India's informal economy is often treated as something spread evenly across the country. The latest data suggests that is far from the reality. A surprisingly large share of India's informal businesses and workers are concentrated in a relatively small number of districts.
On September 10, the National Statistics Office released India's first district-level estimates for the unincorporated non-agricultural sector. The data covers 757 districts and gives a much clearer picture of where India's informal economy actually operates. The top 50 districts account for nearly one-third of the country's unincorporated establishments, workers and gross value added.
That changes how we should think about informality. India's informal economy is not simply a collection of small businesses scattered across thousands of districts. Economic activity is heavily concentrated in particular places.
The concentration becomes even clearer at the top. The 10 districts with the largest number of unincorporated establishments account for about 10% of establishments, workers and GVA across the entire sector. Only 16 districts have more than 5 lakh unincorporated establishments.
This matters because location can determine the opportunities available to an informal business. A small manufacturer operating in a district with strong supply chains, transport links and nearby markets has a very different environment from one operating in an isolated local economy.
The new data also shows that size and productivity do not always move together. In 280 districts, GVA per worker is above the national average of ₹1.56 lakh. That means some districts with large informal economies are also relatively productive.
This is an important distinction. Informality does not automatically mean low productivity. Some informal businesses are clearly generating significant economic value. The bigger problem is that these businesses may not have the same access to finance, formal markets or worker protections available to larger registered firms.
The geographic differences also extend to women. In 237 districts, women make up at least one-third of the informal-sector workforce. In 25 districts, women account for more than half of workers. Telangana, Manipur, Meghalaya and Mizoram contain many of the districts with the highest female participation.
That makes the informal economy more complicated than a simple story about low-income workers. In some parts of India, informal businesses are an important source of employment for women. In others, female participation remains much lower.
The same national label can therefore hide very different local economies.
This has consequences for government policy. A programme designed around the idea that India's informal economy has the same problems everywhere will inevitably miss some of them.
A district where informal businesses struggle mainly because of poor access to credit may need a different intervention from one where businesses are already productive but lack access to larger markets. A district with high female participation may face different barriers from one where women make up only a small share of the workforce.
The new data makes that distinction possible for the first time at this scale.
There is also a broader lesson about India's economic growth. National figures can tell us how large the informal economy is, but they cannot fully explain how it works. The fact that the top 50 districts generate nearly one-third of its activity shows that India's informal economy has its own economic geography.
That geography could become increasingly important as India tries to raise productivity and create better jobs. Helping a business grow depends partly on what surrounds it. Roads, markets, finance, skilled workers and supply chains can determine whether a tiny enterprise remains tiny or becomes a larger employer.
India now has better data to identify where those conditions already exist.
The question is what policymakers do with it.
If nearly one-third of India's informal economy is concentrated in just 50 districts, could targeting those local economic ecosystems be one of the fastest ways to turn informal businesses into more productive sources of employment?
