The Resilience of India’s Informal Economy

Tacit Knowledge: The Lifeblood of the Informal Sector

India’s informal economy, thriving on tacit knowledge, preserves ancient wisdom vital to cultural identity. Tacit knowledge isn’t just spoken or written; it’s lived. It’s an inheritance passed silently through generations.

Milan and the Kolhapuri Sandals

Recently, Prada showcased its Spring/Summer 2026 collection in Milan, featuring footwear eerily reminiscent of India’s Kolhapuri sandals. This sparked an online outcry over unacknowledged cultural borrowing. Yet, this emotional reaction does little to address why Indian creativity captivates global minds, yet struggles at home.

Understanding Informal vs. Formal Economies

Over 85% of India’s workforce, about 476 million people, work in the informal sector, contributing nearly half of the GDP. While some view formalization as the solution to economic growth, the informal sector remains steadfast, resisting change thanks to its deep-rooted tacit knowledge.

India’s Tacit Knowledge: A Cultural Treasure

The informal economy’s tacit knowledge comes from various historical periods. Though often ignored or untapped, it remains essential. This wisdom is preserved within communities and passed down through family lines. It’s visible in the ethnic markets and traditional industries like Kolhapuri footwear.

The Role of Cultural Geography

Kolhapur’s footwear industry, identified as a small-scale enterprise, includes 15 cooperative societies. Thousands manufacture these ethnic sandals for both local and international markets. Here, India’s cooperative mission is apparent, highlighting the significance of cultural geography in localising industries.

Losing the Tacit to Formalization

Preserving tacit knowledge isn’t straightforward. As demographics shift and migration occurs, much is lost. Unlike formal economies where research codifies knowledge, these systems aren’t explicitly documented. Without preserving this heritage, we risk losing more than we gain from formalization’s allure.

Challenges and Opportunities

India must reassess its informal sector, viewing it as an opportunity rather than a liability. We need to embrace our identity as a civilizational economy, harnessing the power of tacit knowledge. This journey requires pioneers who appreciate India’s unique cultural fabric.

Looking Ahead

The blend of formal and informal markets is delicate. Influenced by geopolitics, a large-scale overhaul isn’t feasible without drastic measures. India’s informal sector proves the enduring value of its societal systems. We must explore new paths to preserve and nurture this heritage.

Conclusion: India’s informal economy is a testament to its civilizational strength. To truly thrive, a fresh perspective on its potential and the wealth of tacit knowledge is essential. Let’s ensure this living heritage continues, standing firm amid the challenges of modern transformation.

Venus Upadhayaya is a doctoral fellow exploring India’s unorganized economic sector, senior journalist, and MOFA 2025 Taiwan Fellow.