The Unincorporated Sector: A Complex Tale of Job Creation & Resilience

The unincorporated sector, often called the lifeblood of India's informal economy, has always played a pivotal role in shaping the nation’s economic narrative. From bustling roadside stalls to small-scale family businesses, these enterprises form the backbone of employment generation and entrepreneurial spirit in India. However, the latest findings by the National Statistical Office (NSO) reveal a mixed bag of progress and challenges for this dynamic sector in the fiscal year 2023-24. Let's have a look at the key highlights of the report with TICE.

Job Creation Slows Amidst Structural Changes

In a surprising shift, fresh job creation in the unincorporated sector witnessed a slowdown in 2023-24. According to the Annual Survey of Unincorporated Sector Enterprises (ASUSE), additional employment generation dipped to 10.97 million, down from 11.74 million in the previous year. Despite this, the sector still accounted for a significant share of India's workforce, with the total number of workers increasing to 120.6 million, up from 109.6 million in 2022-23.

This paradox—rising overall employment despite slower fresh job creation—underscores the complexities of India’s labor market. The slowdown has raised eyebrows among experts, with some attributing it to lingering economic distress and others viewing it as a reflection of structural shifts within the sector.

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A Surge in Establishments: Growth or Survival?

One of the most striking revelations from the survey is the surge in the number of unincorporated establishments, which rose by a staggering 8.35 million in 2023-24, compared to 5.34 million in the previous year. This brought the total count to 73.4 million establishments, signaling a notable expansion in the sector.

However, this growth has sparked a debate among economists. While Chief Economic Advisor V. Anantha Nageswaran linked the trend to the post-pandemic recovery and supportive government policies, others like Santosh Mehrotra, a visiting professor at the University of Bath, offered a more sobering perspective.

“The rise in establishments is largely driven by an increase in own-account enterprises (OAEs), which often represent survival strategies rather than true entrepreneurship,” Mehrotra remarked. He pointed out that policy shocks such as demonetization, GST implementation, and the pandemic had left lasting scars on the sector, forcing many to set up businesses as a means of subsistence.

Digital Transformation: A Silver Lining

Amid these challenges, the sector's growing adoption of digital technologies stands out as a bright spot. The share of establishments using the internet rose to 26.7% in 2023-24, up from 21.1% in the previous year. This shift toward digital operations reflects a broader trend of increasing reliance on technology for business growth and efficiency.

“The substantial growth in internet usage among establishments highlights the sector's resilience and its readiness to embrace digital transformation,” the NSO stated.

From online marketing to e-commerce, digital tools are enabling small businesses to reach wider audiences and improve operational efficiency, setting the stage for long-term growth.

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Economic Contributions and Wage Growth

The economic impact of the unincorporated sector remains significant. The gross value added (GVA) by the sector rose by 16.5%, reaching ₹17.97 trillion in 2023-24, up from ₹15.42 trillion in 2022-23. Additionally, the average annual emolument per hired worker increased by 13%, climbing to ₹1,41,000, signaling an improvement in wage levels.

This rise in GVA and wages indicates that while job creation may have slowed, the sector is becoming more productive and financially robust—a promising sign for workers and business owners alike.

Balancing Growth and Challenges

The unincorporated sector's journey through 2023-24 paints a picture of resilience amidst adversity. While the slowdown in fresh job creation and the reliance on OAEs highlight underlying economic distress, the surge in establishments, rising GVA, and digital adoption offer reasons for optimism.

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As India continues its economic recovery, the unincorporated sector's evolution will depend on addressing structural challenges, fostering true entrepreneurship, and leveraging digital technologies. Policymakers must strike a delicate balance between supporting this vital sector and ensuring its growth translates into sustainable job creation and economic resilience.

For now, the unincorporated sector remains a testament to India’s entrepreneurial spirit—a dynamic, ever-evolving ecosystem that refuses to be overshadowed by challenges.

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