Suburbanization Satellite Towns Rural-Urban Fringe Peri-Urbanisation 

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Suburbanization, Satellite Towns,

Rural-Urban Fringe, Peri-Urbanisation 

The rapid growth of metropolitan cities has also brought about spatial dispersal of urban areas. Cities have expanded in an haphazard and unplanned manner into their surrounding rural areas. There is a reverse flow of people from the city to the rural areas. The agricultural land of peripheral villages is converted for industrial and residential use, thus leading to suburbanisation, satellite towns, rural-urban fringes and peri-urbanisation.




In 1950 Charles Zeublin said that ‘the future does not belong to the cities but to the suburbs’. Suburbanization is often seen as a solution to urban problems and at other times it is seen as a cause of urban ills.

The concept of suburbanization is largely vague and ill defined.


Douglas defined suburbia as a “belt of population” living in typically roomier conditions that average city dwellers, but in typically more crowded conditions than those of the surrounding open country. whether they live inside or outside the city. In this definition, according to the United States Census, suburbs are areas located along the Standard Metropolitan Statistical Area (SMSA) but outside the central city.

Suburb refers to an area of the city outside the central city but within the urbanized area. The de-concentration of activities and population from the city to the surrounding fringe areas is a phenomenon of the 20th century and is known as suburbanization. It indicates redistribution of population, trade and industry.

Suburbs may be incorporated or unincorporated but must be socially and economically dependent on the central city. Thus, in essence, they are large density communities near large metropolitan centers. The population found here is urban and not rural in character, the economy is non-agricultural and the social structure reflects their interdependence on the nearby big city. Residents usually identify with both the suburb and the city.





Factors in Suburban Development



Population: The most obvious factor affecting the overall suburbanization process is population growth. The components of this urban growth are threefold – natural growth, rural to urban migration and ethnically diverse migration from abroad. Different factors influenced urban development at different times in history. In examining the numerical aspect of a country’s population, urban researchers often overlook another important aspect – the values held by citizens. Value


Individuals’ location on lifestyle, housing type and neighborhood character influence their locational judgement.


Organization: Institutions ultimately determine how and where the resources of the nation are to be utilised. The government has influenced suburbanization with its various loan programs, explicit grants to suburbs to build water and sewer systems, and highway construction programs. The private institutional sector has been equally important in influencing their marginal development.

Environment: The supply and cost of resources and the availability of land have influenced both the location of cities, their potential growth, and the process of suburbanization.


Technology: Just as elevators, the telephone and telegraph and structural steel made possible skyscrapers and central business districts as they are known today, inventions such as the septic tank, efficient electrification and the internal combustion engine made the modern suburbia a reality. Of all the technological innovations of this century, those in transport have been the most significant in affecting the spatial structures of cities. Cities tend to bring people together at one point, but the better the available transportation, the more dispersed the population is possible.

“POET” are key factors in the analysis of the development of suburbs and any change in one element affects all other elements and causes a change in the degree and pattern of suburbanization.




Suburbanization in the Indian Context



A suburb in India primarily implies a location near the periphery of a metropolitan city. The rapid growth of such cities in India has led to a spatial spread and in most cases the cities have expanded in a haphazard and unplanned manner into the surrounding rural areas. To be designated as a suburb, a place does not have to be a legal town or a recognized administrative area. Major cities like Mumbai, Calcutta, Chennai have suburban railway lines which pass through a number







  Rural-Urban Margin, Periurbanization: Introduction



The walled cities of ancient and medieval India were isolated from the surrounding rural areas. The physical city limits were then clearly defined by the walls, moats, and other protective structures that surrounded the city. The gates, few in number, provided the only regulated points of entry and exit into the city.

Inside the walled city lived an urban class of people engaged in non-agricultural occupations, and in villages outside the city, lived rural people who were mainly engaged in agriculture and animal husbandry. The town and the countryside were clearly divided by a clear and distinct boundary town wall. Even where walls were absent, the boundary between the traditional Indian town and rural village was abrupt and clearly defined.

Even today, the boundaries of all small and big cities and one lakh cities are also clearly demarcated. Even a casual observer in these places will notice the point where urban areas suddenly give way to areas of rural land use. The situation is very different in the case of


Metropolitan cities and some of the million plus cities. The physical expansion of built-up areas around these major urban centres, beyond their municipal limits, has been very distinctive. Most of this development has happened in a spontaneous, haphazard and unplanned manner. Essentially rural villages beyond the municipal limits have now been markedly replaced by urban residential, commercial and industrial complexes. The city has entered

In some cases deeply, in rural areas. The term rural-urban fringe has been used to designate areas where we have a mix of rural and urban land use.



