Informal Sector Employment Trends in India

The latest Annual Survey of Unincorporated Enterprises (ASUSE) for 2021-22 and 2022-23, released by the Ministry of Statistics and Programme Implementation, provides key insights into employment trends in India's informal sector.

Key Findings:

The findings reflect the impact of three major shocks (demonetisation, GST implementation, and the Covid-19 pandemic) on unincorporated enterprises and their workforce.

• Employment Figures:
  • The number of workers in the informal sector decreased by 16.45 lakh (1.5%) from 11.13 crore in 2015-16 to 10.96 crore in 2022-23.
  • The number of unincorporated enterprises increased by 16.56 lakh, rising from 6.33 crore in 2015-16 to 6.50 crore in 2022-23.
• Impact of Shocks:
  • The informal sector bore the brunt of demonetisation, GST compliance, and the Covid-19 lockdown, which disrupted economic activities and affected employment stability.
  • Maharashtra, Bihar, Gujarat, Madhya Pradesh, and Odisha witnessed an increase in informal sector employment, while Uttar Pradesh, West Bengal, Tamil Nadu, Karnataka, and Andhra Pradesh recorded a decline.
• State-wise Trends:
  • Maharashtra saw a consistent rise in informal sector workers, reaching 1.15 crore in 2022-23 from 91.23 lakh in 2015-16.
  • Bihar experienced a decline in informal sector workers till 2021-22 but saw a sharp increase to 58.95 lakh in 2022-23, surpassing pre-pandemic levels.
• Economic Indicators:
  • The real Gross Value Added (GVA) of unincorporated sector enterprises grew by 6.9% in 2022-23, yet remained 1.6% lower than the 2015-16 levels.
  • The sector's compounded annual growth rate (CAGR) contracted by 0.2% between 2015-16 and 2022-23, reflecting the prolonged impact of economic shocks.
• Sectoral Contribution:
  • The unorganised sector contributes over 44% to India's Gross Value Added (GVA) and employs nearly 75% of the non-agricultural workforce, highlighting its pivotal role in the economy.

Why the unorganized sector is struggling?

• Cost Burden: The unorganized sector struggles with any changes that increase its costs. Unlike the organized sector, which is largely digitized and formalized, the unorganized sector finds it difficult to adapt.
• Shift in Demand: Demand has shifted from smaller unorganized units to larger organized ones, leading to the rapid growth of organized sector enterprises.
• Market Capture: Despite the intent of GST to formalize the economy, the organized sector often dominates markets that were traditionally held by the unorganized sector.
• Unpreparedness: GST, digitization, and formalization policies disproportionately benefit the organized sector, disadvantaging the unorganized sector.
• Market Capture: As production in the unorganized sector declines, the organized sector expands into new markets, further marginalizing the unorganized sector.

Why unorganised sector matters?

• Dominant Workforce: The sector accounts for approximately 90% of India's workforce.
• Employment Generation: It provides income-earning opportunities to a large number of people who might otherwise struggle to find formal employment.
• Driving Growth: It plays a leading role in India's electric vehicle (EV) growth, particularly through sectors like e-rickshaws.
• Economic Contribution: It plays crucial role in the economy by contributing to:
  • National Domestic Product (GDP): Contributes through its output and economic activity.
  • Savings: Helps in household savings which contribute to national savings.
  • Capital Formation: Supports investment and economic growth by contributing to capital formation.

Government measures to protect interests of unorganised labour

• Life and Disability Cover: Provided through Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY).
• Health and Maternity Benefits: Insured under Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), targeting those in deprived occupations.
• Old Age Protection: Pradhan Mantri Shram Yogi Maan-dhan Yojana (PM-SYM) launched in 2019. It offers a monthly pension of Rs. 3,000 upon reaching 60 years for unorganized sector workers.
• Other Welfare Schemes:
  • Public Distribution System, enhanced through One Nation One Ration Card scheme under National Food Security Act.
  • Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) for rural employment.
  • Deen Dayal Upadhyay Gramin Kaushal Yojana for rural skill development.
  • Pradhan Mantri Awas Yojana for affordable housing.
  • Pradhan Mantri Gareeb Kalyan Rojgar Yojana for employment generation in rural areas.
  • Mahatma Gandhi Bunkar Bima Yojana for weavers.
  • Deen Dayal Antyodaya Yojana for urban and rural poor.
  • PM Street Vendor's AtmaNirbhar Nidhi (PMSVANidhi) for street vendors.