India Plans New Indices to Track Informal Manufacturing, Services

India's government announced plans to develop new economic indices designed to capture the scale and dynamics of the country's vast informal manufacturing and services sectors, a move that could reshape how policies reach millions of unregistered workers across the country.

The initiative, confirmed by the Ministry of Statistics and Programme Implementation, aims to fill longstanding gaps in official economic data by creating measurement tools tailored specifically to enterprises and workers operating outside formal regulatory frameworks.

What the New Indices Will Measure

The proposed indices will for the first time attempt to systematically track economic activity in informal manufacturing, which includes small workshops, artisan production units, and neighbourhood fabrication operations that collectively employ tens of millions of workers. The services component will cover unregulated enterprises ranging from street-side repair shops to domestic help services and small-scale trading operations.

Officials familiar with the initiative said the indices would capture variables that standard GDP measurements overlook, including seasonal income fluctuations, multi-job holding patterns, and the prevalence of unpaid family labour that characterises much of India's informal economy.

Why Existing Data Falls Short

India's current economic measurement framework has long struggled to accurately represent the informal sector. The Annual Survey of Industries captures factory-level data but misses micro-enterprises operating below registration thresholds. National accounts estimates rely heavily on formal sector filings, leaving large portions of economic activity inferred rather than measured directly.

The National Sample Survey Organisation's last comprehensive employment survey covered the informal workforce, yet findings often arrived years after the reference period, limiting their usefulness for real-time policy decisions. This time lag has frustrated efforts to target welfare programmes effectively.

Researchers at the Centre for Monitoring Indian Economy estimate that official statistics capture barely half of actual economic activity in some segments, meaning policy interventions often operate with incomplete information about the populations they aim to serve.

Direct Impact on Workers and Communities

For the hundreds of millions of Indians working without formal contracts, social security, or documented employment records, the new indices could eventually translate into more responsive government programmes. Better data means welfare schemes can be designed with accurate beneficiary profiles rather than rough estimates.

In Tamil Nadu's textile weaving clusters, for instance, workers have long complained that government skill programmes fail to account for the specific techniques used in handloom production. Similar mismatches appear in construction labour schemes across Uttar Pradesh and in small-scale food processing operations throughout Rajasthan. When officials lack reliable data on what workers actually do and how they earn, training modules and support structures routinely miss the mark.

The indices could also inform decisions about minimum wage adjustments, as current wage benchmarks often fail to reflect actual earning patterns in informal occupations where income varies dramatically by season and location.

Challenges in Data Collection

Building accurate indices for informal economic activity presents formidable practical challenges. Unlike registered businesses that file mandatory returns, informal enterprises often have no formal accounting, no fixed addresses, and workers who may resist survey questions about income or working conditions.

The statistical ministry will need to develop sampling methodologies that can capture dispersed, mobile, and often invisible economic units spread across urban slums and rural areas. Field investigators will require training to approach informal workers in ways that elicit honest responses rather than answers designed to access or avoid government benefits.

International experience offers limited guidance. Indices developed for informal economies in Latin America or Southeast Asia require significant adaptation for India's specific context, where caste, gender, and regional factors shape labour market participation in ways that generic survey instruments may not capture.

Economic Planning Implications

Beyond welfare distribution, the new indices could reshape macroeconomic policy by providing a more complete picture of domestic consumption and production. Consumer demand forecasts currently underestimate purchasing power in informal communities because they rely on income data that excludes irregular and multiple earnings streams.

Banks and financial institutions also stand to benefit. Lending decisions in areas like rural Maharashtra and interior Karnataka often hinge on incomplete understanding of borrower income sources, leading to conservative assessments that exclude viable candidates from credit access. More comprehensive economic data could eventually inform more inclusive lending criteria.

The indices may also support evidence-based advocacy for labour law reforms, providing concrete documentation of working conditions that currently exist only in anecdotal form.

Timeline and What Comes Next

The Ministry of Statistics has outlined a phased approach, with pilot surveys scheduled to begin in select districts of Gujarat and West Bengal before expanding nationally. Officials expect initial results to become available within eighteen months, though comprehensive coverage across all states may require several years of sustained data collection effort.

The government has invited academic institutions and research organisations to participate in methodology development, signalling openness to incorporating diverse expertise in the index design process. Interested researchers can submit proposals through the ministry's official channels over the coming weeks.

What to watch: Whether the initiative receives adequate budget allocation in the upcoming fiscal year's planning documents will indicate the government's commitment to the timeline. Civil society organisations working with informal worker groups say they will monitor whether community members are meaningfully consulted during survey design, warning that indices built without participatory input risk perpetuating the same blind spots they aim to remedy.