From Chai Stalls to Silicon Valley

India’s booming digital economy, projected to grow between 6.3% and 6.8% in 2025–26 (Economic Survey 2024–25), is a story of stark contrasts. It’s a narrative woven with threads of technological innovation and entrepreneurial spirit, but also one deeply intertwined with the often-unseen contributions of its vast informal workforce. From the chaiwala serving tea to techies in Bangalore to the gig worker delivering a late-night snack, the informal economy—comprising street vendors, gig workers, and micro-entrepreneurs—is the often-unacknowledged engine driving India’s technology revolution. While their labor fuels efficiency and innovation, the persistent lack of job security, social protections, and fair compensation raises critical questions about the true cost of this progress. This article explores this complex dynamic, examining the symbiotic relationship between India’s informal economy and its tech sector, while also highlighting the challenges and potential pathways toward a more equitable future.

The Scale of India’s Informal Economy and its Connection to Tech

India’s informal sector is a behemoth, representing 37.6% of the country’s GDP ($5.27 trillion at purchasing power parity levels) and employing 61% of non-agricultural workers. This vast pool of informal labor is not merely a relic of the past; it’s a crucial component of India’s rapidly expanding digital ecosystem. The digital economy’s dependence on this workforce is undeniable, manifesting in various ways:

• The Rise of the Gig Economy: The number of gig workers powering platforms like Uber, Ola, Zepto, and Swiggy has surged, reaching 14 million in 2024, up from 12 million in 2023. These workers form the backbone of on-demand services, driving the convenience economy that fuels tech growth.
• Logistics and Last-Mile Delivery: Companies like Zepto, which saw a 120% revenue surge to ₹4,454 crore in FY24, rely heavily on informal delivery networks, including partnerships with local kirana stores. For every “10-minute delivery,” there is a 19-year-old riding against the clock, often earning wages below the minimum wage.
• Content Moderation and Data Labor: Behind the algorithms and AI models that power Silicon Valley lie the often-unseen hands of Indian data annotators. In cities like Hyderabad, thousands of “click workers” earn meager wages, sometimes as low as $2 per hour, labeling AI datasets for global tech giants. They process data for self-driving cars and other cutting-edge technologies, their contributions essential yet their compensation far from reflecting the value they generate.
• Supply Chains and E-commerce: E-commerce giants like Flipkart rely on a vast network of sellers, many operating small, home-based businesses within the informal sector, demonstrating how informal supply chains are adapting and integrating into the digital marketplace.

The Symbiotic Relationship: Tech’s Silent Partners

The connection between India’s informal economy and its tech sector runs deep, with informal workers acting as silent partners in the industry’s success. Zepto’s rapid growth, capturing 29% of the quick-commerce market in FY24, is closely tied to its reliance on informal delivery networks and partnerships with local kirana stores. Similarly, Flipkart’s vast network of over 300,000 seller partners, many operating informally, highlights the integration of informal businesses into e-commerce supply chains.

The development of artificial intelligence, a cornerstone of the modern tech industry, relies heavily on the work of data annotators. These workers, often employed informally, are the unsung heroes of AI, training the algorithms that power everything from facial recognition to personalized recommendations.

The success stories of many Indian startups are built on the foundation of informal labor. Zepto’s reliance on informal delivery partners and kirana store partnerships is a prime example. Udaan, which connects three million small businesses to formal supply chains, has helped many transition from cash-only operations to digital transactions, demonstrating how tech can facilitate the formalization of informal businesses.

The Dark Side: Exploitation and Inequality

While the digital economy offers opportunities, it also exposes and exacerbates existing inequalities.

• Wage Stagnation and Job Insecurity: Despite the remarkable revenue growth of companies like Zepto, the wages of their gig workers often remain stagnant. Riders report earning meager amounts, far from reflecting the company’s success. Furthermore, the lack of job security and social protections leaves these workers highly vulnerable.
• Automation and Displacement: The rise of automation, including drone delivery trials by Zepto and warehouse robotics by Dunzo, poses a significant threat to informal workers. These technologies could displace hundreds of thousands of workers in the coming years, raising concerns about the future of informal labor in a rapidly changing technological landscape.
• The Human Cost: The pressure to meet ever-increasing demands in the fast-paced world of on-demand services takes a toll on workers. As one Mumbai-based ride hailing driver expressed, “Apps treat us like robots, but we need bathroom breaks too,” highlighting the dehumanizing aspects of the gig economy.

Navigating the Paradox: Policy, Startups, and the Road Ahead

Addressing the challenges of the informal economy in the digital age requires a multi-pronged approach involving government initiatives, startup solutions, and a shift in societal attitudes.

• Government Initiatives: The Indian government has taken some steps to integrate informal workers into the formal economy, such as the e-Shram Portal, where 300 million informal workers have registered. However, the effectiveness of these initiatives remains limited, with only a small fraction of registered workers accessing. The Social Security Code 2020, which promised protections for gig workers, has also seen slow implementation.
• Startup-Led Solutions: Some startups are attempting to address the challenges faced by informal workers. Swiggy’s ‘Street Food Hub’ initiative has formalized thousands of vendors, bringing them into the digital fold. Zepto’s ‘Kirana Connect’ program has onboarded numerous stores, helping small retailers leverage e-commerce. However, even these positive initiatives face challenges, as illustrated by the skepticism of a treet vendor who, despite adopting QR code payments, still faces issues like police bribes.
• Opportunities for Inclusion: Platforms like Meesho, with its reseller model empowering women entrepreneurs, and agri-tech startups like DeHaat, connecting farmers to formal markets, offer examples of how technology can be used to create more inclusive economic opportunities.
• Challenges Ahead: The rise of AI-driven automation continues to pose a threat to jobs in sectors like call centers. The dominance of Big Tech, exemplified by the concentration of digital ad revenue in the hands of Google and Meta, also creates challenges for local businesses and content creators.

The True Cost of Progress

India’s tech boom is undeniably powered by its informal economy. The chaiwala serving tea, the delivery rider navigating city streets, the data annotator labeling images—all play a vital role in this narrative of technological advancement. However, the story is incomplete without acknowledging the challenges faced by these workers. Wage stagnation, job insecurity, and the threat of automation are realities that must be addressed if India’s tech revolution is to be truly inclusive. As we celebrate the achievements of Indian tech, we must also ask ourselves: Who is bearing the cost of this progress? A truly equitable future requires not only technological innovation but also a commitment to fair wages, social protections, and economic dignity for all workers, regardless of their position in the formal or informal economy. As my father once said, “Our generation measured progress by ration cards. Today’s youth measure it by app ratings. But for the chaiwala’s son? He’s still waiting for his turn.”

Arhan Bagati is a youth leader from Kashmir and the founder of KYARI, a non-profit organization addressing critical issues in the region. He is also the Awareness and Impact Ambassador for the Paralympic Committee of India and is currently pursuing a Master’s in Public Policy at the John F. Kennedy School of Government at Harvard University.