📮 The Formalisation Flywheel
“India isn’t just growing — it’s getting legible.”
I. The Quietest Revolution
There’s a silent shift happening in India.
It doesn’t scream from newspaper headlines or stock tickers.
But it changes everything.
More businesses are now on the grid.
More transactions are being recorded.
More workers are being enrolled.
More citizens are visible to the state — and to the financial system.
This is the story of formalisation.
Not just of the economy — but of trust.
II. What Changed?
India’s informal economy was once seen as a permanent feature —
90% of employment, mostly cash-based, undocumented, unbanked.
But the last decade delivered a flywheel:
2016: Demonetisation forced the shift from cash to account
2017: GST unified indirect taxation and created invoice trails
2018 onwards: UPI scaled to 18 billion+ transactions/month (June 2025)
Aadhaar & Jan Dhan gave identity + bank accounts to 550Mn+ people
EPFO/ESIC began registering millions of low-income workers
Today, more than 57 Mn MSMEs are digitally visible.
And over 300 Mn workers are linked to Aadhaar-based social security systems.
We now live in an India where visibility begets credit.
Where identity begets inclusion.
Where digital trails replace hand-written ledgers.
III. Why It Matters for Investors
Formalisation reshapes the investing terrain in five big ways:
1. From Margin to Moat
Earlier, a large part of India’s unorganised sector competed on tax arbitrage — they didn’t pay GST, TDS, or PF. Now, compliance is non-negotiable.
This means organised players get pricing power back.
Example:
In adhesives, Pidilite faces fewer undercutting threats from informal brands.
In apparel, Page Industries wins on trust, compliance, and quality — not just scale.
2. Credit Unlock at the Last Mile
A kirana store with GST filings, UPI receipts, and digital inventory records is no longer invisible to lenders.
Digital data becomes collateral.
This is why embedded lending and supply chain finance are booming.
Fintechs can now underwrite loans based on real-time transaction trails — not paper balance sheets.
India’s credit gap is being closed by visibility, not just policy.
3. Employment to Enrolment
As more workers move to EPFO-covered jobs, a shift begins:
Savings rates go up
Household stress buffers improve
Insurance becomes viable
Consumption becomes smoother — not just spiky
This changes how Indian households absorb shocks, plan purchases, and behave economically.
4. Widening the Corporate Opportunity Set
Historically, public markets missed 80% of India — because 80% of business was informal.
Now, companies that digitise the informal are growing fast:
CMS Info Systems (cash logistics)
V-Mart (tier 2 retail)
CAMS, CDSL (digitisation infra)
Paytm, PhonePe (UPI gateways + lending rails)
The investable universe is no longer restricted to IT, banks, and pharma.
India's new leaders are emerging from the cracks being filled.
5. From Cash-First to Consent-First
India is shifting from grey to transparent.
From informal to trusted.
And in that shift lies a new form of economic compounding.
Formalisation may not show up in this quarter’s GDP print.
But it shows up in:
Better working capital cycles
Better tax compliance
Better customer behaviour
Better investment conviction
IV. What to Watch
The next phase is already underway.
E-invoicing and B2B digitisation are accelerating
ONDC and Account Aggregator will level the playing field for small businesses
Digital public goods (DPI) are being exported — as India’s soft power
The flywheel is real.
And it’s spinning faster than most realise.
V. What This Means
India is no longer just a growth story.
It’s a credibility story.
What was once shadowed is now visible.
What was once informal is now investable.
And what was once anecdotal is now measurable.
When trust scales, capital follows.
The India we are investing in today is more formal, more digital, more banked, and more predictable than ever before.
Until next time,
Ravi Srivastava
Long-term investor | Author, Postcard from India
📬 Reflections on investing, India, and quiet compounding