New Delhi, 03/01/2025: India’s informal sector grew a lot in 2023-24 after shrinking from 2015 to 2021. A new government report says there are now more informal businesses and workers than in 2015-16.
Even though the government is trying to make the economy more formal with programs like ‘Make in India,’ the sector is shifting more towards services instead of manufacturing. The 2023-24 Annual Survey of Unincorporated Sector Enterprises (ASUSE) shows that more businesses outside agriculture are not registered under the Companies Act.
The survey shows that the number of unregistered businesses went from 6.3 crore in 2015-16 to 6 crore in 2021-22, but then increased to 7.3 crore by 2023-24. At the same time, the number of workers in these businesses dropped by 1.3 crore between 2015-16 and 2021-22 but grew by 2.3 crore in the next two years.
This growth goes against the Ministry of Labour and Employment’s claims that the economy is becoming more formal, showing how strong the informal sector is. However, productivity in informal manufacturing went down in 2023-24, with less value being added per business and worker.
The total value added by the informal manufacturing sector increased by just 5.4% in 2023-24, which is slower than the growth in trade and services. As a result, the share of informal manufacturing businesses and workers has gone down, making the services sector even more dominant.
Also, the average pay for workers was highest in the services sector, showing that more people are choosing jobs in services instead of manufacturing. This trend highlights changes in India’s informal economy, even though the government still aims to formalise it.
