India's informal economy: measuring it, covering it, and the drive to formalise it

The structural picture

Informality is the default condition of Indian work, not its exception. The Economic Survey 2021-22 estimated that of about 53.5 crore workers in 2019-20, close to 44 crore were in the unorganised sector, and it is widely cited alongside the Economic Survey’s finding that informal work accounts for roughly nine-tenths of employment and about half of gross value added. The precise share moves with definition — the “unorganised sector” (enterprises below a size threshold), “informal employment” (jobs without written contract or social security), and “self-employment” are overlapping but distinct measures — but every official cut leaves the formal, regular, salaried job a minority experience.

The most recent official employment data does not disturb that picture. The Ministry of Statistics and Programme Implementation Periodic Labour Force Survey put the all-India unemployment rate (current weekly status, age 15+) at 5.2% in September 2025 (PLFS Monthly Bulletin, PIB), while the PLFS Annual Report 2025 recorded a usual-status labour-force participation rate of 59.3% and self-employment at 56.2% — the single largest category of work (PLFS Annual Report 2025, PIB). The tension between a low headline unemployment rate and a workforce that is majority self-employed is the fact around which the entire debate turns: the argument is about the composition and quality of work, not its raw availability.

The institutions and data systems

Three sets of institutions act on the informal economy, each with its own instrument.

Measurement sits with MoSPI. The PLFS, launched in 2017-18, replaced the old quinquennial employment-unemployment surveys with annual estimates and, from 2025, an expanded monthly and quarterly release schedule (PLFS changes, PIB). Because the PLFS is the official lens, its methodology — how it treats unpaid family work, how it defines being “employed,” which reference period it uses — determines what the country believes about its own labour market.

Coverage sits with the Ministry of Labour and Employment. Its central instrument is e-Shram, the National Database of Unorganised Workers, launched on 26 August 2021 on a self-declaration basis and seeded with Aadhaar, which initially targeted an estimated 38 crore unorganised workers (e-Shram, PIB). By mid-2026 the ministry reported 31.78 crore unorganised workers registered, with the portal mapped to a set of government welfare schemes (e-Shram effectiveness, PIB). Alongside the registry sit contributory and assistance schemes: PM-SYM (Pradhan Mantri Shram Yogi Maandhan), a voluntary pension launched in February 2019 for unorganised workers earning up to Rs 15,000 a month and aged 18-40, promising Rs 3,000 monthly after age 60 with a 1:1 government match (PM-SYM, PIB), and the EPFO and ESIC systems that cover the formal-sector floor. The legal scaffolding runs from the Unorganised Workers’ Social Security Act, 2008 — itself the product of the Arjun Sengupta-led National Commission for Enterprises in the Unorganised Sector, constituted in September 2004, which found roughly 93% of the workforce in unorganised or informal work (NCEUS, PIB) — to the Code on Social Security, 2020, which subsumes it.

Formalisation is the third front, spread across ministries. The MSME ministry’s Udyam portal, the single registration-and-classification route since 1 July 2020, and its Udyam Assist Platform for informal micro units, draw unregistered enterprises into a formal database; the MSME ministry counts the sector at 30.1% of GDP and 45.73% of exports (PIB). On the jobs side, the Employment Linked Incentive (ELI) Scheme, approved by the Cabinet on 1 July 2025 with a Rs 99,446 crore outlay, pays first-time formal workers and their employers — and because its benefits flow only through EPFO enrolment, it is also a formalisation lever (ELI, PIB). The four Labour Codes, brought into force on 21 November 2025, are the overarching legal change: the Code on Social Security within them extends provisions to gig and platform workers, and the Code on Wages universalises a floor wage.

Gig and platform work: the newest front

Gig and platform work is the fastest-moving part of the informal economy and the one where the law is most actively being written. The first official sizing came from NITI Aayog’s 2022 report, which estimated 77 lakh gig workers in 2020-21 — about 1.5% of the total workforce — and projected the number would rise to 2.35 crore by 2029-30 (NITI Aayog, PIB). The Code on Social Security, 2020 was the first central law to define “gig worker” and “platform worker” as distinct categories and to enable aggregator contributions toward their welfare (PRS Legislative Research).

