The informal market has much to offer

A fresh perspective is needed to see emerging markets referring not only to a growing economy but to a new kind of economy based on information, technology and knowledge. And the same applies to the informal economy where a more inclusive approach is needed to rescue it from simplistic notions of the informal and formal world operating as functionally independent entities with opposing legal status. [i] No longer is this to be trapped in perceptions of criminality adding fuel to a variation on a theme of Huntington’s Clash of Civilisations. There is more to be gained from synergies between the informal and formal markets and this paper sees Logistics as having much to contribute to this perspective.


In fact, as one study by Chen, Vanek and Carr (2004) makes clear, the informal economy is now characterised by three issues. First, fresh significance and permanence – it is not being reduced by growth; second, a contimuum of economic relations with the formal sector – many products combine formal brands with informal sourcing and; third, consisting of a complex segmentation around employment status – self employed or wage earning, seasonal or .[ii] In fact, the informal sector is not just about what Karl Marx called “petty commodity” trade or even anti development for being locked in small scale traditional handicrafts. The new digitised economy sees a paradigm shift in modes of production that further complexes the scope, scale and future of the informal economy. It is far more likely to grow than decline.   


From 1991, India has moved rapidly away from the Licensed Raj into an increasingly open market. The Hindu growth rates have been left behind as, fuelled by the huge success of the IT services sector, growth rates have climbed to over 7%. However, as a recent Task Force on Employment Opportunities[iii] points out that even continuation of such growth rates will not impact the employment situation. This is because the motor of growth has been capital intensive (manufacturing) or information intensive (in the service sector) rather than labour intensive and where jobs have been created they have been in the informal sector.


The following “continuum” can be seen in the value, supply or demand chain of countless products from apparel through to mobile phones. And overlaid on this is the significant issue of gender whereby industrial outworkers or homeworkers tend to be women and those on wages, men.  


The Formal / Informal market continuum:



Formal Employment

*      Permanent work (a small core usually with contracts of employment)

*      Regular temporary or seasonal work (with or without contracts of employment)

*      Casual and irregular work for short periods of the season or on a daily basis (with or often without contracts)

*      Contract labour employed by a third party labour contractor (often without contracts)

*      Migrant labour employed directly or through a contractor (often without contracts)

*      Small holder production, often involving family labour (paid or unpaid)

Informal Employment




Source: Lund & Nicholson (2003)[iv]


[i] Martha Alter Chen, Rethinking the Informal Economy: Linkages with the Formal Economy and the Formal Regulatory Environment. DESA Working Paper Number 46. (July 2007). A number of important theoretical insights are well covered and developed.

[ii] Chen, Vanek & Carr, Mainstreaming Informal Employment and gender in Poverty Reduction (2004)

[iii] Task Force on Employment Opportunities set up by the Planning Commission of India (2001)

[iv] World Bank Study, Lund & Nicholson, Chains of Production, Ladders of protection (2003)

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