South Asia has the highest share of the informal employment among the world's developing regions. More than 80 percent of total employment in Bangladesh, India, and Pakistan is informal. These workers are excluded from labor laws and social protection schemes that apply to organized labor. Despite rapid overall growth the informal sector remains stubbornly large in South Asia.
The COVID-19 crisis has put a spotlight on the precarious situation of informal workers. Informal firms and workers are particularly vulnerable to shocks as they tend to have less cash on hand and more limited access to credit. Those in the informal sector are more likely to lose their jobs and face extreme poverty and food insecurity as the disease continues to intensify across South Asia. The overwhelming majority of workers in the informal economy have higher exposure to occupational health and safety risks, no appropriate protection, and an increased likelihood that they will suffer from illness, accident or death.
The specific risks associated with COVID-19 exacerbate the main vulnerabilities of poor workers in the informal economy. Policies aimed at dealing with the COVID-19 crisis must be mindful of the sheer size and vulnerability of the informal sector and the households associated with it, and its limited engagement with formal institutions and laws.