Shadow entrepreneurs manage a business that sells legitimate goods and services but they do not register their businesses. Shadow entrepreneurship is a key factor affecting economic development, both in a positive and negative sense.
Moreover, India has one of the highest numbers of shadow entrepreneurs in the world and with a rising gig economy, understanding shadow entrepreneurship becomes incredibly important.
Concerns With Shadow Entrepreneurship
- As Shadow Entrepreneurship is largely unregulated, it provides little job security and few benefits to its workers like social security, insurance, etc.
- Therefore, it is an extension of India’s informal labor, which has been prevalent for a long time and has remained unregulated.
- : Shadow Entrepreneurship results in loss of tax revenue, the unfair competition to registered businesses, and also poor productivity – factors that hinder economic development. Further, as the Shadow Entrepreneurship businesses are not registered, it takes them beyond the reach of the law and makes shadow economy entrepreneurs vulnerable to corrupt government officials.
- Shadow Entrepreneurship may also have cross-border and national security implications. For instance, the recently reported suspicious loans being provided by Chinese instant loan providers online.