Origin of event


The phenomenon of the rural-urban fringe is a recent phenomenon around Indian cities, although its occurrence around western cities was observed much earlier. India before 1950. The main reason for the absence of rural-urban boundary was the very slow growth of cities during that period. Any small increase in a city’s population is usually absorbed into existing residential areas, it is only with an influx of new migrants into the city that the city’s residential areas are no longer able to absorb the growth, and The city begins to expand physically, first through the development of vacant land within the city and later by the gradual encroachment on land in areas outside the city limits.

By thinking Sometimes new migrants, especially the poor; Sections live in villages around the town and go to their work place.

During the British period, many villages around the existing cities and metropolitan cities were displaced to gain space for the construction of new cantonments and civil lines. This process continued throughout the nineteenth century and in some cases even up to the period of the Second World War. During the 19th century, there was no real need for physical expansion of towns and cities, given a stable or declining urban population, and in the first half of the 20th century, urban population growth was still modest, and found Sufficient space within civil lines and cantonment areas, where the density of population was very low. The expansion of towns and cities throughout the British period was limited to the development of new cantonments and civil lines – otherwise, towns and cities showed no evidence of growth during this period, and all remained within the city limits. Native’


The towns within the city were often congested, but were not allowed to expand beyond the city limits.

The post-independence period has seen a sea change, with rapid growth of residential and other urban land uses in a haphazard manner. Private land developers, industrialists and business men interested in making quick profits played a significant role in bringing about the physical expansion of the city. The villages on the city’s periphery, which had hardly any administrative or political clout, were an easy target for the manipulative tactics of the new urbanites, both rich and poor. Unlike their western counterparts, most rural people in India were against money. So completely helpless are the power of the new industrial and commercial elites that in fact they often voluntarily fall prey to monetary inducements. The net result: urban land use has a distinct presence in rural areas surrounding rapidly growing cities.


The physical expansion of the city inevitably brings concomitant changes in the social aspects of life in the fringe villages, with the development of industry, commerce, administration and educational institutions, arts and health generating employment for the rural population. The jobs, even if of an unskilled nature with low pay, are invariably welcomed by the rural community, who in the past had to depend on a precarious and precarious living by farming, or those who wish to continue farming The fast growing city provides a growing market for vegetables, fruits, milk etc. These market forces lead to significant changes in rural land uses and even in the attitudes and values of traditional rural people.

  In fact, the rural people change, their lifestyle imperceptibly but significantly over a period of time and adopt a semi-urban lifestyle, thus we have the emergence of a semi-urban society – between rural and urban societies. a transitional phase.





  Rural Urban Margin, Periurbanization: Meaning and Definition



Weberwen, an American land economist and social scientist was the first to define the rural-urban boundary. According to him, it is a zone of transition between well-recognized urban land use and an area devoted to agriculture.

Blizzard and Anderson have attempted a more specific definition. According to him, the rural-urban boundary is an area of mixed urban and




Rural land use between the point where full urban services are available to the point where agricultural land use predominates.

Urban boundaries from the point of view of Indian cities and villages: –

The area around an Indian town consists of revenue villages with clearly defined boundaries. Near the city, the revenue villages exhibit urban characteristics with some rural features. After a certain distance from the town, the urban features disappear and the village becomes distinctly rural. The problem of delineating the rural-urban boundary therefore involves identifying villages with mixed rural and urban characteristics and then separating them from their purely rural counterparts.

The rural-urban boundary is an area of mixed rural and urban population and land-use, which begins at the point where agricultural land-use appears near the town and extends to the point where villages separate from urban land. uses or where some persons, at least, from the rural community commute to the town on a daily basis for work or other purposes.







Rural-Urban Border Structure



The town and surrounding area essentially comprises two types of administrative areas: (a) the municipal town or town panchayat and (b) the revenue village or gram panchayat.

Municipal towns differ in terms of their distance from the main city. Closer to the core city, especially the smaller municipal corporations “lose their identity” and are actually part of the geographic city. The level of municipal services in these towns is as good or worse as the core city, away from the core city, municipal towns have their own distinct identity and a distinct set of problems related to urban amenities and transport.The provision of amenities in these towns is unrelated to the main city and of very poor quality.

  The non-municipal areas around the city, ie revenue villages or gram panchayats, show a complex diversity. Agricultural land converted for some current or potential urban residential or industrial use

Fully urbanized with lots of Mi. others are only partially affected; In yet others the land-use is entirely rural, the only link with the town being the daily commute. The result is a complex structure of rural-urban fringes.





