Informal Manufacturing Research Articles

Productivity and wage gaps between informal and formal firms in India: Trends and determinants

ABSTRACT This study examines the productivity and wage gaps between informal and formal sector firms in India. Using a comprehensive dataset covering a 15-year period, we explore the influence of access to finance, infrastructure, and labor regulations on these gaps. Employing standard Oaxaca decomposition method, we analyze the role of these factors in explaining the informal–formal gaps in wages and productivity. Our results reveal significant and expanding gaps in both productivity and wages between informal and formal firms. Decomposition analysis suggests firm characteristics and infrastructure as primary factors widening the gaps, while access to finance and flexible labor regulations help narrow them. The findings point to the importance of targeted interventions needed to augment the growth and development of the informal manufacturing sector. Policies that enhance access to finance, improve infrastructure, and promote favorable labor markets can contribute to narrowing the gaps.

Subcontracting Linkages in India's Informal Economy

ABSTRACTSubcontracting relations have often been considered a key channel to facilitate growth in traditional informal enterprises and enable them to transition into larger, modern enterprises. Such relations are expected to strengthen with economic growth. Using nationally representative survey data for the Indian informal manufacturing sector, this article examines the nature and patterns of subcontracting linkages for informal family‐based household enterprises over the high‐growth period of 2001–2016. The article estimates the net accumulation fund (NAF) for these enterprises, which measures their ability to accumulate, and studies the transition possibilities of subcontracted enterprises over time. Results show that the NAFs of subcontracted enterprises remained much lower than those of non‐subcontracted ones, with the disparity growing over the growth period. A vast majority of subcontracted household enterprises are embedded in relations that are akin to a traditional putting‐out system, with little control over their production processes. Female‐owned enterprises and those located within the household are more likely to be in such put‐out relations. Average NAF for put‐out household enterprises has been lower than for relatively autonomous subcontracted and non‐subcontracted firms, although over time the gap in NAF between put‐out and non‐put‐out firms, and thus their differential ability to transition, has narrowed. The prevailing nature of subcontracting relations in India's informal economy, even during the peak growth period, appears to be starkly different from the dynamic linkages that are celebrated in the literature as a channel for facilitating growth and transition.

Allocative Efficiency between and within the Formal and Informal Manufacturing Sectors in Zimbabwe

Abstract Resource misallocation has the potential to reduce aggregate total factor productivity and undermine industrial development. Aggregate productivity losses are found to be particularly pronounced in emerging economies where large market frictions impede efficient resource allocation. Available estimates, however, almost entirely exclude firms in the informal sector that in some countries, such as Zimbabwe, make up a high share of overall production and employment. The exclusion of informal firms can result in either an over- or under-estimate of the aggregate productivity losses from misallocation. This paper, therefore, uses firm-level survey data to analyze how market distortions contribute to the misallocation of resources within and between the formal and informal manufacturing sectors in Zimbabwe. Applying the approach developed by Hsieh and Klenow (2009) to firm-level microdata, the results reveal extensive resource misallocation in both the formal and informal manufacturing sector. Market shares of informal firms are found to be low relative to their productivity—an outcome associated with relatively large capital market distortions. Misallocation is also more pronounced among relatively productive firms, thus exacerbating aggregate losses in total factor productivity (TFP). Estimates indicate that aggregated gains in TFP of 151.4 percent can be realized through efficient resource allocation.

Effects of Subcontracting on Firms in India's Informal Manufacturing Sector: An Empirical Investigation

ABSTRACT: Subcontracting occurs when a producer outsources a part of its production. We study the effect of subcontracting from a firm with buyer power on the profits of subcontracted upstream firms, and how profits vary on the basis of location of firm and owner's gender. Subcontracting is the treatment in our study and the dependent variable is the ratio of Gross Value Added to Sales adjusted or unadjusted for wages. The decision of a firm to subcontract or not is endogenous, so we cannot use OLS regression. Since we cannot have information on a firm being treated and non-treated at the same time, we use the Average Treatment Effect on Treated (ATET) model with Nearest Neighborhood Matching (NNM) approach, in which each treated firm is matched to an untreated firm which is its nearest neighbor on other parameters, to see the effect of treatment on outcome variable on the treated group had they been not treated. We find the existence of a subcontracting premium where being in a subcontracting relationship is beneficial for the informal sector firm, though the magnitude of this premium is small, and female-headed firms gain less from subcontracting. Subcontracted male-owned firms earn a higher premium but also pay more wages out of their total revenue to labor as compared to female-owned firms, perhaps because the latter are more likely to be Own Account Manufacturing Enterprises (OAME) which do not employ hired workers. Our results show that buyer power of the subcontracting firms is offset by the benefits they provide to the subcontracted firms, possibly in the form of assured demand and payments. Thus, policies favoring the informal sector firms need to incorporate the benefits of subcontracting by exploring alternative modes of distribution with lower distribution margins, such as cooperative societies or online platforms for example Amul, MEESHO. Policies should also focus on reducing the profit margin differential between male and female owned firms by formulating a proper channel using mass media to communicate credit information and updates.

