Rising capital intensity

NAS DATA ON INFORMAL SECTOR DOESN'T REFLECT POLICY FALLOUT BETWEEN 2015-16 & 2019-20

- R GOPALAN MC SINGHI

The informal sector in India dominates agriculture and allied services, the non-agricultural sector, and micro, small, and medium enterprises, except in finance, public administration, and defence, and the transport sector, excluding road transport.

Currently, data on the sector is available from both the National Account Statistics (NAS) and the National Sample Survey Organisation (NSSO) for 2015-16 and 2022-23. The intervening period had demonetisation, introduction of a nationwide goods and services tax, and the Covid-19 pandemic, which make the two points perfectly comparable.

The all-India survey of unincorporated enterprises excluding agriculture for 2015-16 estimated the total number of enterprises at 63.4 million in manufacturing, trade, and other services, employing a total of 111.3 million people. The fixed assets per establishment were estimated at ₹2.3 lakh and value added per enterprise at ₹1.8 lakh.

In the survey for 2022-23, the number of establishments increased to 65 million (at an average annual rate of 0.4%) but employment declined to 109.6 million (at an average rate of 0.2%). Manufacturing enterprises faced the brunt of this decline. The value added per enterprise, value added per person employed, and fixed assets per enterprise show a moderate annual increase of 3.9%, 5.2%, and 4.6% respectively, lower than the rate of inflation during this period.

Increase in the number of enterprises could be due to a lack of alternative job opportunities and a fallback position.