Units in urban areas tend to have more workers

Two out of every three jobs in India’s informal sector, not counting units engaged in agriculture and construction, are in businesses engaged in trade or providing services. 

Likewise, about two-thirds of all units in the informal sector are engaged in trade or providing some service, says a recent report of the National Sample Survey Organisation. 

In all, 7.52 crore people are employed in the informal sector, with 4.37 crore in the services sector, including trading units. That number includes proprietors of these units. Another 3.6 crore people are employed in 1.97 crore units classified as manufacturing enterprises.

Analysis of data presented in the report titled ‘Key Indicators of Unincorporated Non-agricultural Enterprises (Excluding Construction) in India’, shows that India’s informal sector employs 1.76 individuals per unit. Significantly, the ratio for manufacturing units is higher — 1.83 individuals per unit.

Own account enterprises

The informal sector is dominated by units that do not usually have hired workers, and so referred to as own account enterprises (OAEs) — over 84 per cent of the units are in this category. Such units collectively account for 62 per cent of all the employment in the non-agriculture, non-construction units in the informal sector. The worker-to-unit ratio for OAEs is 1.29 on an average and this ratio includes the proprietor.

In comparison, enterprises that use hired workers, also referred to as establishments by the NSSO in its reports, have a workers-to-unit ratio of 4.20. As seen for OAEs, the ratio of workers-to-unit is higher at 4.69 for manufacturing enterprises that hire workers.