Design Thinking and Innovation in the Informal Industries in Kenya

In the recent past there have been calls to have Kenyan products labeled ‘Made in Kenya’. By doing so, the proponents believe that products ‘Made in Kenya’ will flock the local stores and even find their way to the foreign markets, thereby making Kenya proud of itself as well as earning the much-needed foreign exchange. While ‘Made in Kenya’ labeled products would be a great step forward to Kenya’s economic wellbeing, showcase talents and skills of the youth and a boost to its image in the global market, the low technology predominantly used in Kenya and lack of design thinking, still remain the greatest impediment to innovation. Using low technology in manufacturing usually results in high production costs and lack of capacity to launch mass production in response to acute increase in market demands. For example, the informal manufacturing sector in Kenya commonly referred to as Jua Kali, is a collection of semi-organized, unregulated, smaller ventures that employ a large number of people and rely on low-level technologies. A significant amount of industrial output is devoted to meeting basic requirements, such as the provision of low-cost consumer goods and services. Wood and furniture, metal products, glass and pottery, clothes, and leather are all produced in this industry. The lack of design thinking and low-level technology used in the production process obviously results in more man-hour on each unit produced, yet this is rarely considered on the final price of the product. The prices to a large scale, are usually concerned with the cost of materials without considering other hidden costs. The drive is to make the products affordable to low-income consumers, in order to satisfy the traders’ basic needs. In a wider perspective, this study focused on the application of design thinking and its impact on innovations in the informal industries in Kenya. Specifically, the study sought to establish; the application of design thinking as a system of feasibility to increase innovation in the informal industries in Kenya, the application of design thinking as a system of desirability to increase innovation in the informal industries in Kenya and its impact on the innovation in the informal industries in Kenya, as well as the application of design thinking as a system of viability to increase innovation in the informal industries in Kenya. This study reviewed secondary sources and investigations others have previously conducted in relation to the title of the study. Conventional content analysis was used to analyze data. The process of analysis began with the development of the research questions, then the identification of the dataset, and thorough evaluation of the dataset. Our findings deepen the current understanding about policy innovation and technological intervention in the informal industries in Kenya. The findings could also benefit the Government of Kenya, Kenya Association of Manufacturers and Juakali Associations, in terms of policy formulation and enhancement of sector performance.

Food insecurity and health outcome nexus: empirical evidence from the informal sector enterprises in Bangladesh

BackgroundFood insecurity indicates the difficulty of constantly obtaining adequate food because of limited economic resources. Food insecurity challenges the desired health outcomes. Although extensive literature has examined the associations between food security and health, low-wage informal sector workers have been less frequently addressed in this topic. The present study has focused on food insecurity among the workers working in the informal sector enterprises who experienced entrenched disadvantage during COVID-19 and examines the relationship between food insecurity and health status as measured by self-reported physical and mental health conditions.MethodsThis study has utilized cross-sectional data collected from workers working in informal manufacturing and business enterprises in Dhaka city of Bangladesh. The Food Insecurity Experience Scale (FIES) with eight items is used to screen for food insecurity, and the Short Form 12v2 (SF12v2) scale with 12 questions, and validated for use with Bengali respondents, is used to measure the health status of the informal workers. A health production function has been constructed where the health status (both physical and mental) of workers is associated with food insecurity and other socio-economic and health care factors. Empirical analyses of the study have included descriptive statistics, mean score comparisons, and multivariate regression analyses to identify the predictive factors of the physical and mental health status of the workers.ResultsA moderate to severe food insecurity is found to be responsible for the poor health status (both physical and mental) of the selected working group population. Moreover, age over 40 years, having a large family, dissatisfaction with the work place, and the prevalence of occupational health risks are linked to lower physical health, while dissatisfaction with the work place and the incidence of severe diseases contribute to poor mental health status along with food insecurity.ConclusionsExtending social and economic protection towards health coverage and basic consumption is suggested as an immediate action to save lives and ensure productivity of the informal workers. Besides, an increase in income and ensuring decent working conditions are also recommended for the health, safety and satisfaction of workers working in informal sector enterprises.

