Nitin Pai: Don’t overburden the gig economy—it offers millions of Indians their first job

This was rebutted by one major platform with data that showed gig workers made a net income of around ₹21,000 in a typical work-month, and that delivery times were optimized by increasing store density, not by incentivizing risky riding. Still, after the Union government’s intervention, platforms have stopped promising 10-minute delivery.

Unfortunately, the anecdotal and emotional framing of the debate does a disservice to the very cause it seeks to promote. Government intervention is not the answer: we are still trying to untangle the labour laws that prevent Indians from working in manufacturing industries.

Labour regulations tend to create more jobs for labour inspectors while employers replace labour with capital. Therefore, we must be careful what we wish for.

So, what is the public interest in the gig economy? There are three big issues: raising income levels, smoothening income volatility and addressing negative externalities. None of these calls for imposing regulations on the gig economy platforms, but rather implementing public policies that make everyone better off.

Let’s consider each of these in turn. First, raising income levels. A recent study by Achyuta Adhvaryu and colleagues shows that compared to their Indonesian and Kenyan counterparts, gig workers in India (in 2024) were better off: working fewer hours, at higher efficiency levels, for better pay.

Now ₹27,000 per month for 58 hours of work per week is not a bad starting pay package for someone with just a basic education. However, for wages to rise, labour productivity must go up. This means that the worker must learn new skills.

Adhvaryu’s research shows that churn is high and around 50% of drivers reported earning more after leaving the platform, many moving into full-time employment. The good news is that gig work works as the first rung of the ladder. The Indian economy must create higher rungs and equip workers to climb them.

Second, smoothening the income flow, which can be quite volatile in the gig economy. As an employer, this sector itself is a financial safety net: the study shows that one in three drivers across countries relies on platform work during emergencies or slow periods in other work.

This suggests that the expansion of the gig economy from home delivery to domestic services is desirable, as workers will have more choice. State governments should create a conducive environment for innovation and growth in this sector.

As I have argued in previous columns, we will need new forms of social security for the gig economy. Creating a welfare fund by imposing cesses, as some governments have done, will not cut it.

A multi-contributor social security system, where governments, employers, customers, CSR and philanthropic funds can be mobilized in a manner that empowers beneficiaries is possible with the financial inclusion that India has achieved.

Gig worker unions can organize low-cost group insurance options, on top of improvements in public health, education and food security schemes that should be available to migrants as well as local residents.

Finally, there is the question of negative externalities; the most visible of which is risky driving on roads. My colleague Anupam Manur argues that this is mostly availability bias: bad driving is common across the board, but we tend to notice delivery riders because they are easily identifiable.

It may well be that delivery persons are unfairly maligned, but their behaviour does have an effect on road safety. Adhvaryu reports that 82% of Indian gig workers had valid licences, compared to 90% in Kenya and 97% in Indonesia. Further, the use of registration-free electric bikes has made it hard to trace and punish offenders.

Fixing negative externalities like these requires a cooperative approach by platforms, law enforcement personnel, local civic leaders and consumers. A local political leader in Bengaluru told me that he had a lot of public toilets constructed in his municipal ward because of the large number of taxi drivers who would rest in that neighbourhood.

Any new business model that becomes successful attracts both admiration and criticism, some of which tends to be over the top. India’s gig economy platforms have transformed the way Indians buy, eat and use services. They have made it possible for a high-school-educated person anywhere in India with a phone and bank account to take a train to Bengaluru, rent an electric scooter and start earning an honest wage from the very first day.

They have also shown that honest, hard-working people have a decent chance of making a life for themselves. Had it not been for the gig economy, I am pretty sure that politicians and well-meaning people would be making the case for an urban employment guarantee scheme.

The author is co-founder and director of The Takshashila Institution, an independent centre for research and education in public policy.