Formalising the informal: cooperativising those at the margin case studies from India
Subject
Abstract
Theoretical models see the informal sector as an intermediate and transitory phenomenon, which would eventually be absorbed by the formal sector, which neoclassical literature had projected as an efficient user and allocator of resources. Experience of the last few decades in most third world countries has however given the lie to this premise. The expected positive effects of increasing deregulation and India’s global advent on informal sector are contingent upon flow of capital into this sector and increasing dynamism of rural industries, which has not happened in the Indian economy. Even where enterprise profitability has gone up, the informality of labour relationships allows the employer to get away with paying a wage well below what a formal contract would entail.