Revisiting Informal Sector: Nature, Measurement and Emerging Perspectives

The informal sector remains one of the most important structural features of labour markets in developing economies. In India, it continues to absorb a very large share of workers despite three and a half decades of relatively high economic growth and repeated reforms, while incomes for many participants remain low. Informal employment has also come to refer to work arrangements without secure tenure, social protection, or formal contracts, regardless of whether the enterprise is registered or unregistered. Around 82 percent of India's workforce is engaged in the informal sector, and nearly 90 percent is informally employed either in informal enterprises or through informal arrangements inside formal enterprises. Comparable patterns are visible across South Asia, Sub-Saharan Africa, other African countries, and parts of Latin America and Southeast Asia.

The durability of informal activity challenges classical and neoclassical development expectations that economies would gradually move from low-productivity informal work into formal, modern, high-productivity industry and services.Instead, structural change has often involved slow growth of formal jobs, deeper casualisation and newer types of informality linked with digital platforms and climate stress. Women and migrants are over-represented in informal work, while care responsibilities and gendered employment hierarchies often keep women at the lower end of value chains.

Globalisation, digitalisation and platform-based markets are reshaping the conditions under which informal enterprises operate. They open possibilities for market access, digital payments, financial inclusion and enterprise expansion. At the same time, stronger competition, technological disruption and compliance requirements create risks for small and resource-constrained units. Digital platforms have also generated a form of new informality, where gig and platform workers are treated as partners rather than employees and are therefore excluded from many labour-law protections. Boundaries between formal and informal production are increasingly blurred as formal firms subcontract or outsource to informal units in order to reduce costs, creating a grey zone of production and employment. Similar informalisation is visible in modern services such as retail, hospitality, logistics and the care economy.

Climate-related risks add another layer of vulnerability. Informal enterprises dependent on natural resources, outdoor activity andlocalised markets are especially exposed to extreme weather and environmental degradation. Informal workers also face frequent loss of work days, health shocks and debt cycles associated with climate-induced disruptions.

Measurement remains a major challenge. In India, the National Commission for Enterprises in the Unorganised Sector (NCEUS) made pioneering contributions to defining and estimating the unorganised economy. Yet reliable enterprise-level records are often absent, definitions and methodologies change over time, and output and income may be under-reported. Even with improvements in statistical systems and national accounting, capturing the full range, value added and diversity of informal production remains an unfinished task.

Policy experiences have been mixed. Governments in India and elsewhere have used concessional finance, labour-law reforms, social protection schemes, formalisation policies, technology programmes and skill-development initiatives. Some interventions have helped, but many have not overcome structural constraints. The rise of unorganised-sector unions in several countries, including India, offers possibilities for rights-based development strategies in a context of widening income inequality. The Goods and Services Tax in India has encouraged incremental formalisation through tax incentives and digital compliance, yet structural informality persists because of enterprise size, labour-market conditions and limited compliance capacity.

The prospective paper writers may foreground the informal sector and informal employment as objects of study - their definitions, measurement, enterprise structures, productivity, finance, formalisation, value-chain links, resilience and policy support. Employment relations, worker protection, and platforms may be examined, but mainly through their connections to informal enterprises, informal labour arrangements, and the formal-informal interface. A few indicative sub-themes for prospective paper contributors include

  • Nature, heterogeneity and structure: The evolving composition of informal-sector enterprises in developing and emerging economies amid growth and structural shifts.
  • Measurement and estimation: Methods for estimating the size, output and value added of informal-sector enterprises.
  • Economic contribution: Role of informal enterprises in employment generation, income creation, and local and regional development.
  • Informal sector and informal employment: Conceptual links, differences, overlaps and difficulties in distinguishing enterprises from employment arrangements.
  • Technology adoption and modernisation: Productivity, constraints to growth and possibilities for upgrading informal enterprises.
  • Wages and earnings: Income differences between formal and informal sectors and between formal and informal employment arrangements.
  • Gendered impacts: How formal and informal employment affect women and men differently, including care responsibilities and value-chain positions.
  • Subcontracting and outsourcing: Magnitude, forms and effects of subcontracting, outsourcing and value-chain integration between formal and informal enterprises.
  • GST, taxation and regulation: Impact of tax policy, compliance regimes and regulatory frameworks on formalisation and sustainability of informal enterprises.
  • Credit and financial inclusion: Access to credit, digital payments and institutional finance for informal enterprises.
  • Digitalisation and platform-based markets: Market access, technological opportunities and disruptions affecting informal enterprises.
  • Sectoral dynamics: Structural shifts across manufacturing, trade, construction, services, care work and logistics.
  • Economic and climate shocks: Effects of COVID-19 and climate-related disruptions on resilience and sustainability.
  • Public policy and enterprise support: Effectiveness of formalisation strategies, enterprise-development programmes and institutional support mechanisms for productivity.
  • Trade, technology and artificial intelligence: Implications of ongoing trade and technological disruptions, including artificial intelligence, for the informal sector and informal employment.
  • Emerging work arrangements: new patterns of worker status, contracts and protection within informal settings, formal-linked informal work, gig work and platform work.
  • Institutional environment and barriers to formalisation: Regulatory frameworks, entry barriers and national or international experiences of bringing informal enterprises into formal economic systems.

Contributions may examine the structure, functioning and transformation of informal enterprises and informal employment, and may assess how policy, markets, technology, finance, climate change and collective organisation shape their future.