A recent report by India Ratings highlights the significant impact of economic shocks post-2016 on India’s informal sector, pegging the loss at 4.3% of GDP. The report underscores the need for a judicious mix of policies to ensure the coexistence of formal and informal sectors, which are both vital to the economy.
The informal sector, which includes a large portion of the workforce and numerous small enterprises, has faced challenges due to demonetization, GST implementation, and the COVID-19 pandemic. These shocks have disrupted livelihoods and reduced economic activity, exacerbating income inequalities and poverty levels.
To address these issues, the report suggests a balanced approach that supports formalization while providing adequate protection and incentives for the informal sector. This strategy aims to harness the strengths of both sectors, promoting sustainable economic growth and development in India.