Investigating the prospect of cleaner production in informal enterprises: A scientific assessment of environmental burdens and economic efficiency

The present study aims to assess the prospects for cleaner production (CP) and sustainable development (SD) of informally operated small manufacturing enterprises, which are frequently blamed for uncontrolled waste disposal and causing pollution to the environment. The economic efficiency level of these firms has been explored to this end, and the metallic pollution loads in the surrounding environment have been scientifically analyzed to investigate the nexus between these two. DEA (Data Envelopment Analysis)-Tobit analysis has been employed, and a pollution load index (PLI) of heavy metal pollution comprising two environmental compartments (soil and water) has been constructed based on the concentration level of metalloid pollutants in the samples collected from the surrounding areas of the studied informal firms in Bangladesh. The study disproves CP practice in majority of the informal firms in Bangladesh by observing a positive relationship between firm-level efficiency and pollution load sourced from their production activities. Afterwards, this study estimates the eco-efficiency level of firms by considering pollution load as an undesirable output and minimizing its impact in an input-oriented DEA model. Applying the eco-efficiency scores in censored Tobit regression analysis, the outcome endorses the prospect of CP for informally operated enterprises in Bangladesh. However, the CP prospect can only materialize if and only if firms are provided with adequate technical, financial, and strategic support for achieving eco-efficiency in their production. The informal and marginal nature of the studied firms restricts them from getting access to the facilities and support services needed for implementing CP and moving towards sustainable manufacturing. Therefore, this study recommends green practices in informal manufacturing and limiting the informal firms by bringing them gradually under the coverage of formalization, which is in line with the achievement of the targets mentioned in Sustainable Development Goal 8.

Migration and COVID-19 Pandemic: A Study of Uttarakhand Migrants in Delhi

The COVID-19 crisis has posed unprecedented livelihood challenges for migrants across the globe. In India too, the vulnerability of migrants working away from their homes, at a different location, has come to light—in the face of the pandemic, many were forced to return to their places of origin, and migrants from Uttarakhand residing in Delhi were no exception. This article is an attempt to understand the disruptions in the lives and livelihoods of migrants from Uttarakhand, who were residing in low-income settlements in Delhi during the COVID-19 pandemic. The findings show that more than three-fourths of these migrant workers lost their jobs during the recent pandemic. Dipping into their past savings and dis-saving, the majority of these migrants survived on lesser food, and essentials in order to stay alive on their reduced household incomes. Understandably, the probit results indicate that migrant workers, particularly the less educated, recent migrants and those engaged in the informal manufacturing and service sectors are likely to be more vulnerable during a crisis like COVID-19 than others, and thus, need urgent policy attention.

Coagglomeration of Formal and Informal Manufacturing in India

Most developing countries have large and persistent informal sector. Historically, the literature was dominated by strict duality viewpoint, where the formal and informal sectors are treated as two separate entities. However, in recent times, a new approach has developed where the formal and informal sectors are not binary but they often co-exist and feed into each other. Most academic work on agglomeration economies is based on developed countries where almost all production takes place in the formal sector. Apriori, there is no reason to believe that agglomeration economies do not extend to the informal sector. Hence, in this paper, we hypothesize that agglomeration economies can arise from the interaction between formal and informal firms as well. To check the validity of the hypothesis, we study the geographic distribution and Coagglomeration pattern between formal and informal manufacturing firms in India. Using the firm level National Sample Survey for unincorporated enterprises and Annual Survey of Industries data, we calculate the Ellison and Glaeser Coagglomeration index at 2-digit NIC level. Further, using the Marshall's theory of agglomeration, we create four kinds of linkages to capture the nature of interdependence between formal and informal firms, i.e. Buyer, Supplier, Labor and Technology. We find that there is heavy clustering of both formal and informal manufacturing firms in India, however, mostly in different areas, with few exceptions like Western Uttar Pradesh and Southern Tamil Nadu. Out of 22 major industries, we find high coagglomeration only in 7. The average value of coagglomeration index at aggregate level decreases from 0.00536 in 2000-01 to -0.0027 in 2015-16. This indicate towards reduced interdependence over time, however in few industries it remains high. The average value of labor linkage increased from 0.1889 in 2000-01 to 0.3651 in 2015-16, during the same period buyer linkage remained constant around 0.2481 and supplier linkage fell from 0.5755 to 0.2749. The technology linkage remained low throughout in the range of 0.02-0.03. Strong buyer and labor linkage mean subcontracting of inputs is the main motive driving the interaction between formal and informal firms.

