Third World Economy: Harnessing the Potentials of Informal Sector for Sustainable Development in Developing Nations

Prof. Satish C. Sharma, Mrs. Harshila Bagoria, Mr. Sumeet Saurabh


Economists have long thought the underground economy - the vast, unregulated market encompassing everything from street vendors to unlicensed cab drivers -- was bad news for the world economy. Now it's taking on a new role as one of the last safe havens in a darkening financial climate, forcing analysts to rethink their views. The Informal Economy exists in both developing and developed nations, though it is most often associated as an engine of economic dynamism in developing countries. The concept is generally defined as the sum of economic income generating activities excluding those that involve contractual or legally regulated employment or enterprises, which constitute the formal sector. The common examples from the informal economy include workers operating "off the books‟ for cash, such as street vendors, construction workers and taxi drivers. Often, informal businesses are small and family-run or run by a single entrepreneur. The concept is elusive because meaning mutate while being appropriated by different paradigms, disciplines, interests, and moments in history. Also, in developing countries, there is often no clear distinction between formal and informal sectors- large factories and state run enterprises have informal labour forces working besides their formal counterparts.

This paper argues that the concept of the informal economy remains inadequate and illdefined to deal with the dynamism of the non-formal sector in developing countries’ policy dilemma. Informal Economy is becoming a lot more important now, as the global financial meltdown casts millions of people out of steady-paying jobs. Especially in developing economies, many of those people are landing in the informal sector, which has become a critical safety net as the economic crisis spreads. India may be leading the pack in terms of new job creation but since 2000, there has been faster growth in informal sector employment than in organized sector salaried jobs.

Key Words: -

Informal Sector, Intensive Symbiotic Relationship, An Informal Collaboration Consumption, Negative Effects of

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