The gig economy, also known as the sharing or freelance economy, has become a new way of working in the modern job market. It involves short-term or freelance jobs where workers are paid for their services based on an hourly, weekly, monthly, per-contract, or per-project basis.
In India, the gig economy exhibits considerable diversity, across numerous industries and professions. During the 1980s and 1990s, gig work in India was primarily restricted to seasonal labour migration. During the non-harvest season, workers often migrated across the country to manufacturing plants where they carried out short-term labour-intensive jobs. Subsequently, with the advent of the computer, part-time data entry jobs gained traction. However, the past decade has been strikingly different. It has been led by a rapid proliferation of digital technologies, such as the internet, public infrastructure, and smartphones. This has further aided platforms like Uber, Ola, Swiggy, Flipkart, Airbnb, Upwork, and many others giving gig workers a new identity, and making them one of the fast-emerging segments in the country. Remarkably, 56% of the surveyed gig workers were found to have full-time employment before their gig roles (StrideOne report).
Gig Economy in India
India's gig economy currently employs about 15 million workers. These workers are spread across diverse sectors such as software, shared services, and professional services. Large new-age platforms alone contribute to about 30%-35% of the total workforce. As per several industry reports, the gig economy is poised to witness a growth spurt in the next five years, with an estimated 200 million workers projected to join its ranks, including digital gig workers, blue-collar workers, and formal/ temps.
Interestingly, the gig economy is not restricted to tier-1 or metro cities alone, which account for only 35% of the gig workforce. In tier-2 and tier-3 cities too, there has been a noticeable surge in demand for gig work. Furthermore, the gig economy has also witnessed a significant increase in the participation of women, which has expanded from 18% to 36% over the last 12 months. As the gig economy continues to grow and evolve, we are likely to see changes across the demographics and geography of the workforce. Covid-19 was a key influencing factor in the movement of skilled-workforce from metro cities to smaller towns. Deeper internet penetration and TRAI's recommendation of a minimum 2mbps download speed to the DoT is expected to aid this trend further.
Despite the thriving gig economy, especially in the post-covid era, several challenges persist across the value chain. Amongst the key challenges, disjointed demand and supply lead the pack as inefficiencies and mismatches dominate. Furthermore, challenges like social security and access to credit are significant concerns for gig workers. This underscores the pressing need for creative solutions targeted at addressing these inadequacies and problems.
Addressing Supply-Demand Issues in India's Gig Economy
From the perspective of both workers and employers, the entire value chain of the gig economy, including discovery, matchmaking (assessment and filtration), training, retention, and replacement, has several flaws. Employers in industrial and new-age sectors often rely on unorganized channels for hiring; primarily local agents with a minimal filtration process, leading to high attrition rates between 8% and 15% monthly. This leaves them with no option but to constantly scramble for replacements. Similarly, workers struggle with upskilling themselves (with only 31% of jobs classified as low-skill) and getting discovered by prospective employers. Few may even find it challenging to secure specific jobs as 67% of the gig workforce lacks post-school education. Currently, medium-skilled jobs account for approximately 47% of the gig workforce, while high-skilled jobs make up about 22% and low-skilled jobs roughly 31%. In the next 5-7 years, the gig economy is likely to see the emergence of other skill sets as well.
Startups & Funding on the Rise
In the burgeoning gig economy, a slew of startups focused on solving these problems have emerged. From job search platforms like Apna and Goodworker to high-velocity discovery and matchmaking platforms like WorkIndia and Vahan, custom models focused on both employers and workers are aiming to solve these inefficiencies. Work fulfillment platforms like Awign, complete lifecycle management solutions like Betterplace (onboarding to upskilling), and industrial blue-collar worker platforms like Aamdhane have also gained traction lately.
Revenue models may also vary based on the platform’s business model and target group. Models include - outcomes-based fees, task-based fees, one-time fees for bulk hiring, per lead/hire fees, and retention-based monthly recurring charges.
While many startups have focused on solving the discovery problem for job/hire, very few have successfully delivered outcomes in terms of matchmaking and other allied Human Resources Management System (HRMS) activities. Despite this, startups in the sector have raised over $200 million in funding across the last few years. This growth trajectory highlights the importance of the gig economy as a major contributor to India's overall labour market and emphasizes on the need for effective policies and strategies to support this rapidly evolving segment of the workforce.
The Emerging Landscape & Intersection of the Fintech Industry
As the gig economy continues to develop, its intersection with various industries and service adjacencies is inevitable. Platformization of this sector with a focus on social and financial inclusion is expected to cover a broader spectrum of gig workers, including street vendors, food stalls, and regional cuisine producers, to provide them with pan-India access. It is also expected to get a push from the government.
In this evolving landscape, fintech firms are poised to play a pivotal role in providing vital support to the growing workforce. With the gig economy's ongoing expansion, freelancers and independent contractors require tailor-made financial services to address their unique needs and challenges, such as access to institutional credit, insurance, emergency savings, and retirement planning. Adjacent services required include financial planning, tax filing, and international money transfers.
Venture capital funding is expected to provide a significant boost to fintech platforms catering to the informal economy, propelling this sector into a mainstream economic conversation. With the surge in investments being directed into the gig economy, the market is poised to mature alongside established gig economies, and policies such as sick leaves, healthcare access, and employer insurance will inevitably be addressed.
How Merisis can help - Contact Us
Fintech companies are expected to play a vital role in increasing financial inclusion and digital adoption. The total addressable market for Indian fintech industry is expected to reach $2.1 Tn by 2030, with a CAGR of 18% from 2022. India has seen a significant rise in fintech investment, with about $35 billion invested across segments so far. The years 2021 and 2022 saw more than $19 billion of fintech funding and an addition of 18 fintech unicorns. Capitalizing on strong demographics, increasing digital adoption, maturing data ecosystem & infrastructure, and product expansion will help fintech companies accelerate financial inclusion within the regulatory guardrails.
The Fintech team at Merisis strives to identify trends early on and assist companies in the identified sub-segments with their growth plans. The team has extensive experience in fundraising and M&A transactions across the FinTech landscape having worked with companies in payments, distribution, lending, wealth tech and insurtech space. Read more
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