Measuring India's Informal Economy Without Formal Proxies

Dev Kar

World Economics, 2026, vol. 27, issue 3, 19-38

Abstract: India's large informal sector, which accounts for the vast majority of employment, remains one of the most difficult components of the economy to measure accurately due to limited direct information on output, prices, and incomes. Although recent revisions to India's national accounts have introduced important methodological improvements, significant challenges remain in estimating informal-sector gross value added, particularly during periods of economic disruption when formal-sector trends may not accurately reflect informal-sector performance. International experience demonstrates that statistical agencies have developed innovative methods to improve the measurement of informal-sector activity, including satellite accounts, labour-force-based estimation techniques, supply-use frameworks, and administrative-data-based adjustments. India can strengthen the reliability of its national accounts by combining more frequent targeted surveys of high-density informal sectors with carefully designed administrative and digital indicators within a framework that preserves statistical independence, transparency, and professional autonomy.

Date: 2026
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