Informal economy in South Asia

A vendor selling forest produce in Nagaland, India. © ILO/ Vijay Kutty

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Despite high levels of economic growth during the past two decades, the informal economy in India still accounts for more than 80 per cent of non-agricultural employment. Informality is found in both the traditional informal economy and – increasingly – through the growth of informality in the formal sector. Limited employment creation in the formal economy means that for many people the only alternative is to seek employment in the informal economy.

Informality also has a gender bias. Women are somewhat more likely to be engaged in the informal economy but significantly more likely than men to be working as informal workers in the formal sector.

The growing level of informal employment in the formal sector is largely due to the growing use of contract labour and outsourcing of production. This also suggests that encouraging the informal sector to formalise with a mix of incentives and enforcement is no longer enough.

India has undertaken a number of initiatives to address informality, including targeted schemes for promotion of micro, small and medium enterprises and legislative measures such as the Unorganized Workers Social Security Act, Contract Labour (Abolition & Regulation) Act, and Workers’ Welfare Boards.

The ILO’s work on the informal economy in India is carried out in partnership with the tripartite constituents – government, workers’ and employers’ organizations - policy-makers, civil society and the academic community. It includes a range of programmes and initiatives at policy and sectoral levels.
The Way out of Informality project seeks to facilitate policy dialogue through research, and, at local level, identify best practices that can be replicated and scaled up. The local level activities are concentrated in Pune, Maharashtra and focus on the automobile sector.

The Formalizing Employment in Domestic Work project uses initiatives that are designed to progressively bring domestic workers within labour and employment regulations and laws, and define the formal elements of employment relationships. The project works in consultation with representatives of employers, domestic workers and the government.


Key resources

  1. Promoting transition towards formalization: Selected good practices in four sectors

    This publication is a collection of innovative practices and policies, which address formalization in the sectors selected by the constituents during the inception of the Way Out of Informality project.

  2. Way out of Informality – South Asia Brochure

    A brochure providing a brief overview of the Way out of Informality Project being implemented in South Asia, including information on the background, target group, project strategy, geographical coverage, priority sectors and key partners.

  3. R204 - Transition from the Informal to the Formal Economy Recommendation, 2015 (No. 204)

    At its 104th Session (2015), the International Labour Conference (ILC)  adopted the Recommendation concerning the transition from the informal to the formal economy (Transition from the Informal to the Formal Economy Recommendation, 2015 (No. 204))  based on strong tripartite consensus and near unanimous vote, following a two-year process of consultations. This page gives a brief overview of the meeting.

  4. Formalization of the informal economy: Follow-up to the resolution concerning efforts to facilitate the transition from the informal to the formal economy

    The paper provides a brief overview of the new Transition from the Informal to the Formal Economy Recommendation, 2015 (No. 204), adopted by the International Labour Conference in 2015. It also establishes the priorities of a possible strategy for action by the Office for the period 2016–21, aimed at giving effect to the related resolution in support of constituents’ efforts to implement the Recommendation.