Introduction

The Unorganised Non-agriculture Sector, often referred to as the Household Sector, plays a pivotal role in the Indian economy. In 2022-23, this sector contributed a significant 44.25% of the total Gross Value Added (GVA) at basic prices and employed 74.3% of the country’s workforce. Its importance extends beyond mere numbers, providing essential links in the domestic supply chain for goods and services to the formal economy.

Sector Performance Analysis

• A closer examination of the recently released data from the Annual Survey of Unincorporated Sector Enterprises (ASUSE) reveals how the informal sector has progressed since the last similar survey in 2015-16.
• Despite changes in survey design and definitions, the data allows for a comparative assessment after adjustments with
•  the Annual Survey of Industries results, offering insights into the Indian economy’s trajectory.

Growth of Unincorporated Non-Agricultural Establishments

• The number of Unincorporated Non-Agricultural Establishments (USE) increased from 6.36 crore in 2015-16 to 6.5 crore in 2022-23.
• This growth is predominantly rural, with rural establishments rising from 51.3% to 55% of the total. A significant shift is also observed in sectoral composition.
• While ‘Trade’ previously held the highest percentage of establishments, ‘Other Services’ now leads with 38%, followed by Trade at 35% and Manufacturing at 27%.

The Rise of ‘Other Services’

• ‘Other Services’ have shown robust sectoral expansion, growing at a compound annual growth rate (CAGR) of 2.53%.
• This aligns with India’s broader trend towards a service-based economy, bolstered by new-age services.
• The sector’s productivity also stands out, contributing 41% of the total GVA from USEs in 2022-23, with the highest GVA per establishment at ₹2.58 lakh.

Manufacturing Sector Dynamics

• While ‘Other Services’ excelled, the Manufacturing sector experienced a decline in the number of establishments but showed an increase in GVA per establishment at a nominal CAGR of 5.9% and 1.08% in real terms over the past seven years.
• This growth was particularly evident in rural areas, highlighting the sector’s potential for rural economic development.

Employment Trends

• Employment in USEs presents a mixed picture. Although there was an 8% annual increase in workers in 2022-23 from the previous year, the overall workforce shrank from 11.40 crore in 2015-16 to 10.96 crore.
• The Manufacturing sector saw the most significant decline, with workers decreasing at a CAGR of 3.33%.
• Conversely, the Service Sector grew in employment, though the average number of workers per establishment slightly declined.

Productivity and Wages

• The overall GVA per worker in nominal terms increased from ₹1.01 lakh to ₹1.42 lakh over the last seven years.
• However, when adjusted for price effects, real GVA per worker remained nearly stagnant.
• Productivity improvements were primarily seen in manufacturing establishments and rural areas, while service and trade sectors faced declines.

Real Wage Trends

• Real wages, reflecting labour productivity, showed a negative growth rate of 0.65% annually.
• Manufacturing saw an increase in emoluments per worker both in nominal and real terms, with a 5.47% annual growth rate in real terms.
• On the other hand, despite the highest annual emoluments per worker in the ‘Other Services’ sector, real wages declined by 1.67% annually.

Strategic Implications

• The data underscores a significant shift towards service-based industries within the USEs, but it also reveals declining productivity and wages in this sector over the past seven years.
• Manufacturing, although reduced in scale, has shown growth in productivity and wages, possibly due to supportive government policies.
• As India marches towards its vision of a developed nation by 2047, both the services and manufacturing sectors will be crucial.
• The government’s dual strategy of incentivising manufacturing while promoting services seems apt, ensuring balanced and sustainable economic growth.