Rajesh Raj S.N

India’s informal economy is often discussed through the lives of its workers: low wages, insecure employment and the absence of social protection. All these issues matter. But there is another question that receives much less attention. What happens inside the millions of tiny enterprises that provide these livelihoods? And why do so few of them grow? Sign up for Open Magazine's ad-free experience Enjoy uninterrupted access to premium content and insights.

Can a state become richer without creating enough jobs? The question lies at the heart of one of the most remarkable economic stories in post reform India. Three decades ago, few people would have imagined that Kerala would overtake Punjab in per capita income. Punjab was the richest major state in the country. The Green Revolution had transformed it into the agricultural powerhouse of India and a symbol of post-Independence economic success.

India’s expansion of financial access over the past two decades has been remarkable. Bank accounts, once unavailable to a large majority of households, have become nearly universal. This transformation has been supported by sustained policy efforts to bring households into the formal financial system. One might expect such an expansion to be accompanied by a narrowing of economic disparities. Yet household consumption data present an interesting puzzle.