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Prime Minister Narendra ModiReuters file

The government has proposed a new plan to create more jobs by training barefoot entrepreneurs, who are a big part of the informal economy.

According to two government officials, the Ministry of Skill Development and Entrepreneurship has planned to reach out to tens of thousands of "barefoot entrepreneurs" to train, mentor and equip them to join the formal economy and help in creating thousands of new jobs, Mint reported.

Barefoot entrepreneurs are those engaged in businesses that range from small grocery stores to tailoring shops, roadside vendors to small laundry and sundry services in smaller areas.

The ministry has selected Chhapra in Bihar to launch the project.

"If 15 million of such establishments add even one more employee to their current capacity then 15 million new jobs will get created," said a top official.

In India, the informal sector includes employment such as manufacturing, construction and trade (wholesale and retail).

One of the major challenges that the government still faces is the problem of job creation. As per the Centre's own estimation, India needs to add about 20 million jobs every year. However, the actual employment generation is not even a fraction of Centre's estimate.

Layoffs in the formal sectors like information technology (IT) and telecom have also further added to the unemployment stress in the Centre. Industry analysts suggest that the situation in the formal sector might even worsen in future due to upgradation, automation and demand for advanced skills.

According to reports, more than 90 percent of the workforce in India is working as informal labour. As per the 2011-12 employment and unemployment survey of the National Sample Survey Office (NSSO), nearly 50 percent of the workers are employed as informal workers.

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Daily wage workers wait for employment on a street side at an industrial area in Mumbai March 30, 2009 (representational image).Reuters file

However, the informal sector which contributes to almost half of national income and employs more than 90 percent of all workers, remains neglected in most policy initiatives.

Also, the informal sector commonly includes low-skilled or unskilled workers. Hence, an initiative to train such workers will most likely boost employment.

"Any effort that boosts entrepreneurship will create jobs, that's better than a situation where the problem is, as some say right now, jobless growth," said S Parasuraman, director at Tata Institute of Social Sciences.