India’s Unorganised Sector: The Invisible Powerhouse Struggling for Survival
ASHUTOSH DUBEY
CLIMATE CHANGE AND SUSTAINABILITY CONSULTANT🌎 AND Founding Editor - kanishksocialmedia-BROADCASTING MEDIA PRODUCTION COMPANY,LEGAL PUBLISHER / OECD
Keywords: unorganised sector, informal economy, low productivity jobs, demonetisation, GST, Own Account Enterprises (OAEs), income inequality, financial inclusion, economic reforms, India’s workforce, NCEUS.
India’s unorganised sector, the backbone of the country’s workforce, employs more than 90% of India’s total workers, yet it remains one of the most overlooked segments of the economy. Despite its significance, this sector is grappling with low wages and productivity, raising serious concerns about its sustainability and role in India’s future economic trajectory.
Defining the Unorganised Sector
The National Commission for Enterprises in the Unorganised Sector (NCEUS) defines the unorganised sector as comprising small, informal businesses that are typically not registered with the government. These businesses often employ fewer than 10 workers and are predominantly family-run. Despite the large number of such enterprises, they remain small in scale, often with fewer than two workers per firm on average. This is a staggering contrast, considering that the sector accounts for about 50% of India’s GDP.
Challenges Facing the Sector
Recent government data reveals that two-thirds of the workforce in the unorganised sector is stuck in low-productivity jobs, earning less than ₹11,000 per month. These jobs are typically found in sectors like agriculture, construction, retail, and personal services. Unlike their counterparts in the formal sector, workers here lack basic job security, social protection, and access to benefits such as healthcare, pensions, and maternity leave.
Impact of Economic Shocks
The sector has also faced a significant downturn in recent years due to major economic disruptions like demonetisation in 2016 and the implementation of the Goods and Services Tax (GST) in 2017. Both events disproportionately affected informal businesses that operate primarily in cash and lack the financial infrastructure to adapt to sudden shifts in the economy.
According to the government’s Annual Survey of Unincorporated Sector Enterprises (ASUSE), the unorganised sector has been slow to recover. Many businesses, especially Own Account Enterprises (OAEs), which are run by individuals without any hired workers, report average annual earnings of just ₹1,27,073, or approximately ₹10,000 per month. This figure is far below India’s cost of living and highlights the precarious existence many workers and small business owners face.
Structural Issues in the Unorganised Sector
The unorganised sector’s problems go beyond economic shocks. Low wages and poor working conditions are endemic, but the lack of formal recognition and infrastructure amplifies these issues. Businesses in this sector often lack access to credit, modern technology, and efficient supply chains, limiting their growth potential.
Moreover, without formal registration, these enterprises remain ineligible for government schemes and financial support, perpetuating a cycle of low productivity and poverty. The absence of social security also means that workers have no safety net during downturns or crises, exacerbating their financial vulnerability.
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Looking Ahead: Bridging the Gap
For India to harness the full potential of its unorganised sector, significant reforms are needed. Policymakers must focus on formalising this sector, which could include simplifying business registration processes, providing easier access to credit, and offering social security schemes tailored to informal workers.
Skill development programs and technology adoption could also help improve productivity and wages. Additionally, the government’s push towards financial inclusion—through initiatives like Jan Dhan Yojana and Digital India—can help bring more unorganised workers into the formal economy.
Conclusion
The unorganised sector, while vital to India’s economy, remains an underutilised and undervalued component of the workforce. With better policy interventions and structural reforms, this invisible powerhouse can not only improve the livelihoods of millions but also contribute more robustly to India’s overall economic growth.
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