Gig Economy in India: Drivers, Challenges & Road Ahead – Dr. Pooja Nagpal

15 May, 2023.

The gig economy, also known as the on-demand economy, is a rapidly growing trend in India. It refers to a labor market where temporary, short-term, or freelance jobs are the norm instead of the traditional nine-to-five office jobs. The blog focuses on drivers, challenges and road ahead of gig economy in India.

The gig workers can be classified as platform and non-platform gig workers.  

Platform workers using digital platforms for their work.  Some examples

• Ride-hailing services: Companies like Uber, Ola, and Rapido.
• Food delivery services: Companies like Swiggy, Zomato, and Uber Eats
• Home services: Companies like Urban Company, Housejoy, and Taskbob
• E-commerce: Companies like Amazon and Flipkart.

Non-platform gig workers work part-time or full-time in traditional sectors as casual wage workers or own-account workers.

• Construction Worker
•  Delivery Boys (not working through online apps)
•  Home-based Workers (such as handicrafts, tailoring, etc.)
• Domestic Workers (maids, cooks, etc.)
• Street Vendors
• Farm Labourers

Drivers of the gig economy in India

The drivers of the gig economy are factors that contribute to the growth and development of non-traditional work arrangements, where individuals work as independent contractors or freelancers, rather than as employees of a single company. The gig economy in India is fuelled by various factors some are stated below:

1. Young demographic dividend: India has a large and growing population of young people who are well-educated and tech-savvy. Many millennials value flexibility and work-life balance and are drawn to the gig economy because of the opportunities it provides.
2. Technology: The advent of smartphones, high-speed internet, digital platforms and technologies, enable work to be performed remotely and independently has been a key driver of the gig economy. These platforms provide gig workers with a way to connect with customers and clients and offer their services on a flexible basis.
3. Rising levels of education and skills: As more people in India attain higher levels of education and develop specialized skills, they are increasingly seeking out opportunities to apply their knowledge and expertise through gig work.
4. Urbanization and rising consumer demand: Rapid urbanization in India is making middle class to continues grow, has created a large demand for gig workers in various sectors such as transportation, delivery, home services, and e-commerce.
5. Cost-effective labor: For businesses, gig workers can be a cost-effective alternative to traditional employees, as they can be hired on a project-by-project basis, without the need to provide benefits or other forms of compensation.
6. Flexible Work Arrangements: The young youth prefer flexi work hours especially post Covid. Gig workers have the ability to set their own schedules and choose the types of projects they want to work on, which can be particularly appealing to those who value work-life balance over traditional employment arrangements.
7. Entrepreneurship: The gig economy has also given rise to a new breed of entrepreneurs who use digital platforms to start their own businesses and offer their services to customers around the world.
8. Supportive government policies: The Indian government has been supportive of the gig economy and has taken several initiatives to promote it, such as the Digital India program, Start-up India, and Skill India.

Overall, the gig economy in India is being driven by a combination of technological, social, and economic factors, and is expected to continue to grow in the coming years.

Challenges faced by gig workers in India

While the gig economy in India has many potential benefits, it also faces several challenges. Some of the key challenges of the gig economy in India are:

1. Job insecurity: Gig workers in India often lack job security, as they are typically engaged on a project or assignment basis, rather than as permanent employees. This can lead to financial instability and make it difficult for workers to plan for the future.
2. Income instability: Gig workers in India may experience fluctuations in income due to the irregular and unpredictable nature of gig work. This can make it difficult for them to meet their financial obligations and plan for the future.
3. Lack of formalization: Many gig workers in India operate in the informal sector, which can limit their ability to access credit, government support programs, and other resources.
4. Lack of legal protection & social security: Gig workers are not covered under India’s labor laws and do not have legal protection in case of workplace harassment, discrimination, or unfair termination. Gig workers do not have access to social security benefits such as health insurance, retirement benefits, and paid leave.
5. Unequal bargaining power: Gig workers in India may lack the bargaining power to negotiate fair compensation and working conditions, particularly when they are competing against a large pool of other workers on digital platforms.
6. Payment issues: Delayed or non-payment of wages is a major issue for gig workers. The government needs to establish mechanisms for ensuring that gig workers are paid on time and that they are able to resolve payment disputes quickly.
7. Training and upskilling: Many gig workers lack the necessary skills to perform their work effectively. Gig workers often have limited opportunities for upskilling and career advancement.
8. Social stigma: Gig work is still viewed by some in India as a temporary or low-paying option, which can result in social stigma and lack of recognition for the work done by gig workers.