Stagnant manufacturing growth in India: The role of the informal economy

This paper examines the role of structural change in India's performance, and in particular the role of the informal segment in the stagnant growth of the Indian manufacturing sector. Using counterfactual analysis – including a modified shift-share approach – the paper considers to what extent the informal sector can help explain the poor performance of Indian manufacturing over the period 1980-2011. The results suggest that the informal segment of manufacturing has been a drag on overall manufacturing productivity growth, with the informal manufacturing segment unable to provide a productivity bonus when absorbing workers from the agricultural sector. Results from the shift-share analysis indicate that labor reallocation to the informal segment of the manufacturing sector is growth-reducing, with structural change being the main source of this reduction, an effect which in turn is driven by movements of employment within manufacturing sub-sectors.

Subcontracting and enterprise development in India's informal manufacturing sector

PurposeSubcontracting is a crucial cause behind the simultaneous existence of formal and informal entrepreneurship in India. This article aims to provide an over-time comparative analysis between the subcontracted and the non-subcontracted enterprises within the informal sector. Further, it also brings to fore the contribution of subcontracting towards ensuring sustainability of the informal enterprises.Design/methodology/approachBy constructing a panel data from two rounds of NSS Unincorporated Enterprise Survey Data (2010 and 2015), and employing a PSM-DID method, considering labour productivity and net retained earnings as two critical indicators of growth and development of the informal sector firms, this study has made some broad claims regarding the differences in immediate and long run performances between the subcontracted and non-subcontracted informal sector enterprises in India.FindingsThis study finds that subcontracted enterprises have not only been performing at a much lower level than the non-subcontracted enterprises, they are also growing much slowly than their counterparts. However, it has been observed that for the establishments, who are capital abundant and also have a larger production capacity, subcontracting is showing the prospect for deriving sustainable gains.Originality/valueThis article contributes to the existing literature in the following two ways. Firstly, it provides an over-time comparative analysis between the subcontracted and the non-subcontracted enterprises within the informal sector. Secondly, it brings to fore the contribution of subcontracting towards ensuring sustainability of the informal enterprises.

COAGGLOMERATION AND NEW ECONOMIC ACTIVITY: EVIDENCE FROM FORMAL AND INFORMAL MANUFACTURING FIRMS

For much of the twentieth century the predominant belief was that informal entrepreneurship would disappear with higher rates of economic growth. However, the informal sector has persisted in most countries and has grown in some, which calls for a re-evaluation of the existing notions of informal entrepreneurship. An important strand of literature in the form of structuralist and neo-liberal theory provides an alternative explanation. We use the coagglomeration framework to understand the relevance of these theories in the case of India. Using firm-level data, we use the Coagglomeration index to calculate the tendency of formal and informal firms to locate in the same region. We also calculate three types of linkages between formal and informal sectors: buyer-supplier, labor and technology. Further, we use panel data to estimate the relative importance of these linkages in explaining coagglomeration between formal and informal manufacturing firms. We find that coagglomeration in India is driven by buyer-supplier linkage. We then use count data models to determine the effect of coagglomeration and agglomeration measures on new firm birth in the formal and informal sector. We find that coagglomeration positively affects new firm birth in the formal sector but not in the informal sector. The evidence provided in the paper supports the structuralist theory.

A Qualitative Study on Barriers to E-Commerce Technologies Uptake by Informal Manufacturing Micro and Small Enterprises in Harare

This study focused on finding out the major barriers inhibiting the uptake of e-commerce by manufacturing Micro and Small Enterprises (MSEs) in Harare, Zimbabwe. E-commerce is one of the major forces to business success, hence small businesses should implement e-commerce systems so as to compete with their bigger counterparts. It has the prospective to increase productivity and effectiveness in many facets of the business operations. Several developing countries across the globe have since started to put critical attention on e-commerce. However, the majority of MSEs in developing nations are still oblivious of the importance of e-commerce in enhancing their business processes, improving their customer base, retaining existing customers and ensuring better customer relationship management (CRM). The sample of the study consisted of 10 participants from metal fabricators and furniture manufacturers operating at Mbare-Magaba area and Glenview Area 8 Home Industry Complex. Data was collected using semi structured in-depth interview questions and data was analysed using content analysis. The findings show that informal MSEs face several barriers that include: high cost of Information Communication Technologies (ICTs) equipment and gadgets, incompatibility with business operations, lack of ICTs infrastructure support by the government, accessibility challenges, lack of education and awareness about e-commerce and cultural and trust issues.

