Growth in the Shadows: Unravelling the Link between Informal Economy and South Asian Gross Domestic Product

Abstract

The informal economy, long overlooked, has recently grabbed the attention of policymakers and development experts, particularly in South-Asian developing nations. While gauging this "hidden" realm is no easy feat, statistics reveal a surprising truth: it's a hotbed of job creation, outpacing the formal sector in the region and even the world. Yet, despite its dynamism, South Asia's GDP growth lags behind in the global race, casting doubt on the informal economy's true impact. Driven by this conundrum, a study embarked on a mission to understand the intricate dance between the informal economy and GDP growth in eight South-Asian countries. Mining data from diverse sources, researchers employed powerful statistical tools to unravel the relationship. Their findings painted a fascinating picture: a clear and positive correlation between the thriving informal sector and economic growth. This disclosure unlocks a path forward. Policymakers and development practitioners must now turn their gaze towards the often-neglected informal sector entrepreneurs. By fostering their ingenuity and removing roadblocks like limited access to finance and legal hurdles, they can unleash the full potential of this hidden engine, propelling South Asia towards sustained economic expansion and prosperity.

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