The Paradox of India's Informal Slum Economy

This piece from The New York Times goes inside the economic powerhouse of Mumbai's Dharavi slum to profile the informality that both troubles it and brings it prosperity.

The shanty town of Dharavi is a humming economic marketplace, with min factories and goods manufacturing taking place in tin-roofed huts. As its role in the Indian economy grows, it's informality is forcing some in the country to reconsider the lack of formal attention paid to this slum and others like it.

"This divide exists in other developing countries, but it is a chasm in India: experts estimate that the informal sector is responsible for the overwhelming majority of India's annual economic growth and as much as 90 percent of all employment. The informal economy exists largely outside government oversight and, in the case of slums like Dharavi, without government help or encouragement.

For years, India's government has tried with mixed success to increase industrial output by developing special economic zones to lure major manufacturers. Dharavi, by contrast, could be called a self-created special economic zone for the poor. It is a visual eyesore, a symbol of raw inequality that epitomizes the failure of policy makers to accommodate the millions of rural migrants searching for opportunity in Indian cities. It also underscores the determination of those migrants to come anyway."

Thanks to Nate Berg

Full Story: In One Slum, Misery, Work, Politics and Hope



fantastic article

This is a great article. It reminds me of some of the economic work being done on shantytowns:

This work points to the idea that these places are complex and that folks may have different incentives for living in them. Some may live in the shantytown in order to grow their business and avoid costly regulations, while other may live in the shantytown because they don't have any other options for gainful employment.

This complexity implies that a one-size fits-all policy is unlikely to meet everyone's needs. Policies encouraging both economic growth and poverty alleviation may be needed. But in order to target these policies appropriately, governments need a way to identify the incentive structure of individuals and households living in these shantytown.

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