Transformation of Frontier Villages



Villages beyond the limits of a rapidly growing city undergo a process of change which ultimately results in their complete absorption within the physical city. This process of transformation of the fringe villages can be seen from two opposite sides: (a) the people of the main town and (b) the people of the village.

There are two fundamental aspects of the changes taking place in the frontier villages;

  1. a) Change of land use within the village
  2. b) Changes in the social and economic life-style of the people of the village.

The mechanism of both changes involves interaction between the town and the village in both cases. In any case, the nature and intensity of the interaction between the town and the village increases with time.

In order to understand the process of change more clearly, five stages of change of border villages have been identified:-

rural forum


Initially, villages located far away from the city and just outside the fringe area remain unaffected by the presence of the city. In particular, there is no daily movement of people from village to city for employment or for sale of agricultural produce. However, there are occasional visits to the town for medical facilities, purchase of expensive wedding clothes, purchase of agricultural equipment, etc. Visits to the town are occasional and irregular, and only better-off farmers attend such visits.


For the most part, the people of the village carry on their traditional occupations of farming and village crafts and services. There may be electricity in the village, but there are hardly any street lights. The streets are always kutcha and the drainage system is conspicuous by its absence. The village is not connected to the main city by bus service. The houses in the village are mostly made of mud and thatch, and there are very few brick houses. Houses with more than one storey are rare and cement is rarely used in construction. The physical form of the village is not static, as even in remote areas one has to face social and morphological changes. The basic criterion to differentiate rural villages from border villages is the lack of daily contact between town and village.




stage of agricultural land use change


The initial impact of the city is seen on the agricultural land-use in the village. The town provides a market for products that the village is in a position to supply, such as milk, vegetables, flowers and fruits. Some enterprising farmers in the village may see this opportunity and take advantage of it, eventually leading to daily contact with the city. Recent studies of such villages have shown that generally lower and intermediate castes and marginal farmers have taken advantage of the town market. Rich and upper caste farmers consider it beneath their status to engage in this trade.

What exactly triggered this development, this commercialization of agriculture in the village, is difficult to determine, but two factors must be mentioned. have to do first

The growth of urban population and, consequently, the demand for products such as milk and vegetables. The second factor relates to the improvement of transport facilities, especially the construction or improvement of roads and the introduction of bus services.

stage of business transformation


In this stage, the village population responds to the employment opportunities in the city. In the initial period, salaried employment is sought at the lower end of the scale, as unskilled workers work in factories, as watchmen in offices, peons, gardeners, and sweepers in government and commercial offices. In most cities, the informal commercial sector is dominated by people coming from marginal villages. Some become daily wage earners by doing odd jobs, others are self-employed as vendors, hawkers, barbers etc. in the city. However, it is again the lower castes, and especially the artisan castes, that take the initial steps in this direction.


A concomitant change in villages relates to the value attached to education and more children are sent to schools, both within and outside villages. The upper castes, who do not want to be left behind, usually take the initiative for higher education so that their children can get better jobs at clerical and supervisory level in the city. In this they often succeed to such an extent that even in the city the social distance between the upper and lower castes is maintained.


The process of business change goes on continuously. As long as most of the families in the village have at least one member working in the city. Farming is done as before, but the major responsibility for it lies with those people who have not acquired any educational qualification due to some reason. In the process, a new category of part-time farmers also emerges, and as a result the actual agricultural work gradually shifts away from the farmers.




Peasant castes for landless laborers. Those who do not own land play a bigger role in agriculture than before. At the same time, women also contribute more labor and time in farming. Very few girls in the city go to school or seek employment.

This phase marks a big jump in terms of spatial mobility of the village population. Village Always City Bus Save

When a village is connected to a village, either as a terminal point or as an important point in the network, the village’s economy changes in a number of ways. Shops selling a variety of urban consumer goods are visible within the village itself. Transistor television sets and other electrical and household gadgets are found in many village homes. There has been a rapid increase in the number of bicycles, scooters and motor cycles providing greater personal mobility. There is a change in dress and even in eating habits. The houses are rebuilt using cement and bricks. One storey houses are being replaced by two storey and even three storey houses. Although basic a facilities. Like any visible improvement in water supply, sewage disposal and drainage.


stage of urban land use growth


To begin with, some plots of farmers’ land in the village are bought by city real estate agents, and developed into residential colonies or industrial sites. The new residential colonies have been given names that are completely unrelated to the village, but reflect the current trend in the town.


