India’s self-employed see a dip in fortune2 min read . Updated: 08 Jun 2020, 06:47 PM IST
- Percentage of households that are self-employed declined in rural India from 52.2% in FY18 to 51.7% in FY19
- In urban India, it declined from 32.4% to 31.8% during the same period
NEW DELHI: While the government has been promoting self-reliance through schemes like MUDRA (Micro Units Development & Refinance Agency) loans, percentage of households who declared themselves self-employed with their own enterprises declined both in rural and urban India in FY19.
According to the recent Periodic Labour Force Survey released by the National Statistical Office (NSO), percentage of households that are self-employed declined in rural India from 52.2% in FY18 to 51.7% in FY19. In urban India, it declined from 32.4% to 31.8% during the same period.
In FY18, self-employed households saw an increase both in rural and urban India when compared with the earlier 68th round NSSO survey conducted in FY12.
In rural India, the decline is due to a fall in households depending on agriculture, from 37.8% in FY18 to 36.6% in FY19, while self-employed in non-agricultural activities increased from 14.3% to 15.1% during the same period. However, it is the decline in self-employed in the urban India that is more perplexing. NSO does not give a break up for agriculture and non-agriculture households for urban India due to little dependence on farm activities.
Former chief statistician of India Pronab Sen said it is a very significant reduction for self-employed, particularly in urban India, suggesting that small businesses such as the ones running small shops have folded up and have moved to become labour.
So where is the self-employed going? They could either be joining the formal workforce becoming regular wage earners or are joining the casual labour force. In rural area, non-agricultural casual labours increased from 12.9% in FY18 to 13.4% in FY19 while in urban India, households dependent on casual labours actually decreased from 11.8% to 11% during the same period. When it comes to regular wage earners, it increased both in rural (13.1%) and urban India (42.8%) by 0.4 percentage points and 1.4 percentage points respectively in FY19, signaling more formalization of the economy.
Sen said while formalization is certainly happening, one would expect sharper fall in casual workers with greater formalization. “2017-18 was the year when the impact of demonetization and Goods and Services Tax was playing out on the economy. During the year, a lot of people used MUDRA loans and it spiked in FY18. In FY19, they had to pay that loan back. So what may well have happened is this is reflecting the closure of smaller units. However in FY19, banks were asked not to recognize MUDRA loans as non-performing assets (NPAs). So they are not appearing as NPAs in their books," Sen argued.
The Pradhan Mantri Mudra Yojana (PMMY) was launched on 8 April, 2015 by the Prime Minister Narendra Modi with the purpose of creating an ecosystem of growth for micro enterprises sector. In FY18, sanctioned amount of MUDRA loans increased to ₹2.53 trillion against ₹1.8 trillion in the preceding year. In FY19, it further rose to ₹3.21 trillion exceeding the target of ₹3 trillion.
The NSO survey defines self-employed as persons who operate their own farm or non-farm enterprises or were engaged independently in a profession or trade on own-account or with one or a few partners. “The essential feature of the self- employed is that they have autonomy (decide how, where and when to produce) and economic independence (in respect of choice of market, scale of operation and finance) for carrying out their operation. The remuneration of the self-employed consists of a non-separable combination of two parts: a reward for their labour and profit of their enterprise," the report said.