States have moved in parallel and, in places, ahead of the centre. Rajasthan enacted the Platform Based Gig Workers (Registration and Welfare) Act on 24 July 2023 — the first such state law — creating a welfare board, worker registration and an aggregator-funded welfare fee (Rajasthan Act, PRS). Karnataka followed with its Platform Based Gig Workers (Social Security and Welfare) Act, 2025, which likewise establishes a welfare board and an aggregator-funded fund and, distinctively, records a gig worker’s right to refuse a task (Karnataka Bill, PRS). The result as of mid-2026 is an overlapping central-and-state architecture whose operational rules — the welfare-fee rates, the collection mechanism, what the funds actually pay — remain substantially in draft.

The live debates (attributed)

The disputes cluster around each of the three fronts, and both sides argue from the same official numbers.

On measurement, the government’s position is that the labour market has improved: the PLFS shows unemployment low and labour-force participation rising (PLFS Annual Report 2025, PIB). Critics — including economists and opposition commentators — argue that the improvement is largely a rise in self-employment and unpaid family work rather than in regular salaried jobs, and that a person doing marginal own-account work is counted as “employed” identically to a salaried worker. That objection is a claim about composition, and the PLFS categories themselves are what both sides cite.

On coverage, the government points to the scale of e-Shram — tens of crores registered and mapped to schemes (e-Shram, PIB). The counter-position, advanced by trade unions and welfare researchers, is that registration is not entitlement: a Universal Account Number on a portal does not by itself guarantee a pension, an insurance payout or a defined benefit, and the 2008 Act was long criticised for creating enabling powers without funded, justiciable rights. The unresolved question is what each enrolment actually delivers.

On formalisation and gig work, the government and platform-friendly analysts argue that lighter unified compliance, portable social security and aggregator-funded welfare boards make formal-style protection reach workers it never reached before. Trade unions and some labour lawyers argue that the same instruments risk cementing a “third category” of worker who is neither employee nor independent — entitled to a welfare fee but not to the full employment rights that come with being recognised as an employee — and that welfare boards with unfunded or under-collected cess deliver little in practice. Aggregators, for their part, have contested the welfare-fee design and its legal basis in court in the states that have legislated.

Settled vs contested

What is settled is the scale and shape: the large majority of India’s workforce is informal by any official definition; self-employment is the single largest category; e-Shram has enrolled tens of crores; gig work is small in share but growing and now has both central and state legal recognition; and the formalisation drive (Udyam, EPFO-linked incentives, the Labour Codes) is the government’s chosen response.

What is contested is interpretation and delivery: whether the PLFS’s low unemployment rate signals a healthy labour market or masks a shortage of good jobs; whether registration on e-Shram translates into real, funded social security; whether the gig-worker laws protect workers or entrench a lesser category; and whether formalisation is drawing informal units into a better system or simply re-counting them. None of these is resolved by the data as it stands, because the data is what each side is arguing about.

Who owns this topic (and why we are here)

Coverage of India’s informal economy is fragmented across three kinds of page. Consultancy and law-firm notes track the compliance mechanics of the Labour Codes and the gig-worker Acts precisely but write for employers and aggregators. Exam-prep and current-affairs explainers list schemes — e-Shram, PM-SYM, Udyam, NCEUS — as syllabus bullets without holding the live contest over what they deliver. Development economists and think-tanks produce deep single-question studies (on PLFS methodology, or on gig-worker welfare) that rarely sit next to one another. What is missing is a single maintained, seat-of-power view that holds the measurement system, the coverage architecture and the formalisation drive in one place, tracks the numbers as they are officially released, and attributes each side of the argument rather than adjudicating it.

That is the gap this desk fills. It tracks the institutions — MoSPI and the PLFS, the Labour Ministry’s e-Shram and PM-SYM, the MSME ministry’s Udyam, the central and state gig-worker laws — as a connected system, folds new data and rule notifications into the current state of play, and makes no forecast and no recommendation.

Maintained topic brief. Analysis by IndiaStand — it characterises the state of play and the range of positions actually held, attributes each claim, and makes no forecast and no recommendation.