The plight of gig workers in India attracted considerable public attention after the introduction of gig workers’ bills in Rajasthan and Karnataka. In 2020-21, approximately 7.7 million people were engaged in the freelance economy, representing 2.6% of the non-agricultural workforce and 1.5% of the total workforce. These numbers highlight the importance of this sector. However, while the legislative efforts mark progress, there is also a need to address the real challenges faced by flexible workers.
India’s gig economy, with a projected growth rate of 17% and an anticipated gross volume of $455 billion in 2024, represents both a massive economic opportunity and a significant challenge for policymakers. While the sector has the potential to create 90 million jobs and contribute 1.25% to India’s GDP, there is a need for frameworks that balance the interests of independent workers, platform companies, and the broader economy.
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These jobs, largely concentrated in e-commerce, transportation, and delivery, offer alternative revenue streams and workforce integration opportunities but also expose workers to vulnerabilities like income instability and limited access to social benefits. Ensuring the sector’s growth is inclusive and sustainable requires a nuanced approach that integrates social security measures, industry best practices, and equitable regulations.
Sweeping definition misses point
The proposed bills adopt a broad and somewhat vague definition of freelance workers, describing them as individuals engaged in remunerative work based on a contract facilitated through a platform. This sweeping definition spans activities ranging from ride-sharing and food delivery to professional services, failing to capture the diversity of freelance work in India.
Before delving into the gaps in these bills, it is essential to understand how the gig economy operates. Platforms serve as digital intermediaries, connecting workers to clients for services ranging from website development to food delivery. While these platforms are lauded for providing autonomy and flexibility, in India, the reality is starkly different. For most gig workers, participation in this economy is driven not by choice but by necessity—a means to sustain their livelihoods.
The autonomy paradox: Freedom or illusion
The gig economy offers theoretical flexibility, allowing workers to choose when and where to work. However, this autonomy often comes at a steep cost. For instance, food delivery workers for platforms like Swiggy or Zomato have far less control compared with highly skilled professionals on platforms like Fiverr or Upwork. Moreover, arbitrary changes in pay structures, commissions, and the constant risk of deactivation due to inactivity expose the fragility of this so-called autonomy.
This autonomy paradox is emblematic of the gig economy: workers enjoy some freedom but lack the security of permanent employment. With no employer-provided benefits, gig workers face income instability and remain vulnerable, akin to informal labourers, but without the safety nets traditionally offered in formal employment.
Winners and losers in the gig economy
India’s gig economy, particularly in urban areas, has absorbed a significant portion of the unorganised workforce, with many engaged in food delivery and ride-hailing services. Despite the high volume of transactions, the earnings distribution is skewed. For instance, in a Rs 100 food order, a delivery partner might earn Rs 40-45, while platforms and the government collect substantial revenues through fees and GST.
Platforms like Swiggy, which reported 2.5 biryanis being ordered every second in 2023, illustrate the massive scale of operations. Yet, gig workers, who endure long hours and challenging conditions, receive only a fraction of the value generated. While platforms and the government reap the rewards, gig workers, who bear the costs of equipment, maintenance, and risks, are left with little financial stability.
Need for a comprehensive support system
This imbalance highlights the urgency of labour reforms to protect gig workers. While it may not be feasible to classify aggregators as employers, they can play a pivotal role in ensuring fair working conditions. A viable solution is the establishment of a social security scheme tailored for gig workers, funded jointly by the government, aggregators, and workers.
State-led initiatives, such as welfare boards in Rajasthan and Karnataka, could serve as models. These boards can register gig workers, create unique IDs, and maintain a central database. Such a system would enable the provision of meaningful benefits, including income support during lean periods, pensions for long-term workers, and financial assistance in emergencies. For instance, a contributory fund could offer gig workers a lump sum after five years or a monthly pension after retirement.
Additionally, mandating third-party insurance for trips and providing grievance redressal mechanisms could significantly ease the burdens faced by gig workers. These steps would offer much-needed stability and protection to individuals operating in an inherently precarious environment.
With India’s gig workforce projected to grow to 23.5 million by 2029-30, the gig economy could either become a robust source of employment or a cautionary tale of missed opportunities. State governments are taking incremental steps toward formalising policies for gig workers, potentially paving the way for central reforms.
However, these efforts must be grounded in a comprehensive understanding of the gig economy’s dynamics, the challenges faced by workers, and the broader implications for the labour market. If designed thoughtfully, these policies could transform the gig economy into a lifeline for millions. If not, they risk becoming lofty aspirations with little impact on the ground.
Dr PK Santhosh Kumar is Director, Centre for Budget Studies, CUSAT. Neenu Rachal Philip is a Fellow at Centre for Budget Studies, CUSAT.