Context:
The unincorporated manufacturing sector in India has not been able to recover employment levels to pre 2020-11 levels according to the latest data from the Annual Survey of Unincorporated Sector Enterprises and the 67th National Sample Survey Experts believe that a combination of policy shocks has impeded growth and employment in this sector.
Key Highlights:
Employment Trends
- Lower Employment in 2023-24
- Employment in the manufacturing sector continues to be below 2020-11 levels. For example employment for 337 million workers was recorded in 2023-24 while in the previous reference period 2010-11 it was 349 million. The policy shocks such as demonetisation GST and COVID19 lockdowns have prolonged the work of bringing the employment levels back.
Growth in Establishments
- Number of Establishments increased
- As a consequence while employment has not gotten back to the previous levels the number of manufacturing establishments has managed to rise up to 2014 million in 2023-24 from 172 million recorded in 2010-11.
- The jump is primarily because of an increase in own account enterprises (OAEs) or in simple words self employed individuals or households who do not hire regular fulltime employees.
- OAE has increased its share to 883 in 2023-24 from 838 in 2010-11.
Own Account Enterprises OAEs Emergence
- Impact of OAEs on Employment
- The OAEs are typically characterized by low employment as they represent smallscale operations with no regular hired workers. Thus while the number of establishments has risen overall employment is low.
Policy Impact
- Policy Shocks Their Long Term Impact
- Experts believe that the unincorporated sector has been suffering the most during the changes in the economys successive economic policy. The factors which have caused stagnation of employment at higher levels in the sector include demonetisation in 2016 the onset of GST and COVID19 lockdowns.
How Do MSMEs Contribute to Employment?
- Role of MSMEs for Employment
- Micro Small and Medium Enterprises (MSMEs) especially in the unorganised sector are the largest providers of nonfarm employment. However MSMEs in the unincorporated manufacturing sector face difficulties due to the structural challenges and lack of significant growth which affects employment creation.
“Own Account Enterprise” (OAE)
An “Own Account Enterprise” (OAE) refers to a business that is entirely run by its owner(s) without employing any hired workers on a regular basis; essentially, a self-operated enterprise with no paid employees, making it a key component of the informal sector in many economies.
Key points about OAEs:
- No hired workers:The defining characteristic of an OAE is that it does not employ any workers on a regular basis, meaning the owner(s) perform all tasks themselves.
- Used in economic surveys:OAEs are commonly tracked in economic surveys to understand the scale and nature of unincorporated businesses, particularly in developing countries.
- Contrasting with establishments:When compared to “establishments” in economic data, establishments are businesses that do employ at least one hired worker.
Example scenarios of OAEs:
- A street vendor selling food from a small cart.
- A home-based tailor stitching clothes for customers without employing any assistants.
- A small family-run shop where all family members contribute to operations without hiring additional staff.