  Plots in residential colonies are sold to city dwellers; This has been made possible by the growing awareness among the urban people about the location of the village and the demand for land. Land values in the village increase rapidly as the potential for urban land-use is recognized in both the village and the city. The process of land acquisition and its development for urban use starts slowly initially, but picks up speed within three to five years. As more and more of the village’s agricultural land is acquired for urban uses, the village’s farmers are forced by circumstances to give up farming altogether. The development of new residential colonies within the village has changed the village to a great extent.

  Not only does the population of the village suddenly increase, but it also splits into two different social categories. The old village settlement remains almost intact with its original inhabitants, while the new residential colonies are inhabited by city dwellers. The people of the city belong to various caste, linguistic and regional groups. The village’s population is now highly heterogeneous, a fact that is not reflected in census data. Social ties between the old village and the residents of the new colonies are more and more tenuous and superficial. At times, a third component is introduced into the field. belong to this social group




New immigrants from rural areas who came to the city in search of employment. Finding urban areas more expensive, they settle in marginal villages, sometimes near factories, high-rise unauthorized slums located along roads, near drains etc.

With increasing physical evidence of urbanization around the village, the site of the village also receives some attention. Piped water supply, drainage and street lighting have been introduced. All this improvement in the village site has been made possible by the inflow of money through the sale of land and income from employment in the town. There is a progressive decline in the importance of agriculture as an occupation and the way of life in the village is becoming increasingly urbanised.


Urban Village Stage


The final stage in the transformation of a fringe village is reached when all land formerly in agricultural use is taken over for urban use. There is no agricultural land now. In many instances, the original villages are surrounded by low quality residential areas and illegal slums. With the increasing pressure of population on the town especially the poorer sections are forced to seek accommodation within the original village site. Thus, the original village population acquires a new character with a mixture of natives and newcomers. With overcrowding comes further deterioration in the level of civic amenities. The neglect of buildings and poor sanitary conditions reduce the urban village to slum status. The dignity of the original village has been lost, replaced by a den of crime and illegal activities including bootlegging. The urban village continues to exist until it is cleared for ‘redevelopment’.





The rapid growth of metropolitan cities has also brought about the spatial spread of urban areas. Cities have expanded in a haphazard and unplanned manner into the surrounding rural areas. There is a reverse flow of people from the city to the rural areas.


Agricultural land in peripheral villages is converted for industrial and residential use. In these newly developed areas, city dwellers migrate in search of better and cheaper housing. These areas often lack basic urban amenities. However, they are outside the purview of municipal taxes and regulation, and this acts as an incentive for new housing construction.


Suburbanisation is essentially a development of metropolitanisation, but still differs from it in terms of migration and its attendant problems. The term “suburb” refers to a place near the periphery of a metropolitan city. Suburbs are defined as urbanized nuclei that are located outside but within accessible range of central cities. They are politically independent but economically and psychologically linked to the services and facilities provided by the metropolis. They have substantial population density and predominantly non-rural occupations and typically urban forms of recreation, family life and education. suburbs different from cities

Huh. There are different types of suburbs.



  satellite city


A satellite city is considered to be a city with a metropolitan fabric that has a more diffused growth pattern of development. In some aspects, satellite cities are smaller versions of metropolises located outside the rural-urban boundary. They can also be defined as self-contained, politically independent and formally organized townships. The main function of satellite towns is to decongest the metros and it does so through a fourfold process.

  • By distribution of population
  • By stopping the flow of population to the main centre.
  • By distribution and relocation of industries and services.


  • Stopping the drain on the city’s already overburdened resources.




  rural urban limits, peri-urbanization


The rural-urban fringe is an area of mixed urban and rural land use between the point where full urban services are no longer available to the point where agricultural land use predominates. It is an area of mixed rural and urban population and land-use, starting from the point where agricultural land-use appears and extending to the point where villages have distinct urban land-uses or where Some people, at least, commute daily from the rural community to the city for work or other purposes. The phenomenon of rural-urban fringes is a recent phenomenon around Indian cities, its phenomenon was observed much earlier around western cities. There are mainly two types of administrative areas in the structure of rural-urban border:-

  • Municipal Town or Nagar Panchayat
  • Revenue Village or Gram Panchayat.

There are two basic aspects of the changes taking place in the marginal villages:-

  • Change in land use within the village.
  • Change in the social and economic life style of the village people.


Five stages of transformation of fringe villages or peri-urbanisation have been identified.

