Home » Blog » The Invisible Becoming Invincible: Formalizing the Backbone of Bharat

“When dignity reaches the grassroots, the nation stands tall.”

Bharat boasts the world’s largest informal economy, a testament to its ancient economic systems. Yet, for too long, the informal workforce has remained in the shadows, unrecognised and unprotected. This is changing. A quiet revolution is underway, driven by digital platforms, policy reforms, and financial inclusion, bringing millions into the formal economy. This shift is not just economic; it’s deeply human, centred on dignity, access, and opportunity.

This article explores India’s journey toward formalising its workforce, making the invisible invincible.

Understanding India’s Informal Backbone

While the formal economy grabs headlines, India’s informal sector is where most people work, from vegetable vendors to gig workers. This sector, though resilient, operates outside official oversight, lacking contracts, social security, and legal protections. Workers here rely on cash, have no access to formal credit or insurance, and are excluded from state benefits. Yet, it employs over 85% of India’s workforce and contributes nearly 50% to the GDP (Indian Staffing Federation, 2024; Drishti IAS, 2022).

This isn’t a sign of failure but reflects structural issues like complex regulations, low financial literacy, and cultural preferences for informality. Formalisation is crucial because informality is not just an economic status; it’s a condition of vulnerability.

The Drivers of Formalisation

India’s shift toward a more formal economy is a deliberate, multi-faceted effort spanning technology, policy, finance, and governance. These forces are lifting millions from economic invisibility into structured, secure participation in the mainstream economy.

Digital Infrastructure and Financial Inclusion

The JAM trinity—Jan Dhan accounts, Aadhaar identification, and mobile connectivity—has enabled previously excluded citizens to access banking, receive government benefits directly, and become part of the financial system. Tools like Unified Payments Interface (UPI) and digital wallets have transformed transactions across urban and rural India, replacing cash with traceable, auditable digital flows.

Progressive Policy Reforms

Structural reforms like the Goods and Services Tax (GST) have simplified tax compliance and incentivised businesses to formalise to claim input credits and remain competitive. The consolidation of labour laws into four new labour codes aims to bring uniformity, reduce ambiguity, and extend labour rights to previously uncovered workers.

Expansion of Social Protection Nets

Initiatives like the e-Shram portal have enrolled millions of unorganised workers, providing them with a national database and access to social security schemes. Pension schemes like PM-SYM and expanded access to EPFO and ESIC benefits incentivise formal employment relationships.

Credit and Entrepreneurship Incentives

Schemes like Mudra Yojana and Start-Up India offer accessible funding to help informal businesses transition to formal entities, especially in rural areas and Tier 2/3 cities.

Platform Economy and Tech-Enabled Gig Work

The rise of digital platforms like Swiggy, Zomato, Uber, and Urban Company has created a new form of semi-formal employment. While gig work offers flexibility, it also poses challenges such as a lack of job security and benefits. However, these platforms are beginning to address these issues by providing insurance, health benefits, and other perks, marking an early form of formalisation.

Government-to-Person (G2P) Transfers and Welfare Delivery

India’s Direct Benefit Transfer (DBT) system has revolutionised welfare disbursement by linking Aadhaar, bank accounts, and mobile phones, reducing leakages and encouraging more people to enter the formal economy to access welfare schemes.

Data-Driven Governance

Platforms like e-Shram and UDYAM are not just registration tools; they are a data infrastructure that enables better targeting of schemes, risk assessment for lending, and predictive modelling for employment trends.

Urbanisation and Aspiration

Urban migration and rising aspirations, particularly among youth, are pushing informal workers to seek better working conditions, legal recognition, and access to upward mobility.

Globalisation and Supply Chain Compliance

As Indian MSMEs integrate into global supply chains, particularly in sectors like textiles, manufacturing, and IT-enabled services, they are compelled to adopt formal practices to meet international standards, such as ESG norms.

Public-Private Partnerships (PPPs) and Ecosystem Support

Innovative partnerships between governments, NGOs, fintech, and startups are helping bridge the last-mile awareness and documentation gaps, especially for the most vulnerable informal workers.

Why Formalisation Matters

Formalisation is more than just a shift in paperwork; it is a transformation of opportunity, security, and dignity. For millions of workers, being part of the formal economy means access to pensions, healthcare, legal rights, and economic mobility. For small enterprises, it opens doors to credit, stability, and growth. And for the nation, it creates a robust, tax-compliant, and data-rich economy ready for long-term development.

The benefits of formalisation ripple far beyond individual livelihoods, redefining the very fabric of economic justice in Bharat.

Challenges in the Transition

While the promise of formalisation is powerful, the path is anything but smooth. Many informal enterprises fear the costs of compliance or mistrust government intentions. In rural and underserved areas, digital illiteracy and lack of access to documents create barriers to onboarding. Even when willing, many workers struggle to navigate fragmented platforms or understand complex processes.

Formalisation must be driven by trust and incentive, not coercion or red tape. Without a people-centric approach, the push for formalisation risks widening, not closing, the gap.

Moreover, there are potential downsides to formalisation. One major concern is the risk of job losses in the informal sector, particularly for those who may not be able to meet the requirements of formal employment. Additionally, there may be cultural resistance to formalisation, as many informal workers value the flexibility and autonomy that their current arrangements provide. Over-regulation could also stifle the entrepreneurial spirit that characterises the informal sector.

Therefore, the approach to formalisation must be balanced, ensuring that it respects the needs and realities of informal workers while providing them with the protections and opportunities that formal employment offers.

The Road Ahead

Formalising the backbone of Bharat is not a one-time reform but a long-term, evolving mission. As India continues this transition, the challenge will be to make formalisation inclusive, accessible, and aspirational for every worker and enterprise.

Policymakers must focus on simplifying processes, expanding outreach, and building trust among informal sector participants. Digital platforms must be paired with on-ground support, multilingual help, and simplified documentation to make onboarding seamless. Micro and small enterprises should receive incentives, not penalties, to encourage compliance and growth. Public-private partnerships, NGOs, and grassroots organisations can play a key role in bridging last-mile awareness, especially in rural and semi-urban pockets.

Integrating informal workers into skilling programs, expanding access to affordable credit, and ensuring portability of social security across states are essential next steps. Most importantly, formalisation must not come at the cost of livelihood flexibility or cultural identity. Instead, the goal should be to respect the informal spirit—its innovation, resilience, and agility—while giving it the tools to thrive in a structured, secure, and scalable way.

Conclusion

India stands at the cusp of an economic transformation. The road ahead is complex, but with vision, collaboration, and empathy, Bharat can ensure that no worker or entrepreneur is left behind. The invisible is indeed becoming invincible. Bharat’s informal workforce is stepping into the spotlight not merely as labour, but as leaders of a more just, resilient, and future-ready economy. Their rise is not just a statistic; it is a story of empowerment. And it’s still being written.

“A Digital India is an empowered India, boosting ‘Ease of Living’ and transparency.” – Prime Minister Narendra Modi