Berkley Center

There were so many foreigners on the beach (mostly Russians) that I could have been anywhere in the world, save for one constant reminder—the Indian women who traipsed up and down the shoreline, wearing saris in spite of the heat. The women were hawking everything from fruit to jewelry to sarongs to bags, and if your eyes lingered a little too long they would sense an opportunity and come over to you, prepared to stay until they made a sale.

As tourists looked through their items, the women would glance nervously down the beach. I soon discovered why once I saw a police jeep zooming across the sand, causing the women to drop all of their merchandise and run to hide. Legally, these women were not allowed to sell their trinkets here. Demand still existed, however, and so this cat and mouse game continued.

These women are part of the informal economy—also known as the black market or the shadow economy—comprised of activities that fall outside of government protection and regulation. The type of work found in this sector is vast; street hawkers, shoe shiners, garment workers, street children, home businesses, garbage collectors, and traffickers are all part of it. In OECD countries, the informal economy accounts for less than 10 percent of the economy, but in developing countries it is usually around 50 percent. In India, the informal sector accounts for 90 percent of non-agricultural employment, and at least half of total GDP. The informal sector constitutes 75 percent of all Indian businesses, making this one of the largest informal economies in the world.

The upsides to this system are patently obvious to any traveler in a developing country. In my travels, I’ve always been overwhelmed by the variety of cheap goods to be found in markets and on the side of the street. Buying from the informal sector is certainly less expensive and easier, not only for tourists but also for the urban poor. But the existence of this parallel economy, as ubiquitous and essential as it may be to everyday life, is endlessly controversial because of the costs to the workers who enjoy no protection under law. These women selling their wares on the beach can be arrested, harassed, and fined at any time. They are prone to bribery and extortion tactics used by the police. At any moment, they might lose all of their merchandise. They do not have health insurance, a retirement account, or sick days. Some informal workers can be forced to work in cruel or exploitative conditions, with no way to file complaints.

But this is more than just an issue of justice, it is also a question of economic growth. Informal workers and unregistered businesses have little access to formal financial channels, meaning that micro-enterprises have little opportunity to scale. Clearly, India must resolve these issues moving forward, both for growth and for the sake of the 90 percent working in the informal sector.

The coming week may prove to be significant in changing the status quo. The 2015 budget will be revealed, and one of the focus areas is labor law. It is hopeful that they will also reveal measures to ease entry of workers into the formal sector. For the sake of the hardworking women on the beach, I hope that this happens and that they are one day recognized not as illegal street hawkers, but as micro-entrepreneurs.