Can Tourism Help In Reshaping a Country’s Informal Sector? Evidence From India

Abstract

Even though the informal sector in India is the principal source of employment for 80% of the workforce, it faces numerous challenges in the social and economic realms, making it vulnerable. The presented study focuses on tourism and credit availability as two major factors in fueling the formalisation of traditional sectors, specifically jute, pottery, leather, handlooms and the cultural gig economy, as means to resolve some of the challenges faced by the informal sector. The motivation to study tourism as a propellant of the formalisation of the informal sector follows from the idea that formalisation leads to an eventual rise in economic stability while simultaneously preserving culture. Moreover, physical and virtual tourism offer incredible opportunities for local craftsmen by enabling high-value sales and visibility in national and international markets. The study also reflects on the marginalisation of the artisans due to paucity of institutional support, especially credit accessibility, thereby encouraging the use of loan accessibility as the other component of analysis. Furthermore, a mixed method approach is followed, combining trend analysis of sectors, namely, jute, pottery, leather, handlooms and the gig economy using both secondary data and primary data collected from the semi-structured interviews of 78 craftsmen across 4 states, as well as correlational and regression analysis by regressing worker incomes on tourism and credit access. The trend analysis highlights the heavy reliance of workers on tourism-derived demand due to the ‘seasonal’ nature of these sectors. Additionally, the regression results reveal a stark positive correlation between the income of artisans and the tourism density of a region of around 75% as well as an even stronger positive correlation between income and loan accessibility to artisans of around 89%, which can serve as a base for policy formulations for the formalisation of the sector. Henceforth, informality and income volatility are perpetuated by constitutional barriers like limited access to credit, seasonal demand, digital exclusion and uneven policy implementation, regardless of a notable demand for genuine local goods from tourists.