The Rise of the Underground

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It costs a lot more to hire full-time employees than take on temporary workers, so big corporations in India only add them when they're really flush, economists say.

As a result, much of India is now embracing the underground economy. That includes Ahmedabad, where informal jobs have played a crucial role in keeping the economy afloat in recent years.

For decades, this city of roughly five million people, where camels still amble down city streets, was known as the "Manchester of India," after the city in England famous for textiles. In the early 1980s, it had more than 60 giant mills employing 150,000 people or more, most of them with generous pension packages and other benefits. The industry trade union, started by Mahatma Gandhi himself (he kept an ashram by the city), was one of the most powerful institutions around and even ran a bank and hospital.

Then the mills entered a long and disastrous decline. More efficient operations were opening in other places, including China, and most of Ahmedabad's factory owners refused to make investments to become more efficient.

The mills became uncompetitive and shut down, dumping their workers and leaving scores of rotting mills and smokestacks that still loom ominously over the city. Today there are only about 10 mills left in operation. Membership in the trade union has fallen to about 9,000 people, and its bank and hospital have closed.

In many American or European cities where major industries died, like Buffalo, N.Y., urban centers fell into decay because there was nothing left to replace them. But Ahmedabad remains a thriving city. Most of the laid-off employees were able to find work in street vending, rickshaw driving, day-wage construction or other informal jobs, and as a result, the percentage of people employed in the underground economy increased. Today, Ahmedabad has some 55,000 rickshaw drivers, 70,000 street vendors, 70,000 construction workers and 45,000 roving trash collectors and recyclers.