Around 6.5 Mn Jobs Have Been Formalized Till Mar’24

Bottom of the pyramid’s share in consumption stands at 43% now

FinTech BizNews Service

Mumbai, June 21, 2024: Basis recently released ASUSE data for 2021-22 and 2022-23, meaningful insights into the changing landscape of informal sector can be gauged across rural and urban latitudes, stamping the rapid tilt towards formalization reaching a tipping point now, states Dr. Soumya Kanti Ghosh Group Chief Economic Adviser State Bank of India, in a research report. 

❑ Other Services and Trade led the rapid growth in unincorporated enterprises, more so in rural areas, inching upwards to 6.5 crore in FY23 from 5.8 crore in FY11 even though decadal plus trends shows stability for workers, greater number in urban establishments and there is a concomitant shift in workers from manufacturing to trade 

❑ Rural establishments, apart from embracing higher growth, also witnessed robust growth in GVA (2.7X against 2.3X growth for urban establishments) with traction coming from rise in contribution from other services…Further, rural establishments have exhibited a rapid pace of increase from GVA per establishment contribution with larger increase in all the three sectors, viz. manufacturing, trade & other services vis-à-vis urban counterparts…Also, GVA per worker increased more for rural establishments with the other services sector contributing more 

❑ ASUSE data gets a thumping stamp of credibility, with its figures on wages earned by regular workers matching with PLFS findings….On an average, a formal hired worker earned Rs 2.45 lakh per annum as compared to Rs 1.11 lakh earned by informal hired worker…with services being most remunerative and trade being the least! 

❑ Distribution of labour force (568 million) shows 45% of labour force is still informal, with the usual suspects of agriculture (25.5%) and services (13.9%) accounting for close to 40% of total workforce / 88% of informal workforce 

❑ Employment distribution data is in consonance with KLEMS data which showed 83.3 million employment generation in between FY16-FY22, with the share of industry and services growing while that of agriculture shrinking (even with a marginal increase in numbers employed because of the reverse migration during pandemic)

We have endeavored to estimate the share of informal economy with some assumptions based on the ASUSE data. Assuming manufacturing as a proxy for industry GVA and trade and other services sector for services GVA, the size of total informal economy comes close to 23.7% in FY23 as compared to 25.9% in FY16…..In absolute terms, this translates into Rs 26 lakh crore formalized in seven years! 

❑ As on date, 29.7 crore unorganised workers have registered on e-Shram portal of GoI which holds unbridled possibilities to become a lynchpin for speeding up the formalization of labour force and migrant statistics as a substantial percentage (47%) comes from migrant outbound states like UP, Bihar, WB etc. Further, the registration in e-Shram portal is slightly higher than the informal labour that we have estimated using ASUSE database (26 crore), possibly a % of such workers are in the formal sector 

❑ Using ECR data of EPFO, since FY19, close to 65 lakh jobs have been formalised till Mar’24 (though the speed of formalisation shows some deceleration in the last three fiscals) 

❑ Bottom of the pyramid’s share in consumption stands at 43% now

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