New Delhi: India’s informal sector continued its post-pandemic growth in 2023-24, reversing a trend of contraction between 2015 and 2021, with the number of establishments and workers surpassing 2015-16 levels, a new government survey shows.
While more than a quarter of India’s informal, non-agricultural workforce is in manufacturing, the sector saw its productivity falling in 2023-24 in terms of gross value added per establishment as well as per worker.
The informal sector also seems to be leaning away from manufacturing and towards services, despite the government’s ‘Make in India’ push.
The Annual Survey of Unincorporated Sector Enterprises (ASUSE) 2023-24, released last week, measures non-agricultural establishments that are not registered under either the Companies Act, 1956 or the Companies Act, 2013.
The ASUSE has so far been conducted for 2021-22, 2022-23 and 2023-24. However, the National Sample Survey’s 73rd round provides comparable data for 2015-16 as well, allowing for a longer-term comparison.
The data shows that the number of such unregistered establishments shrank from 6.3 crore in 2015-16 to 6 crore by 2021-22. Thereafter, however, the number of such informal establishments grew to 6.5 crore in 2022-23 and 7.3 crore in 2023-24.
Put another way, there were 30 lakh fewer informal establishments in 2021-22 than in 2015-16. This trend reversed strongly and quickly, with 1.3 crore more informal establishments in 2023-24 than in 2021-22.
Similarly, the number of workers in informal establishments shrank by 1.3 crore between 2015-16 and 2021-22. However, it grew again by 2.3 crore in two years.
This comes at a time when the Ministry of Labour and Employment has claimed, “India’s economy is currently undergoing a transformative shift marked by an increasing trend toward formalization.”
Drop in manufacturing productivity
The ASUSE data shows that productivity in the informal manufacturing sector improved consistently from 2015-16 to 2022-23, before falling in 2023-24. The gross value added per informal establishment in the manufacturing sector grew from Rs 1.36 lakh in 2015-16 to Rs 2.02 lakh in 2022-23.
In 2023-24, however, this measure of productivity fell to Rs 1.89 lakh per informal manufacturing establishment.
Similarly, the gross value added per worker grew from Rs 74,000 in 2015-16 to Rs 1.18 lakh in 2022-23, before falling to Rs 1.13 lakh in 2023-24.
This fall in productivity has more to do with low growth in gross value added than due to an increase in workers or establishments, the data shows.
That is, the total gross value added of the informal manufacturing sector grew from Rs 3.61 lakh crore in 2022-23 to Rs 3.8 lakh crore in 2023-24, a 5.4 percent increase, much lower than the increases seen by the trade (12.8 percent) and other services (26.2 percent) sectors.
On the other hand, the informal manufacturing sector has been seeing a falling share in both the number of establishments and the number of workers.
The share of the manufacturing sector in the total number of informal enterprises fell from 31 percent in 2015-16 to 27.4 percent in 2023-24. At the same time, the other services sector saw its share grow from 32.6 percent to 41.5 percent over the same period.
Similarly, in terms of unorganised sector workers, the manufacturing sector saw its share fall from 32.4 percent in 2015-16 to 27.9 percent in 2023-24. The services sector saw its share rise from 32.8 percent to 39.1 percent.
It’s also not hard to see why this would be. The data shows that the average emoluments per hired worker were the highest in the other services sector, at Rs 1.49 lakh, compared to Rs 1.35 lakh in the manufacturing sector and Rs 1.33 lakh in the trade sector.
(Edited by Sugita Katyal)
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