After three shocks, 16.45 lakh jobs lost in informal sector over 7 years

The number of workers employed in the informal sector in 2022-23 has dropped by 16.45 lakh or about 1.5 per cent to 10.96 crore compared to 11.13 crore in 2015-16, according to the latest Annual Survey of Unincorporated Enterprises (ASUSE) for 2021-22 and 2022-23 released by the Ministry of Statistics and Programme Implementation (MoSPI).

The data available for the first time since 2015-16, provides an understanding of the impact of the three major exogenous shocks viz., demonetisation in November 2016, rollout of the Goods and Service Tax in July 2017, and the Covid-19 pandemic in March 2020, on the growth of unincorporated enterprises and the employment in these enterprises.

The ASUSE for 2021-22 and 2022-23 also showed that the number of unincorporated enterprises increased by 16.56 lakh from to 6.50 crore in 2022-23 from 6.33 crore in 2015-16.

Much of the brunt of the three shocks of demonetisation — sudden withdrawal of cash from the system, GST — regulatory compliances and inclusion in the tax net, and Covid-19 that prompted the government to impose a national lockdown, was borne by the informal sector.

Among the top ten states that account for nearly three quarters of the informal sector workers employed in India, five states — Maharashtra, Bihar, Gujarat, Madhya Pradesh and Odisha — recorded an increase in the informal employment between 2015-16 and 2022-23. On the other hand, Uttar Pradesh, West Bengal, Tamil Nadu, Karnataka and Andhra Pradesh registered a decline in the number of informal sector workers during the same period, the survey showed. These five states account for 42 per cent of all informal workers.

While 16 states/UTs out of 34 states/UTs (Jammu & Kashmir and Ladakh don’t have comparable figures) recorded a decline in informal sector workers in 2022-23 in comparison with the previous data of National Sample Survey’s 73rd round on Unincorporated Enterprises for 2015-16, the share of informal sector workers increased in most states in the immediate aftermath of the pandemic, an indication of the economic distress and a possible shift from formal to informal sector.

Uttar Pradesh recorded a decline in informal sector workers to 1.57 crore in 2022-23 from 1.65 crore in 2015-16, but registered an increase from the level of 1.30 crore in 2021-22. West Bengal also saw a decline in informal sector workers to 1.05 crore in 2022-23 from 1.35crore in 2015-16, but the number increased marginally from 1.02 crore in 2021-22.

Maharashtra, however, recorded an increase in informal sector workers throughout this seven-year period rising to 1.15 crore in 2022-23 from 91.23 lakh in 2015-16 and 98.81 lakh in 2021-22. Madhya Pradesh, Gujarat and Odisha, which feature among the top ten states for informal sector employment also recorded an increase in workers in 2022-23 compared with 2015-16.

Bihar, which is among the largest source of migrant workers in the country, stood out among other states by recording a decline in informal sector workers during 2015-16 and 2021-22, but recording a sharp increase in 2022-23 to surpass the pre-pandemic level of informal employment. In numbers, Bihar recorded a decrease in informal sector workers to 43.22 lakh in 2021-22 from 53.07 lakh workers in 2015-16, only to reverse the trend to mark a sharp increase of informal sector workers to 58.95 lakh in 2022-23, higher than the level seen in 2015-16.

For informal sector output in value added terms of Gross Value Added, India Ratings in a note said the real GVA of unincorporated sector enterprises (USE) grew by 6.9 per cent in 2022-23, which was still lower than the pre-pandemic level. “Although the real GVA of USE grew 6.9% YoY in 2022-23, it was still 1.6% lower than the levels attained in 2015-16. A long-term view at the real GVA of USE gives a better picture of the deleterious impact of the shocks on the sector. While the real GVA of USE had grown at a CAGR (compounded annual growth rate) of 7.4% between 2010-11 and 2015-16, its CAGR contracted by 0.2% between 2015-16 and 2022-23,” Paras Jasrai, Senior Analyst, India Ratings said.

As far as the number of unincorporated enterprises is concerned, Uttar Pradesh, West Bengal and Maharashtra accounted for the highest share of such informal sector enterprises in both rural and urban areas in 2022-23.

State Bank of India in its research report, however, noted that the KLEMS data by the Reserve Bank of India and the ASUSE employment numbers broadly match and show around 8.9 crore employment in industry and services for the nine-year period during FY14-FY23.

The unorganised sector contributes over 44 per cent to the country’s GVA and employs nearly 75 per cent of the workforce employed in non-agricultural enterprises. The surveys for the unincorporated sector enterprises have been released by the Ministry after a long gap since the data collection.Top of Form

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The data for these non-agricultural sector enterprises is seen as a crucial jobs indicator since the informal sector is closely watched for its employment generation capacity and absorption of labour force, especially in case of a slowdown in the formal sector.