Rural level: where there is no daily movement of people from village to town for employment especially for sale of agricultural produce. However, there are occasional visits to the city for medical facilities, expensive clothing or agricultural equipment.

Stage of agricultural land-use change: In which the initial effect of the city is seen on the agricultural land-use in the villages. Here the town provides a market for products that the village is in a position to supply, such as milk, vegetables, flowers and fruits.

Occupational change phase: In this phase the village population reacts to job opportunities in the city, a concomitant change that occurs in the villages is related to the value attached to education and more children are sent in and out of school Is.



The process of occupational change progresses rapidly until most of the rural households have at least one member working in the city. This phase marks a big leap in terms of spatial mobility of the village population as the village is connected to the city by bus services. The whole material and non-material aspects of culture have changed in the village with the village selling urban goods. However, there is no visible improvement in basic amenities like water supply, sewage disposal and drainage.

Stages of Urban Land Development The process of land acquisition and development for urban land use is recognized in both the village and the city. More and more agricultural land in the village is acquired for urban use and the farmers in the village are forced to give up farming altogether. With increasing evidence of urbanization around the village, introduction of piped water supply, drainage and street lighting, the importance of farming as an occupation is seen to decline progressively and the way of life in the village increasingly getting urbanized.

Urban Village Stage


The final stage in the transformation of a fringe village is reached when all land formerly in agricultural use is taken over for urban use. The dignity of the original village has been lost, in its place a den of crime and illegal activities. Until it is approved for redevelopment, the “urban village” continues to exist as a virtual slum. The “urban village” is in practice and in theory an integral part of the city because it no longer has any agricultural land around it, but is surrounded on all sides by urban land use.




Suburb – A location near the periphery of a metropolitan city. Suburbs are defined as urbanized nuclei that are located outside but within accessible range of central cities. They are politically independent but economically and psychologically linked to the services and facilities provided by the metropolis. They have substantial population density and predominantly non-rural occupations and typically urban forms of recreation, family life and education. Suburbs are different from cities.

Satellite cities – cities with a metropolitan fabric that have a more diffused growth pattern of development. In some aspects, satellite cities are smaller versions of metropolises located outside the rural-urban boundary. They can also be defined as self-contained, politically independent and formally organized townships.




Rural-urban fringe: The rural-urban fringe is an area of mixed urban and rural land use where full urban services are not available, to the point where agricultural land use occurs. 


Dualistic Labor System; Slums: Profile Of An Indian Slum



litigant labor system



Economic dualism is said to be characteristic of India and other industrialized countries, with two sectors, the formal (organized) and the informal (unorganized), living side by side. They reveal structural dualism in urban economies in terms of size, mode of production, organizations, technology, productivity and labor markets. More recently, a belief has emerged that economic growth and development need not be based on a large-scale and highly formalized economic structure. Now there is a development strategy, which lays emphasis on the development of the small, unorganized and informal sector.

Two facts justify these assumptions. One is that, despite high rates of industrial growth and overall modernization, a large proportion of activity in urban economies in most developing countries continues to be in the unorganized sector. The second is that the informal sector reveals some positive characteristics with respect to its ability to generate employment and the uniform pattern of distribution. It is therefore likely that an emphasis on the informal sector has the potential to effectively reduce urban poverty.

In Böcké’s classical interpretation, the phenomenon of dualism refers on the one hand to an urban market economy generally of a capitalist nature and on the other to a rural subsistence economy characterized primarily by a stable agricultural system of production.

Less controversial is the notion of a certain socio-economic dichotomy that arises at a different stage of development, a process that invokes, or at any rate reinforces, the modern and traditional capitalist versus non-capitalist, in contrast to industrial urbanism. Production of the difference between agricultural rural mode. These economists see cities with their modern industries as dynamic centers from which the static character of the rural system, characterized by stagnant agriculture with very low labor productivity, can be gradually overcome. But the assumption that the surplus labor thus available will be absorbed in the modern sector does not stand out.


  During the last few decades, we have seen that the expansion of industrial employment opportunities has lagged far behind the growth of the urban labor force. The urban dichotomy that is evident today in many developing countries is not due to the slowly disappearing distinction between a modern-dynamic growth pole and a traditional static sector that has survived strongly in the urban environment, but to the overall economy. is due to structural disturbances within and society. The low rate of industrialization and the presence of surplus labor have been listed as major reasons why a dualistic system has emerged in Third World cities. The informal sector comprises a group of the working poor whose productivity is much lower than in the modern urban sector, most of whom are excluded.

