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The Informal Economy in India: size, dynamics and impact

India is the third largest economy in the world with a GDP of $9.174 trillion (in 2017 constant PPP international dollars) in 2019, the year before the pandemic distorted most economic comparisons. This compares with $20.563 trillion in the United States and $22.492 trillion in China. These comparisons are made on the relative sizes of the measured economy using compatible UN national accounting standards. These figures omit unmeasured estimates of the informal economy which can vary significantly from around 10% of GDP for developed economies to well over 40% and more of GDP for many emerging markets. The informal economy is India is known to be one of the largest in the world. Adjusting GDP to include it would not change the relative rankings of the top three economies, but would significantly reduce the gap between India and the USA and China, and given India’s favourable demographic profile, may shorten the period before it matches or even overtakes the two world giants. From the perspective of inequality and poverty levels, the Covid-19 pandemic will have hit workers in the informal economy harder in India with no government sanctioned support schemes and high levels of infections and a fall in remittances from the Indian diaspora. More information is needed.

Informal Economy

There is no precise definition of the informal , or shadow economy, but it consists of economic activities, whether legal or illegal, which have a value and which would, as transactions, add to the size of GDP and to public sector tax revenues if recorded. The International Labour Organisation......

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