MALINVESTMENT, CREDIT CYCLES, AND THE SUSTAINABILITY OF THE GIG ECONOMY: AN AUSTRIAN BUSINESS CYCLE PERSPECTIVE

A rapid growth has been witnessed in the gig economy of India, leading to absorption of displaced labour during recessions and other phases of bust. The Hayekian business cycle theory under the umbrella of Austrian School of Economics puts forth the idea that the periods of economic booms stimulated by artificially lowered interest rates misguide the economic actors into undertaking malinvestment, viz. Misallocation of capital and other scarce resources. This malinvestment eventually requires correction, which descends upon the defunct economic system as a recession. While the labour roles and positions most seen within the gig economy are often viewed as a flexible fix adopted during labour downtimes or during stretches of underemployment, such economic opportunities are reliant on Venture Capital (VC), which raises concerns about sustainability. This paper critically examines whether gig platforms in India represent a genuine and sustained labor market correction during such phases of bust, or are merely another form of short lived malinvestment in face of monetary tightening that reduces easy credit.