Out of the Shadows?

An important feature of the recent process of structural transformation in developing countries has been that the informal sector has remained an important element of manufacturing activity. In spite of rapid rates of economic growth since the 1991 reforms, the informal sector has been a persistent phenomenon in India, leading to significant policy concerns on the lack of inclusivity of economic growth. This book assesses how informal manufacturing firms have responded to the context of economic liberalization in India. It takes a novel approach to the study of informality, by viewing it through a 'production' lens and making enterprise performance the centre-piece of the analysis of informality. The book studies the determinants of enterprise growth and performance along the entire 'continuum' of the informal sector, from micro household enterprises to larger enterprises in the informal sector employing wage labour. The strength of the book is the systematic examination of the various aspects of informality in the Indian manufacturing sector using rich firm-level data from large nationally representative surveys spanning two decades of reforms The book argues that concerted government action is needed to allow the informal sector to participate more fully in India's economic growth.