International entrepreneurship in Sub-Saharan Africa: interfirm coordination and local economy dynamics in the informal economy

PurposeThe International Labor Organization (2020) estimates that eight out of ten enterprises (i.e. own-account workers and small economic units) are informal worldwide. However, less is known about the internationalization of informal enterprises. Here, it is argued that economic blocs, such as sub-Saharan Africa, with a greater proportion of informal enterprises, may provide broader societal legitimacy for them to operate internationally. Thus, informal firms would need to collaborate with other firms to overcome their resource constraints. Geographic colocation is one way to facilitate positive interfirm interactions that promote networking and subsequently cooperation. The purpose of this paper is, thus, to addresses two questions. Firstly, how and to what extent does interfirm marketing cooperation in geographic colocation influence the internationalization of micro and small informal manufacturing enterprises? Secondly, how do the perceived benefits of local external economies moderate this relationship?Design/methodology/approachThe study draws evidence from 125 randomly selected informal enterprises located in two major clusters in Ghana, using a mixed-method approach.FindingsThe partial least square - structural equation modeling (PLS-SEM) analysis applied revealed two central points. Firstly, sharing marketing costs allows informal firms to upgrade their phases of export development directly. Secondly, the linkage of increasing sales activities and local external economies encourages the progress of the phases of export development and the scope of internationalization. Results confirm that the cluster benefits of interfirm cooperation and local external economies on the informal firm internationalization process complement each other in addition to their linear relationship.Originality/valueThe study contributes to understanding the nexus of the informal sector, geographic colocation and the entrepreneurial internationalization literature. The results should motivate researchers and policymakers to approach informal firm internationalization through collaborative business activities.

Home-based work or non-home-based work? Factors influencing work choices of women in the informal sector

PurposeThe purpose of the study is to determine the factors influencing the job choices of Indian women working in the informal manufacturing sector. The informal sector has always played a significant role in emerging and developing countries. This study investigates the effect of social cultural norms influencing women informal workers in the manufacturing sector to participate in home-based work (HBW) or non-home-based work (non-HBW) .Design/methodology/approachBoth Quantitative and Qualitative methodology have been used. In accordance with descriptive statistics, a multinomial logistic regression model was employed to assess women's likelihood of participation in home-based activities. To gain a more in-depth insight, semi-structured interviews were used to collect the perspectives of both men and women workers. The data were analysed using narrative analysis.FindingsThe findings reveal that a high fixed cost is a key driver of HBW. Workers prefer to work from home when the loss of joint household production due to working outside is substantial. Social and cultural standards play a significant effect in job selection for women. These conventions limit women's employment options, and the current study demonstrates that strong social and cultural standards limit women to home-based jobs only.Social implicationsEnhancing women's involvement in the public realm is critical and may be accomplished by affirmative action; but, for women to be treated equally in their homes and in society, an attitude shift is necessary. Despite the government's initiatives and regulations aimed at protecting informal women workers, many of the programmes and legislation fall short. The position of women in this environment cannot be improved until and unless the norms of society are flexible and liberal for Indian women. The first step would be to educate people and make them aware of the need to abandon outdated practices and embrace new progressive ideals. It will not be achievable just via government efforts; rather, both the government and society must work together to achieve the same goal.Originality/valueThe author hereby declares that this submission is their own work and to the best of their knowledge it contains no materials previously published or written by another person, except where due acknowledgement is made in the thesis. The author would like to undertake the above-mentioned manuscript has not been published elsewhere or under editorial review for publication elsewhere; and that all co-authors have agreed to have seen and approved the manuscript for submission.

