Informal economy of South Asia
The economies of South Asia—including India, Pakistan, Bangladesh, Nepal, and Sri Lanka—are significantly shaped by informal workers, smallholder farmers, micro-entrepreneurs, and other non-institutional actors. These individuals often operate outside formal regulatory and institutional systems, yet their contributions sustain vital sectors like agriculture, construction, retail, and services.
Role in Agriculture and Food Security
A significant proportion of South Asia’s workforce is engaged in agriculture, particularly in rural areas of India, Pakistan, and Bangladesh. Smallholder farmers — typically managing less than 2 hectares of land — are responsible for producing a large share of staple food crops. Despite facing challenges such as climate change, land degradation, water scarcity, and volatile market conditions, these farmers remain central to national food security strategies.
Urban Informal Workforce
Urban centers across South Asia rely on a large informal labor force that includes rickshaw drivers, domestic workers, street vendors, construction workers, waste pickers, and small shopkeepers. According to the International Labour Organization, informal employment accounts for more than 80% of total non-agricultural employment in countries such as India, Bangladesh, and Nepal. The World Bank also confirms that more than 80% of workers in South Asia are informally employed, with over 90% of micro and small enterprises operating outside formal structures.
Women's Contributions and Gender Disparities
Women across South Asia contribute significantly to both formal and informal sectors. Many are involved in home-based work such as textile weaving, embroidery, food processing, and handicrafts, in addition to unpaid care work and agriculture. Despite their economic contributions, women face systemic barriers including wage gaps, lower financial access, and limited legal protections.
Policy Implications and Social Protection
The predominance of informality in South Asia presents both economic opportunities and structural challenges. While informal workers and enterprises contribute substantially to GDP and employment, they often lack legal status, labor protections, and access to finance.
In response, the World Bank and development agencies advocate for "progressive universalism"—a strategy of expanding social protection to cover informal workers gradually, starting with the most vulnerable. They also recommend tailoring formalization policies to local realities instead of relying on rigid regulatory enforcement.<ref name="WB-Hidden" />
Role in Agriculture and Food Security
A significant proportion of South Asia’s workforce is engaged in agriculture, particularly in rural areas of India, Pakistan, and Bangladesh. Smallholder farmers — typically managing less than 2 hectares of land — are responsible for producing a large share of staple food crops. Despite facing challenges such as climate change, land degradation, water scarcity, and volatile market conditions, these farmers remain central to national food security strategies.
Urban Informal Workforce
Urban centers across South Asia rely on a large informal labor force that includes rickshaw drivers, domestic workers, street vendors, construction workers, waste pickers, and small shopkeepers. According to the International Labour Organization, informal employment accounts for more than 80% of total non-agricultural employment in countries such as India, Bangladesh, and Nepal. The World Bank also confirms that more than 80% of workers in South Asia are informally employed, with over 90% of micro and small enterprises operating outside formal structures.
Women's Contributions and Gender Disparities
Women across South Asia contribute significantly to both formal and informal sectors. Many are involved in home-based work such as textile weaving, embroidery, food processing, and handicrafts, in addition to unpaid care work and agriculture. Despite their economic contributions, women face systemic barriers including wage gaps, lower financial access, and limited legal protections.
Policy Implications and Social Protection
The predominance of informality in South Asia presents both economic opportunities and structural challenges. While informal workers and enterprises contribute substantially to GDP and employment, they often lack legal status, labor protections, and access to finance.
In response, the World Bank and development agencies advocate for "progressive universalism"—a strategy of expanding social protection to cover informal workers gradually, starting with the most vulnerable. They also recommend tailoring formalization policies to local realities instead of relying on rigid regulatory enforcement.<ref name="WB-Hidden" />
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