Yes, it is necessary to generate employment in formal sector rather than in the informal sector because –

Ø The formal sector provides social security benefits like pension, provident fund, gratuity, etc.

Ø The workers and enterprises in the formal sector have regular income as compared to the informal sector.

Ø Income earned in formal sector is more than that in the informal sector.

Ø The formal sector enterprises use updated and better technologies than the informal sector.

Ø Generating employment in formal sector will help in reduction of poverty and income inequalities.