Informal entities in manufacturing lost 5.4 million jobs in 7 years

Unincorporated enterprises in the manufacturing sector lost nearly 1.8 million establishments and shed 5.4 million jobs between July 2015-June 2016 and October 2022-September 2023, an analysis of the fact sheet on ‘Annual Survey of Unincorporated Sector Enterprises (ASUSE)’ and the comparable 73rd round survey in 2015-16 by the National Statistical Office (NSO) showed.

An estimated 17.82 million unincorporated enterprises operated in the manufacturing sector in October 2022-September 2023, nearly 9.3 per cent down from 19.7 million unincorporated enterprises in July 2015- June 2016.

Similarly, the number of workers engaged by these establishments declined by nearly 15 per cent to 30.6 million (2022-23) from 36.04 million (2015-16).

Unincorporated enterprises refer to business entities that are not legally incorporated as separate legal units.

These typically include small businesses, sole proprietorships, partnerships, and informal sector businesses.

Business Standard reported on June 15 that even after adding 11.7 million workers in the October 2022-September 2023 period from the pandemic lows in April 2021-March 2022, total workers employed in the vast informal sector in India — at 109.6 million — still remained below the pre-pandemic period.

Pronab Sen, chairperson, Standing Committee on Statistics, says that the unincorporated sector was severely hit by the successive economic shocks such as demonetisation, Goods and Services Tax (GST) and Covid pandemic in the past decade or so.

“There is no doubt that the informal sector was severely hit by these policy decisions and the pandemic-induced lockdown.

"Given that an establishment provides employment to around 2.5-3 people, as these are mostly own account enterprises or involve family members, it is logical that manufacturing lost close to 5.4 million jobs in the process,” he added.

Echoing similar views, labour economist Santosh Mehrotra says that the small, micro and medium enterprises (MSMEs) in the unorganised sector are the biggest employment providers in the non-farm sectors.

“The deterioration of the MSMEs of the unorganised sector and non-farm employment in these units was very much part of the sharp slowdown seen after 2016 due to successive policy-induced shocks.

"Even though the current data shows that the number of total establishments has surged after the pandemic, it is due to an increasing number of own account enterprises, which have emerged as a survival strategy for the vast populace,” he adds.

The analysis of the data also shows that the number of unincorporated establishments in the “trading” sector declined by 2 per cent to 22.5 million in October 2022-September 2023 from 23.05 million in July 2015-June 2016, even as the number of workers engaged in the sector saw a marginal growth to 39 million from 38.7 million during this time period.

On the other hand, the number of unincorporated establishments in the “other services” sector grew by nearly 19 per cent to 24.64 million from 20.68 million and the number of workers engaged surged by 9.5 per cent to 39.96 million from 36.5 million.