The Informal Economy and Street Vendors
Why Informality Persists
High costs of registration, low productivity, and a large supply of workers keep much of India informal.
If formal jobs are better, why are there so few?
Compliance costs
Registering, filing taxes and following labour laws can be expensive and complex for tiny firms.
Low productivity
Small firms may earn too little to afford wages and benefits required by formal rules.
Labour supply
Many people need income and there are not enough formal jobs, so they create their own work.
Fear of the state
Owners sometimes avoid registration to escape harassment or bribes.
She cannot afford the accounting help needed to comply with all the paperwork, so she stays unregistered.
It mostly reflects the lack of formal alternatives.
- Compliance costs are a barrier.
- Low productivity limits formalisation.
- Too few formal jobs exist.
- Distrust of officials matters.
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