A silent killer? Informal manufacturing jobs are disappearing in India

The headlines scream “layoffs!” » in all sectors, painting a bleak picture of the job market. But what if the real story is hidden? A closer look reveals a worrying trend in India’s informal manufacturing sector: millions of jobs are disappearing, going largely unnoticed amid reports of corporate downsizing. TICE.News looks at the data behind these job losses and explores the potential reasons for this underreported crisis.

Imagine a bustling market, filled with a buzz of activity: family workshops making complex products, small businesses producing everyday essentials. This dynamic network, known as India’s informal manufacturing sector, has long formed the backbone of the country’s economy, employing millions of people. But recent rumors suggest a worrying trend: are millions of jobs in this sector simply disappearing?

What factors could be behind such a decline? Has the pandemic dealt a fatal blow to these small businesses? Or are there deeper economic forces at play? Let’s look at the data and uncover the story behind the disappearance of jobs in the informal manufacturing sector in India.

Jobs in the informal manufacturing sector

Digging into the data provided by the National Statistical Office (ONS), a worrying trend emerges. Between July 2015 and October 2022, the informal manufacturing sector lost 5.4 million jobs. This dramatic decline coincides with a significant drop in the number of unincorporated establishments – a decrease of 1.8 million. These unincorporated businesses, comprising family workshops, sole proprietorships and small businesses, form the backbone of the informal sector. Their struggles paint a worrying picture of the future of this vital sector.

What is the informal manufacturing sector?

For a clearer understanding, let us define the informal sector. These are companies that operate outside the formal legal framework. They often lack official registration and may not comply with all regulations. Despite this, they play an important role in the Indian economy, employing a vast workforce.

A decade of challenges: demonetization, GST and pandemic

Experts point to a confluence of factors contributing to the decline of informal jobs in the manufacturing sector. The past decade has seen a series of economic events that may have had a disproportionate impact on these companies. Pronab Sen, chairman of the Standing Committee on Statistics, points out that demonetization, implementation of the Goods and Services Tax (GST) and the COVID-19 pandemic are potential contributors. These events may have disrupted supply chains, increased compliance burdens and reduced cash flow for these small businesses.

Job losses and coping strategies

Experts believe that small, micro and medium enterprises (MSMEs) play a vital role within the informal sector. MSMEs are important providers of non-agricultural employment. Policy changes and the impact of the pandemic have significantly hampered these businesses, leading to the observed decline in establishments and jobs.

While the informal industry suffers, the NSO report reveals a different situation for other sectors. The number of establishments in the commercial sector saw a slight decline, with the workforce showing marginal growth. On the other hand, the “other services” sector saw an increase in both the number of establishments and employed workers.

The way forward: Addressing the challenges of informal manufacturing

Significant job losses in the informal manufacturing sector raise serious concerns about the future of the sector. Understanding the specific challenges these businesses face is crucial. Policymakers and stakeholders will need to work together to create a more favorable environment for these informal businesses. This could involve streamlining regulations, facilitating access to credit and fostering innovation within the sector. Only then can India’s informal manufacturing sector regain its footing and continue to be a vital source of employment and economic dynamism.

Join our thriving entrepreneurial community

Follow TICE News on social media and build a strong community of talent, ideas, capital and entrepreneurship. Youtube | Linkedin | X (Twitter) | Facebook | Newsletters