F
UEL
R
E
NGINES
3 August 2017
F
RIEND
O
F
T
HE
E
CONOMY
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How is unorganized manufacturing doing?
Unorganized segment outperforms organized segment during slowdown
The recent quinquennial survey released by National Statistical Survey Office (NSSO)
indicates that the number of hired workers in unorganized manufacturing declined
for the first time in two decades; however, self-employment grew after a decade of
decline. Overall, employment in the manufacturing sector (organized + unorganized)
during the last five years grew at the fastest pace in a decade.
Further, like in the previous slowdown of the late 1990s, real GVA in unorganized manufacturing has grown faster than
real GVA growth in the organized segment. This is primarily because productivity in the unorganized segment grew
strongly, while it slowed in the organized segment.
Though all details of this survey are not yet published, the outstanding loan per enterprise in the unorganized segment –
as per the 2010-11 survey – was only 0.02% of that in the organized segment. If this is due to institutional financiers’
unwillingness to support the unorganized segment, the economy may be losing out on entrepreneurial talent. If so,
policy makers need to be more sensitive about the lack of institutional financing to the unorganized segment.
In the last couple of
reports,
we discussed employment generation and
other
characteristics
of the organized manufacturing sector in India, represented by the
factories covered under Annual Survey of Industries (ASI). In this note, we discuss
the key characteristics of the unincorporated/unorganized manufacturing
sector
1
,
published under the quinquennial
survey
2
released by NSSO in late June 2017.
While the unorganized
manufacturing sector
accounts for ~17% of total
manufacturing GVA, it
accounts for more than 70%
of total manufacturing
employment
As per the new data available for 2015-16, while the unorganized manufacturing
sector accounts for ~17% of total manufacturing GVA (gross value added), it
accounts for more than 70% of total manufacturing
employment
3
. Over the past two
decades
4
, while the importance of the unorganized sector has maintained itself in
terms of GVA, it has fallen in terms of employment. In terms of GVA, the
unorganized sector accounted for 17.3% of total manufacturing GVA in 2015-16,
higher than 16.5% in mid-1990s and 15.8% in 2010-11
(Exhibit 1).
In terms of
employment
5
though, while the unorganized sector still accounts for more than
70%, the share has fallen consistently over the past many surveys
(Exhibit 2).
Exhibit 2: …but the unorganized sector accounts for more
than 70% of manufacturing employment
Employment in unorganized manufcaturing sector
(% of
total)
82.3
80.0
Exhibit 1: Unorganized manufacturing sector’s GVA less than
20% of total manufacturing GVA…
GVA in unorganized manufcaturing sector
(% of
total)
16.5
25.2
19.4
15.8
17.3
76.5
73.3
71.7
1995-96
2000-01
2005-06
2010-11
2015-16
1995-96
2000-01
2005-06
2010-11
2015-16
Total = unorganized + organized (ASI) data (estimated)
Source: National Sample Survey Office (NSSO), MOSL
Nikhil Gupta
– Research analyst
(Nikhil.Gupta@MotilalOswal.com); +91 22 3982 5405
Rahul Agrawal
– Research analyst
(Rahul.Agrawal@motilaloswal.com); +91 22 3982 5445
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