development, linking small enterprises in specific geographic areas to achieve economies of scale in skill acquisition, technology development, and marketing. This would eventually expand into a Growth Pole approach, creating common infrastructure and service centers that could multiply production and employment effects in both urban and rural areas.

Building a comprehensive skill development system 🔗

Perhaps one of the most forward-looking recommendations from the NCEUS involved establishing a National Mission for Development of Skills in the Unorganised Sector. The commission found that only 2.5 percent of total unorganised sector workers had received formal training, while 12.5 percent had non-formal training. This massive skills gap kept workers locked in low-productivity, low-wage occupations.

The proposed mission would create a decentralized training system with facilities at least at the block level, making skills training accessible to workers in even remote areas. Consider a young woman in a rural village who wants to learn tailoring or electronics repair; under this system, she wouldn’t need to travel to distant cities for training but could access quality programs close to home.

Making training relevant and accessible 🔗

The NCEUS recommendations emphasized identifying master trainers at village, block, and district levels and linking them with formal training institutions. This would preserve valuable traditional skills while also introducing modern techniques. The commission suggested well-designed training programs for trainers and proposed that post-training work opportunities be made available near workers’ place of residence, particularly for women who face mobility constraints.

Recognizing that unorganised sector workers often cannot afford to lose income during training periods, the commission recommended providing financial support to subsidize wage losses. A nodal agency at the district level would coordinate, implement, and evaluate skill development programs while also serving as a Labour Market Information Centre to match training with actual employment opportunities.

The scale of the proposed training expansion was ambitious. The commission estimated that during the Eleventh Five Year Plan period, annual training capacity would need to increase to about 12.5 million workers, up from approximately five million at the time. This massive expansion would require coordination among multiple government ministries, private training providers, and community organizations.

Creating institutional infrastructure for workers 🔗

One innovative aspect of the NCEUS recommendations involved establishing Workers Facilitation Centres at the local level of village panchayats and municipal governments. These centers, operated by designated agencies such as NGOs, trade unions, or cooperative organizations, would register all informal workers through self-certification.

This registration system would solve a critical problem that became painfully visible during the COVID-19 pandemic: the government had no comprehensive database of informal workers and therefore struggled to provide targeted relief. With proper registration, workers could access social security schemes, training programs, and welfare benefits as entitlements rather than as ad hoc government largesse.

State-level Social Security and Welfare Boards would implement the national social security scheme, with each state able to add benefits based on their fiscal capacity. A National Social Security and Welfare Board would oversee the entire system, distribute funds, provide policy advice, and monitor welfare schemes. Both national and state funds would receive predetermined budgetary transfers to insulate them from arbitrary allocation decisions.

Why these recommendations remain relevant 🔗

Although the NCEUS submitted its comprehensive reports between 2006 and 2009, many of its recommendations were not fully implemented. The commission itself was quietly disbanded, and its detailed proposals for legal rights and entitlements for informal workers were largely ignored in favor of poverty alleviation schemes that treated workers as beneficiaries rather than as rights-bearing workers.

However, the framework developed by the NCEUS remains remarkably relevant. The commission understood that strengthening the unorganised sector required a holistic approach that combined immediate protection through social security with long-term capacity building through skills development and employment creation. It recognized the heterogeneity of the informal sector and proposed differentiated strategies for agricultural workers, non-agricultural workers, and informal enterprises.

Recent government initiatives such as the Unorganised Workers’ Social Security Act 2008, various skill development missions, and social security schemes like the Atal Pension Yojana reflect partial implementation of NCEUS ideas. However, the comprehensive architecture envisioned by the commission, with its emphasis on worker registration, statutory entitlements, and dedicated funding mechanisms, remains unrealized.

What do you think? Given that India’s unorganised sector continues to employ the vast majority of workers, how can the NCEUS recommendations be adapted to address contemporary challenges like rapid technological change and the rise of platform economy workers? What lessons from the COVID-19 pandemic’s impact on informal workers should inform any future attempts to strengthen social security and employment in this sector?

References

1. https://www.gktoday.in/unorganised-sector/
2. https://pmc.ncbi.nlm.nih.gov/articles/PMC7489190/
3. https://ruralindiaonline.org/hi/library/resource/report-on-comprehensive-legislation-for-minimum-conditions-of-work-and-social-security-for-unorganised-workers/
4. https://dcmsme.gov.in/Skill_Formation_and_Employment_Assurance_in_the_Unorganised_Sector.pdf