Determinants of innovation and interactive learning in informal manufacturing enterprises in India

Abstract In the context of globalization, the informal sector enterprises are also exposed to international competition; and therefore, they need to remain productive and competitive. In this regard, innovation is an obvious strategic choice at the firm level. Drawing from the data gathered through an extensive field survey in NCT-Delhi, India, this study observes that innovation activities in the informal enterprises take place mostly through non-research-and-development routes and rely more on interactive learning and learning by doing. The econometric analysis shows that formal interactions through subcontracting and membership in the industrial associations along with informal interactions with other firms, buyer–supplier interactions, and social capital are having positive and significant influence on product, process, and marketing innovation. However, this study reveals that formal interactions play a vital role in introducing marketing innovations. Further, the results show the essential role of in-house training, entrepreneurial expertise, and information communication technology usage at the firm level. Thus, the paper provides empirical evidence reiterating the importance of integrating informal manufacturing enterprises and their learning processes as the key components of the innovation system in India.

Differences in Efficiency in the Formal–Informal Dichotomy—A Study of Indian Firms

The unorganised manufacturing industries play a vital role in the process of industrial development of the Indian economy. Informal firms are relatively less productive than formal firms, because a majority of the firms are technically inefficient, producing far below the actual attainable level of production. This article examines differences in efficiency and output between formal and informal production firms across India’s manufacturing industries. The key novelty in this article is in studying both the formal and informal sectors simultaneously by applying the technique of Oaxaca–Blinder decomposition to determine efficiency differences across the sectors. The results suggest that capital is a positive and the most significant determinant of the output of efficient industries. Output gaps can be explained by coefficient, endowment and interaction aspects of capital and capital productivity, while efficiency differences are explained by coefficient and interaction characteristics of emoluments and capital productivity. The results of density plots show that informal firms are no longer functioning as a pool of surplus labour in the context of Indian manufacturing industries during these years. The results dispel the notion that the informal sector is a poor performer in terms of total output compared to the formal sector. Also, capital and capital productivity are less in informal manufacturing industries than in the formal sector. JEL Codes: E26, J46, O14, O17

Decadence and relational freedom among China's gay migrants: Subverting heteronormativity by ‘lying flat’

Departing from the prevailing, individualist perspective of freedom, emphasizing individuals’ independence and the maximization of self-interest via unconstrained decision-making, this article applies the concepts of practised freedom and relational autonomy to explore the lived experience of Chinese rural-to-urban migrant gay men. Drawing on our ethnographic fieldwork in the ‘urban villages’ (城中村) of South China, we examine the ways in which rural migrant gay men achieve a sense of freedom, which is dependent on rural-to-urban migration, informal manufacturing jobs, and other queer peers, thus demonstrating a certain level of relational autonomy. Our article clearly shows how these men have come to identify as homeless guabi (挂逼, local slang for those who suffer a tragic and mysterious fate) and spend their days wandering, with no interest in stable work or long-term monogamous relationships. Our research offers a first-hand anthropological account of young adults from the rural working classes who prefer to ‘lie flat’ (躺平) – they refuse to strive for upward social mobility because they believe that upward social mobility is unattainable and a factory job too taxing.

Co-location of Formal and Informal Manufacturing and Firm’s Performance: Evidence from India

This study analyses the impact of co-location between formal and informal manufacturing sectors on plant-level productivity. We employ a unique data obtained by merging plant-level data from Annual Survey of Industries (ASI 2011–2012) and Survey of Unorganised Manufacturing and Repairing Enterprises provided by National Sample Survey Office (NSSO 67th round). We find that formal and informal manufacturing plants gain from localisation. Further, co-location with informal enterprises has a positive impact on productivity of formal sector plants; however, we observe insignificant impact of co-location on informal sector enterprises. Additionally, we find evidence that informal sector enterprises benefit from industrially diversified regions. JEL Codes: D24, R12, R3

Gold governance and goldsmithery: Economic sociology of an informal manufacturing sector in India

In India, gold’s uniqueness lies in its dual demand for ‘sacred’ ritual purposes as well as ‘profane’ economic security. As a scarce commodity, gold is continuously monitored and regulated by the state. This study investigates how communities associated with the craft and trade of gold jewellery cope with state regulations, an aspect that has largely gone undocumented in sociological literature. The article traces the transformation of the goldsmithing sector in post-independence India. The repeal of the Gold Control Act 1968 in 1990 and high demand during the post-liberalisation period gave a tremendous fillip to the gold jewellery sector. The study captures the occupational recasting as a new community of goldsmiths emerged during this period replacing the traditional goldsmithing castes. It contributes to the under-studied field of goldsmithing in India providing an ethnographic account of a triadic relationship between an informal manufacturing sector, state regulation and a self-organised workforce based on regional ties and village networks.