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Photo: Bloomberg
Photo: Bloomberg

India sees a dip in number of self-employed households in FY19

  • Regular wage earners rose both in rural (13.1%) and urban India (42.8%) by 0.4 and 1.4 percentage points in FY19
  • The percentage of self-employed households in urban India, fell from 32.4% in FY18 to 31.8% in FY19, the PLF survey says

NEW DELHI : The percentage of households that declared themselves self-employed declined both in rural and urban India in FY19, even as the government promotes self-reliance through schemes such as Micro Units Development and Refinance Agency (MUDRA) loans.

The percentage of self-employed households in rural India dropped from 52.2% in FY18 to 51.7% in FY19, while in urban India it declined from 32.4% to 31.8% during the same period, according to the Periodic Labour Force Survey released by the National Statistical Office (NSO).

In rural India, the decline is because of a fall in households depending on agriculture, from 37.8% in FY18 to 36.6% in FY19, while those self-employed in non-agricultural activities rose from 14.3% to 15.1% in the same period. However, it is the drop in number of self-employed households in urban India that is perplexing. NSO does not offer a break up for agricultural and non-agricultural households in urban India due to their comparatively lower reliance on farm activity.

It is a very significant reduction for self-employed, particularly in urban India, which suggests that small businesses such as those running small shops have folded up and people running them have become labourers, said former chief statistician of India Pronab Sen.

The self-employed people could either be joining the formal workforce, becoming regular wage earners or the casual labour force. In rural areas, non-agricultural casual labourers grew from 12.9% in FY18 to 13.4% in FY19. In urban India, households dependent on casual labour fell from 11.8% to 11% in the same period. In the case of regular wage earners, it rose both in rural (13.1%) and urban India (42.8%) by 0.4 percentage points and 1.4 percentage points respectively in FY19, signalling more formalization of the economy.

Formalization is certainly happening, but one would expect a sharper fall in casual workers with greater formalization, said Sen.

“The year 2017-18 was when the impact of demonetization and the goods and services tax was playing out on the economy. The use of MUDRA loans spiked in FY18. In FY19, they had to pay that loan back," said Sen.

“What may well have happened is that 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 said.

The Pradhan Mantri Mudra Yojana was launched on 8 April 2015 by Prime Minister Narendra Modi with the purpose of creating an ecosystem of growth for micro enterprises sector. In FY18, the sanctioned amount of MUDRA loans rose to 2.53 trillion from 1.8 trillion in the preceding year. In FY19, it rose to 3.21 trillion exceeding the target of 3 trillion.

The NSO survey defines self-employed as those who run their own farm or non-farm enterprises or are 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 and economic independence for carrying out their operation," the report said.

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