List and explain three structural factors that cause a higher prevalence of informal employment in rural India. Illustrate each factor with a specific example.
Answer
Low‑productivity agriculture, limited access to formal credit, and inadequate rural infrastructure are three structural factors.
Step-by-step solution
- Identify factor 1: low agricultural productivity; explain that small farms cannot generate enough surplus to create formal jobs; give example of marginal farmers in Bihar who sell produce in local markets without formal contracts.
- Identify factor 2: limited access to formal credit; explain that lack of collateral pushes workers into casual labour or family‑run enterprises; give example of a micro‑enterprise in Madhya Pradesh relying on informal money‑lenders.
- Identify factor 3: inadequate rural infrastructure (roads, electricity); explain that poor infrastructure raises transaction costs, discouraging formal firms; give example of a textile unit in Uttar Pradesh operating informally because of unreliable power supply.
Common mistake: Mixing demand‑side causes (low demand for formal jobs) with supply‑side constraints (lack of skills, credit).
Concept tested: Rural informal employment reasons
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