Triple whammy

IN recent years, India’s informal sector has faced significant challenges due to three major shocks: demonetisation in 2016, the rollout of the Goods and Services Tax regime in 2017 and the Covid-induced lockdown in 2020. These events have collectively led to the loss of 16.45 lakh jobs in seven years, according to the latest Annual Survey of Unincorporated Enterprises by the Ministry of Statistics and Programme Implementation. The survey highlights the fragility of unincorporated enterprises. Operating outside the formal regulatory framework, such firms are particularly vulnerable to policy changes and economic disruptions. The employment in these enterprises fell from 11.13 crore in 2015-16 to 10.96 crore in 2022-23, marking a 1.5 per cent decline. This drop reflects the compounded impact of the three exogenous shocks on the sector’s capacity to sustain employment.

Despite these challenges, the sector has shown resilience. The number of establishments increased by 5.88 per cent and there was a 7.84 per cent rise in the estimated number of workers between 2021-22 and 2022-23. The sector’s Gross Value Added grew by 9.83 per cent, indicating some recovery. This was supported by enhanced capital investment and access to loans and greater use of IT.

In this context, Prime Minister Narendra Modi laying emphasis on job creation, especially in rural areas and the manufacturing sector, in the lead-up to the Union Budget assumes significance. The informal sector’s ability to generate employment remains crucial for economic stability. For a more effective support of this sector, the Union Government must focus on improving Centre-state relations and enhancing programme implementation on the ground. To foster sustainable growth, it is imperative to address the systemic vulnerabilities exposed by the triple shocks. Strengthening the informal sector through targeted policies and ensuring a more robust safety net for workers can help mitigate future risks.