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India’s Informal Economy
Context:Data from the Annual Survey of Unincorporated Enterprises (ASUS) shows Informal Economy which is crucial for job creation and employing semi-skilled workers has lost 1.645 million jobs over the past 7 years (non-farm informal economy).
Unincorporated enterprises(USE)
- These are enterprises in the unorganised or informal sector, comprising Micro, Small and Medium Enterprises (MSMEs), household units including those with hired workers, and own-account enterprises.
- The surveys were carried out for unincorporated non-agricultural establishments in three sectors: manufacturing, trade, and “other services”.
Results of Survey
- The informal sector registered a decrease in employment, though the number of enterprises increased over the previous round in 2015-16.
- The number of unincorporated enterprises increased by 16.56 lakh to 6.50 crore in 2022-23 from 6.33 crore in 2015-16.
- The number of workers employed in the informal sector in 2022-23 dropped by 16.45 lakh (1.5%) to 10.96 crore from 11.13 crore in 2015-16.
- Own-account enterprises increased nearly 4% during the seven-year period, even as hired-worker enterprises contracted by 3.2%.
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- This indicates a deterioration in the quality of employment as units shifted to self-owned units, that is, households or one-person units rather than hired-worker units, which are typically a source of labour-intensive enterprises, especially in manufacturing.
- Manufacturing units were the worst hit, contracting 9.3% between 2022-23 and 2015-16 to 1.78 crore. The number of workers in manufacturing fell 15% to 3.06 crore during this period.
- Units in the trade sector contracted to a lesser extent — to 2.26 core, a 2% decline in 2022-23 from 2015-16. The number of workers increased marginally by 0.8% to 3.90 crore in this period.
- Services sector establishments, on the other hand, recorded increases in numbers of both units and workers — by 19.1% to 2.46 crore and by 9.5% to almost 4 crore respectively.
Inference from the survey
- While the real GVA of USE had grown at a CAGR (compounded annual growth rate) of 7.4% between 2010-11 and 2015-16, its CAGR contracted by 0.2% between 2015-16 and 2022-23.
- Sixteen out of the 34 states/ Union Territories recorded a decline in informal sector workers in 2022-23 compared with the data from 2015-16.
- Data from the surveys help to understand the impact of the sudden withdrawal of cash from the system (2016),GST (2017), and of the national lockdown (2020-21), the brunt of which was borne by the informal sector.
- Around 63 lakh informal enterprises shut down due to GST between 2015-16 and 2022-23, resulting in a loss of about 1.6 crore jobs.
- The number of informal enterprises increased from 50.32 lakh with 85.6 lakh workers in April-June 2021 at the peak of the COVID-19 second wave, to 1.91 crore firms with 3.12 crore employees in January-March 2022.
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About informal Economy
Indian Government scheme to boost informal economy
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