Informal Sector Loses Rs 11.5 Trillion, 16M Jobs Post Shocks
India's informal sector suffers major losses, with 16 million jobs lost and significant economic impact due to macroeconomic disruptions
By : Sangeetha G
Update: 2024-07-09 12:30 GMT
Chennai: The cumulative impact of macroeconomic shocks over the past few years on the informal sector enterprises has led to an economic loss of Rs 11.5 trillion and job loss of 16 million.
As per the data of the Ministry of Statistics and Programme Implementation (MOSPI), the total number of establishments in the non-agricultural sector increased to 65 million in 2022-23 from 59.7 million in 2021-22. In 2015-16, the number of informal enterprises stood at 63.4 million.
There was an addition of 5.7 million enterprises between 2010-11 and 2015-16 which translates into an addition of about 1.1 million enterprises annually. Had the macro shocks such as demonetisation, implementation of GST and COVID-19 not taken place during the post 2015-16 period and the growth in enterprises followed the pattern between 2010-11 and 2015-16, their total number would have reached 71.4 million in 2022-23.
Similarly, the number of workers employed would have been 125.3 million. Hence, there has been a loss of 6.3 million informal establishments and 16 million job losses during the 2015-16 to 2022-23 period, finds India Ratings.
The size of informal enterprises was Rs 15.4 trillion in 2022-23 growing at a CAGR of 4.3 per cent between 2015-16 and 2022-23. Between 2010-11 and 2015-16, the CAGR was 12.9 per cent. Had the pace of growth remained at 12.9 per cent during 2015-16 to 2022-23, the size of informal enterprises in 2022-23 would have been Rs 26.9 trillion. This translates into a cumulative economic loss to the tune of Rs 11.5 trillion, which is 4.3 per cent of FY23 GDP.
“The number of informal enterprises which were shut down between 2015-16 and 2022-23 are estimated at 6.3 million, leading to Rs 11.5 trillion economic loss and about 16 million informal sector job loss. However, this period also coincided with the rise in the formalisation of the economy, which has resulted in robust tax collections”, said Sunil Kumar Sinha, Principal Economist, Ind-Ra.
While formalisation of the economy is the way forward, the reduced footprint of the unorganised sector has implications for employment generation. Therefore, a judicious mix of policy which allows coexistence of both formal and informal sectors needs to be pursued in the interim.
The informal sector’s share in the Gross Value Added (real) of Manufacturing Trade and Other Services stood at 18.2 per cent in 2022-23, falling sharply from 25.7 per cent in 2015-16. The shrinkage has been sharper in other services and trade sectors. The share of the informal sector in these sectors dropped to 32.3 per cent and 21.2 per cent in 2022-23 from the pre-shock level of 46.9 per cent and 34.3 per cent, respectively. In the manufacturing sector, the share of the informal sector fell to 10.2 per cent from 12.5 per cent during the same period
As per the data of the Ministry of Statistics and Programme Implementation (MOSPI), the total number of establishments in the non-agricultural sector increased to 65 million in 2022-23 from 59.7 million in 2021-22. In 2015-16, the number of informal enterprises stood at 63.4 million.
There was an addition of 5.7 million enterprises between 2010-11 and 2015-16 which translates into an addition of about 1.1 million enterprises annually. Had the macro shocks such as demonetisation, implementation of GST and COVID-19 not taken place during the post 2015-16 period and the growth in enterprises followed the pattern between 2010-11 and 2015-16, their total number would have reached 71.4 million in 2022-23.
Similarly, the number of workers employed would have been 125.3 million. Hence, there has been a loss of 6.3 million informal establishments and 16 million job losses during the 2015-16 to 2022-23 period, finds India Ratings.
The size of informal enterprises was Rs 15.4 trillion in 2022-23 growing at a CAGR of 4.3 per cent between 2015-16 and 2022-23. Between 2010-11 and 2015-16, the CAGR was 12.9 per cent. Had the pace of growth remained at 12.9 per cent during 2015-16 to 2022-23, the size of informal enterprises in 2022-23 would have been Rs 26.9 trillion. This translates into a cumulative economic loss to the tune of Rs 11.5 trillion, which is 4.3 per cent of FY23 GDP.
“The number of informal enterprises which were shut down between 2015-16 and 2022-23 are estimated at 6.3 million, leading to Rs 11.5 trillion economic loss and about 16 million informal sector job loss. However, this period also coincided with the rise in the formalisation of the economy, which has resulted in robust tax collections”, said Sunil Kumar Sinha, Principal Economist, Ind-Ra.
While formalisation of the economy is the way forward, the reduced footprint of the unorganised sector has implications for employment generation. Therefore, a judicious mix of policy which allows coexistence of both formal and informal sectors needs to be pursued in the interim.
The informal sector’s share in the Gross Value Added (real) of Manufacturing Trade and Other Services stood at 18.2 per cent in 2022-23, falling sharply from 25.7 per cent in 2015-16. The shrinkage has been sharper in other services and trade sectors. The share of the informal sector in these sectors dropped to 32.3 per cent and 21.2 per cent in 2022-23 from the pre-shock level of 46.9 per cent and 34.3 per cent, respectively. In the manufacturing sector, the share of the informal sector fell to 10.2 per cent from 12.5 per cent during the same period