The term informal sector was first introduced by Hart (1971), who described the informal sector as that part of the urban labor force that falls outside the organized labor market. The informal sector has since been greeted as a promising concept and further refined by a mission from the International Labor Office (ILO), which studied the employment situation in Kenya within the framework of the World Employment Programme.




Formal (Organised) Sector:


The formal (organized) sector is defined as the sector comprising the labor force in all public as well as private sector enterprises employing 10 or more workers.

Organized units are being supported and protected by the government. They provide better wages, good working conditions and other benefits to the workers even pension facilities. Many have developed and built their career with the organized units. There are manufacturing organizations – public sector service organizations such as commercial banks and insurance private sector service organizations such as banks – transport tourism organizations finance companies or communications such as mobile phone services, television etc.

The formal (organized) sector is standardized. They mostly work on settled lines. The demand for labor in this sector is balanced with the supply through the efforts of employment exchanges, counsellors, advertisements, trade unions, etc. A formal selection process is used for appointment. Workers or employees are regulated by formal laws.


Organization is also formally controlled, there is hierarchy of authority, well organized work, knowledge base adopted as specialization, effective line of communication, high pay scale according to ability and experience. Formal, indirect, contractual, impersonal and temporary relationships are prominent in such organisations.


Organizations in this area train and develop employees through their own efforts. They pay wages/salaries to employees based on their job evaluation and their ability to pay. Trade unions are strong in these organisations. They regulate the HRM practices in these organizations.

According to studies by Braverman and others, skill initiative and control have been steadily removed from work with the development of mechanized and automated production. Furthermore, the labor process in capitalist society has been increasingly rationalized. The functions are finely divided into simple operations and directed and arranged by the management.

is located. This development applies not only to the manufacturing industry but also to work in general.


The net results of these changes are (1) scarcity of labor power (2) loss of its control over the work process and especially cheapening of labor power. The laborers are forced to sell their labor power in order to survive. There has been a process of degradation of their work which involves removal of skills, responsibility and control and dominance of employers and management over the work process. The organized sector is limited to manufacturing, electricity, transport and financial services. Organized sector includes public and private sector. Now due to the policy of the government to reduce employment in the public sector, the share of public sector in organized sector employment has come down. Private sector is profit motivated and does not create employment as public sector.




  Concept of Informal [Unorganized] Sector: Introduction, Meaning and Definitions:-



The informal or unorganized sector as defined by the Central Statistics Organization includes all those incorporated enterprises and household industries [other than organized] which are not regulated by any law and which do not maintain annual accounts or balance sheets.

Economists have tried to define this sector in terms of the organization of capital, the technology used [traditional or modern] in terms of the nature of the products [local or common] or the consumers of the products [rich or poor]. Banerjee describes the unorganized sector as low-tech, that it caters to local markets and consumers from the lower strata of society.


A third use of the term informal or unorganized sector is by trade unions and those concerned with labour. According to Nirmala Banerjee, the unorganized sector… usually consists of productive activities with loose-knit groups bound by informal working contracts of various kinds. That’s why it is also called informal sector. This includes a section of self-employed, wage earners, family producers as well as domestic workers.


  The importance of this definition is that it brings out the nature of the employment relationship as the main factor that differentiates the organized sector from the unorganized sector. In this definition, three main features of the informal sector are given. The ‘productive activities’ are carried out by ‘loosely formed groups’ bound by ‘informal contracts’.

The constituent organizations in an unorganized sector include small scale industries, small scale industrial units, cottage industries, shops and establishments, hotels, restaurants, mobile business or trading units, taxi operators, agriculture, etc.

The demand and supply of labor in this market is mostly balanced through casual labor and contract labor. These practices are widely prevalent in third world countries. Organizations in this sector do not follow any systematic or scientific method of recruitment or selection. The candidates are mostly employed informally. They also accept low wages. Sometimes their skill is considered.

Organizations in the informal sector do not design jobs, do not plan for manpower. They do not take any measures to train or develop the employees. In informal sector organizations, performance appraisal never takes place through formal means.

Employees are generally paid the minimum wage declared by G.

Government. Some organizations refrain from paying even the minimum wage. Generally, organizations in the informal sector do not provide employee benefits, welfare measures, fringe benefits, etc.

Most of the organizations do not have trade unions. Trade unions are usually weak in these organizations as well, wherever they exist.

Workers’ grievances, industrial conflicts etc. are very rare in this sector as the workers have to accept the wages paid by the employer. Apart from this, they also accept other terms and conditions of the job.

The informal sector mainly comprises people who are self-employed and provide essential services but in an unorganized and unauthorized manner e.g. Street vendors. This sector can cover a wide range of activities such as retail and wholesale trade, repair and servicing, casual labor and manufacturing etc.