Overall, these challenges can make it difficult for gig workers in India to maintain financial stability and plan for their future, despite the growing demand for gig work in the country.

Road Ahead of Gig Economy in India

The gig economy in India is expected to grow at a significant rate, and the statistics show that it has a promising future. According to a report by the International Labour Organization (ILO), India is the second-largest gig economy in the world, with around 56% of all gig workers in the Asia-Pacific region working in India. According to a report by Nasscom, the gig economy in India is expected to grow at a Compound Annual Growth Rate (CAGR) of 17% with 23.5 million gig workers and the growth projection of reaching a market size of $455 billion by 2023 are impressive figures. The gig economy is predicted to be a significant building block in achieving India’s aim to become a $5 trillion economy by 2025, the reports indicated. This would help in bridging the income and unemployment gap. The study conducted by Boston Consultancy Group (BCG) estimates that the Indian gig economy has the potential to create up to 90 million jobs in the non-farm sectors, which is about 30% of India’s workforce. The growth of the gig economy is expected to lead to efficiency and productivity gains, which can contribute up to 1.25% to India’s GDP. This indicates that the gig economy can have a significant impact on India’s economy by providing employment opportunities and boosting economic growth. The gig economy has already started to make an impact in various sectors, and with further growth and development, it has the potential to create a substantial positive impact on India’s economy diverse range of sectors and industries.

Conclusion

The increasing demand for gig workers and the rise in participation of gig workers, especially the youth and women indicate that the gig economy in India is gaining popularity. The top three sectors driving the gig economy in India are ride-hailing, e-commerce, and food delivery.  The government is also taking steps to address some of the challenges faced by gig workers. In 2020, the Ministry of Labour and Employment proposed a social security scheme for gig workers, which includes health and life insurance, disability coverage and also considering the introduction of a code of conduct for gig platforms to ensure fair treatment of workers. On March 2021, the government announced that it is working on a new set of rules to regulate the gig economy and provide legal protection to gig workers to ensure that gig workers are not exploited by platform companies. The GoI has launched several skill development initiatives to help gig workers acquire new skills and improve their employability like Pradhan Mantri Kaushal Vikas Yojana (PMKVY). The GoI has also launched several financial assistance schemes for gig workers who have been affected by the COVID-19 pandemic and lost their livelihood like Pradhan Mantri Garib Kalyan Yojana. These initiatives show that the GoI is taking the challenges faced by gig workers seriously and is working towards providing them with social security, legal protection, and better working conditions. Additionally, greater collaboration between the government, employers, and workers’ organizations is needed to ensure that gig workers are able to enjoy their rights and access the benefits they are entitled to. Though, there are still significant gaps in the protection provided to gig workers, and many workers remain vulnerable to exploitation and abuse. The future of the gig economy in India is bright, as the country is expected to see continued growth in the number of gig workers and the range of services they offer.

Concluding Thoughts

References:

1. https://www.businesstoday.in/latest/economy/story/how-indias-gig-economy-is-shaping-up-thanks-to-startups-369840-2023-02-11
2. https://www.niti.gov.in/sites/default/files/2022-06/Policy_Brief_India%27s_Booming_Gig_and_Platform_Economy_27062022.pdf
3. https://www.financialexpress.com/education-2/indian-gig-workforce-to-witness-200-jump-by-2030-niti-aayog/2972631/