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In graphs: How the pandemic helped shrink the informal economy

The defining picture of the first wave of the pandemic in 2020 was likely that of migrant workers going home. That shifted the limelight from the health care panic to the state of the workers who were part of the vast informal economy. While the pandemic has had a devastating impact on all categories of workers, those in the informal sector have been hardest hit. Now that the economy is starting to calm down, workers in the formal sector have largely recovered, but the informal sector is still suffering.

Research by the State Bank of India (SBI) shows that estimates for fiscal year 2018 show that the informal economy accounts for 52% of the overall economy.

What is the informal economy exactly? Informal economic activity is also not specifically defined globally. The International Monetary Fund says the informal economy is any unrecorded activity that has a market value and would increase a country’s tax revenue and GDP if recorded. It is difficult to measure the size and extent of the informal economy; The SBI’s research note states: “A globally recognized statistical framework for measuring the informal economy is still awaited.”

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