We're living in a developing economy in which the informal sector constitutes a crucial part of the economic landscape. Some SMEs operate outside the formal economy, which contributes to GDP and employment, but remain undocumented and unregulated.

Well, the Indian Government recognized their need for bringing into the formal economic fold, and thus, Udyam Registration was introduced. Keep reading to know everything about the registration in detail and the potential impact made to formalize the informal sector. 

What is the Informal Sector?

Generally, the informal sector referred to as the unorganized sector comprises a range of activities that fail to be regulated by the government and don't adhere to any formal business regulations. Such kinds of entities are small-scale operations having minimum capital investment, limited access to formal credit channels, and fewer employees. 

What is Udyam Registration?

The Ministry of MSME has come up with Udyam Registration, which can be described as a simplified process for the registration of enterprises like micro, small, and medium. However, it has replaced the earlier system of UAM and aims to streamline the process. Thus, it turned out to be less time-consuming and more accessible for business owners. 

Steps to Register Your Enterprise 

Step 1: Visit the Udyam Registration Portal

Firstly, you've to visit the official portal of Udyam Registration. If you're a business owner, then make sure you're using the correct website to avoid any fraudulent sites. 

Step 2: Aadhaar Verification

Your registration process will begin with the Aadhaar number verification. It is important to have the Aadhaar card of the business owner or the authorized signatory.

Step 3: Filling in Details

When you're done with Aadhaar number verification, you'll be required to fill in basic details related to the enterprise. It comprises the name, address, type of organization, bank account details, the number of employees, and PAN number. 

Step 4: Categorization

After that, your enterprise will be categorized as medium, small, and micro as per the investment made in plant and equipment or machinery and the annual turnover. 

Step 5: Final Submission

Now, you have to go through your information for a review and submit your registration form.

Step 6: Udyam Registration Certificate

With the successful submission, a URN is generated, and the Udyam Registration Certificate is issued. 

Benefits of Udyam Registration

1) Eligibility for Government Schemes

Now, you can avail yourself of a range of government schemes to promote your enterprise. It comprises schemes for market development assistance, technology upgradation, skill development, and financial support to participate in international trade fairs.

2) Protection and Compliance

If you have a registered business, then your enterprise is entitled to several forms of protection and can comply with legal requirements. It comprises access to a grievance redressal mechanism, protection against delayed payments, and simplified compliance with tax and labor laws. 

3) Market Access

Udyam Registration can aid your business to gain better market access, both in terms of international and domestic. Thus, it can boost the credibility of the enterprise which makes it easy to secure contracts and form business partnerships with government agencies and larger companies.

4) Enhanced Competitiveness

After becoming a part of the formal economy, you can leverage innovation and technology more effectively. Also, you'll benefit from government initiatives whose aim is to improve the ease of doing business and promote digitalization. 

Impact on Formalizing the Informal Sector

1) Economic Inclusion

Formalization can make you participate in the economic activities of your country. Opportunities will be opened up for your business to access formal markets, government support, and financial systems. Such economic inclusion results in reducing inequality and the development of the economy. 

2) Increased Tax Revenue

Let your informal business into the formal economy to expand the tax base resulting in increased tax revenue. So, the additional revenue can be used for funding public service and infrastructure development, which can stimulate economic growth. 

3) Data Collection and Policy Making

The Udyam Registration portal acts like a comprehensive database of MSMEs. Such data is invaluable for policymakers because it allows them to design support mechanisms and targeted interventions. Also, it aids in understanding the challenges and needs of the MSME sector and formulating policies that address the issues.

4) Employment Generation

Formalizing your informal business can result in social security and better working conditions for employees. Your enterprise has chances to comply with labor laws to ensure benefits and fair wages for workers. Thus, there will be increased productivity, job satisfaction, and higher employment rates. 

Challenges and the Way Forward

1) Digital Literacy

As the registration process is online and that's why digital literacy is a prerequisite. There is a need for efforts to improve digital literacy among small business owners, mainly in semi-urban and rural areas. 

2) Support Mechanisms

With support mechanisms like call centers, business owners can get aid to navigate the registration process. Such kind of support systems can resolve queries and guide to make the process smoother. 

3) Awareness and Education

There are small business owners in the informal sector who might not be aware of the Udyam Registration. Thus, there is a need for educational initiatives and awareness campaigns to ensure these entrepreneurs have a basic understanding of registration. 

4) Infrastructure and Accessibility

It is crucial to ensure that the necessary infrastructure is in place to support online registration. Generally, it comprises access to smartphones or computers and reliable internet connectivity. 

Conclusion

It can be said that Udyam registration is more like a landmark initiative that can easily bring informal enterprises into the formal economy. However, the only thing required is the right initiatives and strategies to pave the way for a resilient, inclusive, and robust economy.