Share of unorganised sector in India's gross output declines to 33.0 pc in FY23 from 34.9 pc in FY18

The unorganised sector, which encompasses the household sector and private unincorporated enterprises, has historically played a substantial role in India's economic framework.

A recent analysis by India Ratings and Research (Ind-Ra) reveals a notable decline in the share of the unorganised sector in India's gross output, dropping from 34.9 per cent in FY18 to 33.0 per cent in FY23. This trend underscores the evolving landscape of the Indian economy, influenced by significant policy changes and external factors over the past few years.

The unorganised sector, which encompasses the household sector and private unincorporated enterprises, has historically played a substantial role in India's economic framework. However, events such as demonetization, the implementation of goods and services tax (GST), and the impact of the COVID-19 pandemic have contributed to the expansion of the organised sector's footprint while diminishing that of the unorganised sector.

Ind-Ra's analysis underscores the significance of this shift, projecting a GDP growth of 7.1 per cent for FY25 and anticipating India's ascension to a USD 5 trillion economy by FY29-FY30. While this transition signals positive strides for the economy, it also raises pertinent concerns regarding employment generation and the consumption patterns of individuals previously engaged in the unorganised sector.

Approximately 90 per cent of employment in the agricultural sector and close to 70 per cent in the non-agricultural sector originate from the unorganised segment. The sector has traditionally served as a safety net for individuals seeking employment opportunities, especially those unable to secure positions in the organised sector.

Additionally, the subcontracting model adopted by the organised sector often relies on sourcing output from the unorganised sector to maintain competitiveness. Recognizing the importance of the unorganised sector, the government introduced the "Unorganised Workers' Social Security Act" in 2008, leading to the rollout of various schemes aimed at providing social security to workers in this segment.

Initiatives such as the Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana, Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana, and Pradhan Mantri Shram Yogi Maan-dhan Yojana have been instrumental in extending life, disability, health, maternity, and pension benefits to workers in the unorganised sector. Ind-Ra's analysis also reveals intriguing insights into the dynamics between the organised and unorganised sectors.

Despite the decline in the unorganised sector's share of gross output, its share in gross value added has exhibited a rising trend since FY16. This can be attributed to a reduction in input costs for the unorganised sector, highlighting its ability to control costs effectively. Moreover, the data indicates that the unorganised sector contributes significantly to the total operating surplus in the economy, surpassing the organised sector in FY23.

This disparity is primarily due to the inclusion of compensation for self-employed and family labor in the unorganised sector's operating surplus calculation. Furthermore, while certain sectors exhibit a dominant presence of either the organised or unorganised sector, shifts in sectoral contributions have been observed over the years.

Manufacturing, for instance, remains predominantly organised, while sectors like agriculture, forestry & fishing, and construction are largely unorganised. (ANI)

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