Informal Sector Workers in 2025: Changes and Persistent Challenges

The informal sector continues to be a key player in the global economies in 2025, hiring 80% of the Indian workforce and accounting for 45% of GDP, but the recent survey has revealed that the road to formalization is slow and has uneven results. The number of informal businesses in India is at its highest ever since, with 8 crores as per the July-September 2025 period, the number of workers remaining constant at 12.9 crores, urban job positions going up to 6.9 crores, and internet use in the sector going up to 39%. The share of women in the workforce is at 28.7%, but the manufacturing industry saw a reduction in its employees by 9.3% during the first quarter, which is an indication of the sector’s weakness. For more labour rights insights and workplace updates, visit our Labour Rights page.

On the other hand, formalisation benefits where EPFO records show 139.78 lakh new subscribers in the fiscal year 25 also seem to be hindered by problems such as very low salaries and the global warming situation that is cutting down the labor force by losing 259 billion man-hours every year. This article attempts to examine the changes that took place in 2025 and the reforms that are still needed.

Positive Shifts in 2025

Informal sector employment in India was back to pre-COVID-19 levels, with a net addition to EPFO of 139.78 lakh, which was the highest among all years since FY19, and the majority was young workers (61% were below 29 years) and female workers (25% were new to EPFO). Explore a Simple Guide to Provident Fund Basics and Withdrawal. Digitalization got to the companies’ side as 39% of them turned to the internet for transactions, while the urban population of the working class rose by 7.2%, indicating the development of the gig economy (12 million workers). Lakhs of people were covered under Government initiatives like Atal Pension Yojana by July 2025, offering some social security to 80 lakh. See what are the Gig Workers’ Rights in India: like Social Security, Platform Duties and benefits.

Persistent Vulnerabilities

In spite of the improvements, there are still 61% of women workers in the non-agriculture sector that are informal, they receive poverty-like wages, have no protection, and only 8.25% of graduates are in skilled jobs, hence, they are actually underemployed. The number of manufacturing units decreased by 4.7% to 2.06 crores in the first quarter of 2025, causing a total job loss of 2.1%. Extreme weather events have the most impact on outdoor workers, with heat alone being responsible for huge hour losses. The self-employment rate reached 58.4%, which very often is a sign of insecurity rather than the opposite.

What Still Needs Action

• Social Security Extension: Portable benefits, health insurance, and pensions for gig/informal workers beyond pilots.
• Skill Development: Bridge mismatches via targeted training for 80% informal force.
• Regulatory Reforms: Simplify registration, enforce minimum wages, and implement climate-resilient policies.
• Data and Monitoring: Monthly PLFS from Jan 2025 aids tracking, but enforcement lags.