Informal Economy and Its Contribution to Poverty Reduction in Urban Area of Nepal

Dipak Bahadur Adhikari

The informal sector represents an important part of the economy and the labour market in many countries, especially developing countries, and plays a major role in employment creation, and income generation. The Nepal Labour Force Survey 2008 has estimated around 70 percent people aged 15 and over to be currently employed in the non-agricultural informal sector. The survey has also measured a new additional topic on informal employment. It is estimated that there were 96.2 percent of the currently employed, who were informally employed in all industries. Among them 66.0 percent were males and 34.0 percent were females. And 32.7 percent were in urban areas and 67.3 percent in rural areas.

Employment is the main source of income among the poor, and it is still considered to be the most effective vehicle to take them out of poverty. People in rural areas will keep coming to urban areas or big cities. So, economic growth, structural change are increasingly linked to urbanization process or urban expansion and people migration from villages to cities, and more people will live in urban settlements than in rural       areas. Metropolitan cities like Kathmandu can offer the lure of better employment, education, health care, and they contribute disproportionately to the country’s economy. However, rapid urban expansion is often associated with poverty, rapid growth of urban informal sector.

The objectives of the study are to analyse the income and employment pattern of informal worker of urban area. This study is based on secondary data but some evidences are based on primary data which is related to street vendors of Kathmandu Metropolitan City.

The informal sector represents a challenge to policy-makers with regard to issues such as: improvement of the working conditions and legal and social protection of the persons employed in the informal sector; training and skills development; organization of informal sector producers and workers; urban development.

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