Although the informal sector has been in existence since time immemorial, the concept of “informal economy” got recognition only in the early 70s. The ILO started using this term to describe the economic activities that are not fully accounted for, protected or regulated by the state.

Poverty, illiteracy and child labour form a vicious circle in poor economies. Child labour is rampant in underdeveloped econom-ies. The majority of the informal economy workers in the developing countries are paid low wages with limited or no social protection and there is little respect for workers’ rights. In the past, social security of the workers and their working conditions were not considered a priority area and thus labo-ur management was provided with very limited resour-ces to deal with the issues.

The informal economy accounts for about half of the employment in the world. In India, 93 per cent of workers are in the informal economy. In Nepal, the contribution of formal sector to total employment is estimated to be less than 10 per cent. Agriculture alone employs about 71 per cent of the population.

The informal economy is an integral part of the Nepali economy. But at a time when existing infrastructure of labour administration established both at the central and district level to cater to the needs of the workers engaged in the formal economy is not strong enough to look after the formal sector, the administration cannot be expected to expand towards the informal economy. Further, the existing labour law is neither tailored nor targeted to protect the basic needs of the workers in the informal economy. But in the backdrop of a changed economic scenario as per the country’s commitments made to the WTO, the changed political system must now address the issues pending in the labour sector. The people have given a mandate to the new government to deal with the issues of informal economy both in terms of labour and revenue administration. An investment-friendly law should be introduced to ventilate the workers’ grievances and to improve their working conditions.

The challenges faced by the workers in the informal economy should be addressed through a tripartite mechanism starting at the grassroots level involving workers, employers, VDCs and local bodies. Unbalanced legislative enactments and other measures to bring the workers under a highly regulatory mechanism may adversely affect the informal sector, as it would create hurdles to the functioning of market forces. The government should play the role of a facilitator and a promoter to create a conducive environment for both the employees and employers.

Although some efforts have been made by the government, trade unions and NGOs/INGOs in the past to look after the interests of the workers in the informal economy, these have largely been inadequate. To make a success of any attempt to improve the socio-economic conditions as well as the working conditions of the workers engaged in the informal sector, involvement of the local community, local bodies, voluntary and other institutions is a pre-requisite. Joint initiatives involving the local bodies, trade associations, trade unions and labour administration would supplement the role of the government. A larger role should be assigned to VDCs for the enforcement of investment-friendly labour laws.