An Enabling Ecosystem towards formalization for enterprises

May 18, 2022

The subject of transitioning from informality to formality continues to be discussed extensively. Informal economy comprises of activities that are beyond the state’s reach. Emerging and developing countries have 93 per cent of the world’s informal employment.Around the world, informality makes up for makes up about a third of low- and middle-income countries’ economic activity. India is no exception to this. The oft-cited statistic to show the grip of informality in Indian economy shows that 99.7 percent of all enterprises in India operate informally, and 93% of its total workforce earn their livelihoods as informal workers.The benefits of formalization in an economy are myriad – access to capital, suppliers, talent, skills, and technology. Greater formalization in enterprises levels the playing field for enterprises ensuring fairer competition, contributes to government revenue and enables higher economic growth. While there are strong arguments in favour of the transition from informal to formal, it is high time we understand that this process is not a linear one. Formalization is not an end point that is to be reached. It has to be approached as a process that enables enterprises to formally register and thrive beyond that.