New Delhi, June 19 -- Recently, Indian GDP measurement came under considerable discussion in the media on account of an observation emanating from the Niti Aayog based on a projection made by the World Bank-that India has become the world's fourth largest economy. As part of this discussion, some commentators speculated that Indian GDP is underestimated because "a very significant informal sector is not measured in the GDP." This allegation can be fairly easily dismissed.

The 'informal sector' is a term that is loosely used by many economists. There are two different conceptual approaches to defining this term. First, by the International Labour Organization, which tends to focus on 'informal employment,' primarily referring to work that...