Beyond E-SHRAM: Why Informal Employers Should Matter More Than Informal Workers in the Indian Economy

The Government of India's achievement of onboarding and providing social and food security access to more than 30 crore informal workers, through the E-SHRAM platform, is unprecedented and laudable. This is not just a digital expansion achievement, but a global-scale social-capability upgrade. 

However, for the larger economy, I argue, this is insufficient: Worker-side digitisation and provision, by itself, does not constitute a functioning labour market. It constitutes only half of one.

The next logical—and far more complex—step is to bring the demand side of informal labour into view.

The structural gap in India’s informal labour reforms

India’s informal economy is not defined merely by informal workers; it is equally defined by informal employers—small service-providing entrepreneurs and enterprises that operate across cities, towns, and villages. These include contractors, event organisers, construction supervisors, logistics operators, household service aggregators, and countless micro-enterprises that rely heavily on seasonal and migratory labour.

Most of these entities:

Do not see themselves as “employers” in the legal sense

Operate through word-of-mouth rather than formal hiring

Face acute uncertainty in accessing labour during peak seasons

Employ workers intermittently rather than continuously

Festive cycles, wedding seasons, tourism flows, agricultural cycles, and construction timelines create sharp crests and troughs in labour demand. Workers and employers alike navigate this volatility through informal networks that work—until scale, migration, and fragmentation overwhelm them.

Digitising only workers, without mapping employers, freezes this informality in place rather than organising it.

Why employer onboarding is harder—but unavoidable

Unlike workers, informal employers are:

Extremely fragmented (likely numbering in crores)

Highly sensitive to compliance and enforcement fears

Temporally unstable (many exist only for a season or a project)

Any attempt to onboard them through coercive or compliance-heavy mechanisms would likely fail. The solution, therefore, must be incentive-led, non-threatening, and context-aware—designed as a coordination utility, not a regulatory net.

A distributed labour coordination platform

What India now needs is a distributed, contextualised labour coordination platform with three core functions:

Employer onboarding and documentation:

A system that allows small service-providing entrepreneurs to register themselves as work providers—without legal intimidation—documenting:

- Type of work

- Seasonal demand patterns

- Duration and scale of labour requirements

- Preferred worker profiles

Worker integration from existing registries:

Informal workers already registered on platforms such as E-SHRAM should be able to opt into visibility for matching, specifying:

- Availability windows

- Willingness to migrate

- Nature of work preferences

- Seasonal constraints

Context-aware matching, not rigid contracting:

With the help of AI and pattern recognition, the platform can suggest plausible matches rather than enforce placements—learning over time from seasonal rhythms, regional demand spikes, and repeat engagements.

The objective here is not to formalise every transaction, but to reduce search friction and uncertainty for both sides.

The critical role of local bodies: panchayats and municipalities

The success of such a platform hinges on one often-overlooked institutional layer: local governments. Panchayats and municipalities are uniquely positioned to act as:

On-the-ground documenters and verifiers

Validators of worker and employer credibility

Contextual interpreters of local labour demand

Initial facilitators of worker-employer matching

They already possess the local knowledge, trust capital, and informal reputational memory that neither central nor state governments can replicate.

Crucially, their participation should be incentivised, not mandated.

Incentives, oversight, and role clarity

Local bodies can be incentivised by the Central government based on:

Successful worker-employer matches

Repeat, dispute-free engagements

Quality and accuracy of local data

At the same time, state governments must provide oversight, audits, and grievance redress

The Central government must remain the architect—building the digital infrastructure, setting standards, and funding the system

This clear separation of roles would ensure that governments act as enablers, overseers, and regulators, while the informal private sector continues to function as the primary engine of employment and growth.

Employer incentives: social protection and economic capability 

For the platform to achieve scale, employer participation must be rewarded—not mandated. Just as E-SHRAM provides social (and food) security access to informal workers, the employer side should get access to social protection and economic capability, without forcing formal enterprise status.

Social protection for informal employers: 

Worksite accident insurance

Short-term business disruption cover (weather, labour shortages)

Access to government-backed dispute mediation

Greater credit access for informal employers:

Short-duration working capital

Season-linked micro-credit windows

Project-specific financing

What should be avoided:

Long-term loans

Blanket subsidies

One-size-fits-all credit products

Informal employers' eligibility should improve with:

Timely payments

Low dispute rates

Repeat fair engagements

This arrangement would create discipline without coercion.

The platform itself should not lend. Instead, public sector banks, NBFCs, cooperative banks and credit societies can plug into it—using platform data to price risk intelligently.

Why this approach preserves informality while improving outcomes

This model deliberately avoids the most common policy trap: over-formalisation.

It does not:

Force long-term contracts

Impose rigid compliance burdens

Criminalise flexibility

Instead, it enables:

Better planning without coercion

Reduced anxiety for both workers and employers

Smoother seasonal transitions

A gradual shift from uncertainty to predictability

In other words, informality is not eliminated; it is organised enough to work at scale.

The larger payoff

If implemented well, such a system would:

Create India’s first real map of informal labour demand

Act as an early-warning system for regional economic stress

Stabilise migrant labour flows without restricting mobility

Provide valuable signals for future skilling initiatives

Most importantly, it would mark a shift in the state’s role—from labour controller to labour coordinator.

This shift could be the foundational upgrade for India’s vast informal economy.