By definition – units in the informal sector are those which employ less than 10 workers. But it is difficult to differentiate between the formal and informal sectors.

The informal sector is largely unorganised, unregistered and therefore vulnerable. Migrants usually enter the region for the dire need of survival. The informal sector is also known as the large self-employment sector.

The concept of informal sector has developed in the historical context of urbanization, industrialization and migration. Inevitably the industrialization of the peasant economy gave rise to the process of urbanization and mass migration from rural areas to cities. Both push and pull factors were responsible for the migration towards cities. But due to the low rate of industrialization and its increasingly capitalist i.e. profit-oriented nature, not all migrant labor could be absorbed into the industrial or what is also called the modern sector. After failing to get a job in the industrial sector, this

The father’s surplus labor went for alternative sources of income and in the course of this search, found informal ways to earn it and in the process created a subsistence segment within the formal economic system – a living sector. Also known as the informal sector. There is no formal structure or recognized or official organization for economic management in the informal sector.



According to the SNA of 1993, the informal sector refers to productive institutional units that have (a) a low level of organization (b) little or no division between labor and capital and (c) are based on casual employment and/or social relations. But there are labor relations. Opposition to formal contracts These units belong to the domestic sector and cannot be associated with other units. In such units the owner is solely responsible for all financial and non-financial obligations incurred for the productive activity. For statistical purposes, the informal sector is considered as a set of production units that form part of the household sector in the form of household enterprises or equivalently – unincorporated enterprises owned by households.

Hart Keith J in Small-Scale Entrepreneurs in Ghana and Development Planning used the concept of the “informal sector” to denote a large self-employed sector. In his field study of Ghana, Hart observed that new entrants to the urban labor force who were unable to enter the formal sector found means of livelihood.

The unorganized informal sector is a segment of the urban economy where production and marketing relations are informal in nature.




Attempts have been made in ILO studies to identify and differentiate the informal sector. Taking cues from the dual nature of urban economies in developing countries, nature of organization (organized and unorganized), technology used (traditional or modern), mode of production (capitalist or subsistence), state recognition of economic activities and products and State regulation of labor markets are taken as the lines that demarcate the formal and informal sectors. Thus sectors like manufacturing, construction, transport, trade and services can be considered as informal sector.


But again to differentiate informal sectors from formal sectors (sectors), some criteria have been developed by ILO groups which are as follows:-

  1. a) Small size of operation – The production or manufacturing activities are carried out on a small scale.
  2. b) Family ownership – There is an informal relationship between the employer and the employees. There is no functional division of labor or specialization.
  3. c) Casual nature of employment – Jobs are highly temporary.


  1. d) Use of indigenous and non-modern (traditional) technology – which is labor intensive with completely manual operations involved in the production process.
  2. e) Lack of access to state benefits – such as organized capital market benefits, bank finance, foreign technology, foreign exchange concessions, imported raw materials, protection from foreign competition and many other concessions and incentives that are given to formal sector enterprises b



On the basis of their being recognized by the Govt.

  1. f) Competitive and insecure markets – mainly arise due to ease of entry, nature of the product being produced and its demand and exploitative marketing arrangements.
  2. g) Insecure labor market – leading to insecure jobs, underemployment and reduced wages.
  3. h) Scattered nature of workplace or employment – the place of work is spread. Different types of activities are taking place at different places even in the same line of production.




  1. i) Contract nature of labor – Most of the workers are employed on contract basis hence they are most likely temporary.
  2. j) Workers – Semi-Skilled and Illiterate:- Most of the skilled or unskilled workers do not work in the informal sector. The workers are generally migrants and do not have adequate qualifications.

The ILO considers the informal sector to be a job-generating sector because it can absorb people who cannot enter the organized formal economic system because of certain inefficiencies. It is argued that the informal sector provides jobs and supplies goods and services that are needed by the lower and middle classes.



Main features of informal sector



According to ILO UNDP, there are some identifiable characteristics of the informal sector which are as follows –

1) Ease of Access – Since there is no need for any formal selection, the needy workers get jobs easily. There is no interview or specific qualification required. In urban areas, this sector absorbs anyone who wishes to enter. Such a sector attracts skilled, unskilled, semi-skilled, illiterate, temporary or permanent workers.

2) Reliance on indigenous resources – The informal manufacturing sector uses locally, readily and cheaply available materials for production. This brings down the cost.

3) Family Enterprise – Most of the family members work in the enterprise.


4) Small Scale Operation – Production is done on a very small scale. The number of workers is less and the capital invested is also less.

5) Labor intensive and optimized technology – Most of the work is done either by hand

Or done by simple tools and machines.

6) Skills not acquired formally – workers learn skills only by practice. At the time of hiring, many times the employees do not have any required skills


7) Market very uncertain – Since the products are sold door to door or to very poor or middle class people, the market is not stable or protected.

8) The informal sector is not officially recognized – many shop owners have no registration with the government. Without any formal recognition, they lose many tax concessions or reductions in import duties, thus putting them at a loss. They also cannot apply for space or water facilities.





Due to the growth of informal sector



  1. a) Rapid urbanization – Due to the attraction of the city, a large number of people are migrating from the rural areas to the cities. Since not everyone can find a job in the organized industrial sector, they enter the informal sector and accept any job.
  2. b) Lower and middle class market – Since the proportion of middle class population is huge, there is no dearth of consumers. The sector can expand very rapidly.
  3. c) Abundant supply of labor – Due to large scale city ward migration – not all migrant workers could be absorbed in the industrial sector. Not all of them can get a job easily or immediately.


Therefore, workers accept jobs in the middle time or in the informal sector to fill the gap. Therefore, there is no shortage in the supply of labor in this sector. Many people enter into construction work, transport work, home to home delivery or selling, home business of selling apparel, saree or any consumer goods, garage, rag picking, street hawking, jewelery making etc.

  1. d) Creation of employment opportunities – The informal sector creates more and more employment opportunities. Unskilled, illiterate, inexperienced, skilled trained men, women and children all types of labor can be absorbed in this sector without any reservation. This sector is not required to follow any legal rule or control. There is no government intervention or quality checking system of the products. There is no strict wage payment system. The owners of the workshops maintain an informal relationship. The income may be low, but there is no dearth of jobs.




  1. e) Low cost of production – Due to cheap labor, which is easily available and involvement of family members, the initial cost of production is very low. In addition, the raw material used for production is not very expensive. This encourages many entrepreneurs to enter the informal sector.
  2. f) Informal nature of the sector – This sector does not require any formal interview or be specific about the required qualifications among the workers in need. The relationship between employer and employee is very informal, personal and regulated by need norms. the countryside

The system is not regulated by law. There is no problem of labor conflict. Workers do not need to be highly qualified or educated. You can get a job through personal contacts.








Comparison of formal and informal sector



1) The formal sector includes both the public and private sectors. The informal sector includes only the private or individual sector.

2) The formal sector is organized, controlled and regulated by law. The informal sector is not organized, controlled and regulated by law.

3) In the formal sector the products are mainly sold to middle and high income groups. The informal sector mainly sells a variety of goods and services to low income groups.

4) The formal sector is capital intensive and uses imported technology making labor productivity high. The informal sector uses labour-intensive, indigenous technology that leads to low productivity.

5) The formal sector pays higher wages, provides other benefits and retirement plans. The informal sector does not offer high wages.

6) The formal sector follows formal written rules and selects employees through interview procedures, advertisements, etc. The informal sector does not follow written rules, laws or follow formal selection procedures.

7) Earlier the formal sector used to give employment to a large number of people. Today, the informal sector is the largest employer.


8) Formal sector provides more job security, pension scheme, promotion, status, authority etc. The informal sector does not provide all these.

9) Preference is initially given to educated, qualified and experienced people in the formal sector. In the informal sector, there is no need to have skills initially, can be learned through experience, no formal educational qualification is required.


To conclude, the two sectors, the formal and the informal, co-exist side by side. They reveal structural dualism in urban economies in terms of size, mode of production, organization, technology, productivity and labor markets. There are essentially some dualistic tendencies in the urban labor force. On the one hand, those who have to earn their livelihood with the help of low paid, unskilled, intermittent work which is considered to be of low standard due to considerable physical effort

On the other hand, those in permanent employment require formal education or trained skills – jobs with fairly high and often regular pay that ensure security and social responsibility for the worker. However, these profiles are seen most clearly at the extremes of the two poles of the labor force. As the distance between the extremes narrows, equality in recruitment, working conditions and the bargaining process gradually overcomes the differences between different categories of labor in this respect. In other words, the different ranges are marked by gradations rather than watertight divisions. To divide the employment system into two sectors would amount to an approach that is overly rigid and does not do justice to the need for a more holistic categorization. In Jan Bremann’s terminology, the concept of “market” should be applied to the entire labor force. The structure of this market is not binary, but it has a more complex ranking.

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