UNINCORPORATED ENTERPRISES (Syllabus: GS Paper 3 – Economy)

Context: India's informal sector, comprising SMEs and household enterprises, contributes nearly half of the country's GDP and over 75% of jobs. 

• The recent data from ASUSE reveals challenges, with many units closing and around 16.45 lakh jobs lost in the past seven years.

Unincorporated Enterprises

• About: It belong to the unorganised or informal sector, encompassing Micro, Small and Medium Enterprises (MSMEs), household units with hired workers, and own-account enterprises.
• Sector Coverage: Surveys are conducted for unincorporated non-agricultural establishments in three main sectors: manufacturing, trade, and "other services".
• Manufacturing Sector: Includes manufacturing units not covered under the Factories Act, 1948, and those outside the organised sector’s Annual Survey of Industries (ASI). This also encompasses informal establishments engaged in activities like cotton-ginning, cleaning, bailing, and manufacturing bidi and cigar.
• Electric Power Sector: Covers units involved in non-captive electric power generation, transmission, and distribution that are not registered with the Central Electricity Authority (CEA).

Recent Data of NSSO

• The informal sector saw a decline in employment despite an increase in the number of enterprises between 2015-16 and 2022-23.
• Own-account enterprises grew by nearly 4% over seven years, contrasting with a 3.2% decline in hired-worker enterprises.
• The Periodic Labour Force Survey (PLFS) shows a rise in agricultural workers and a decline in manufacturing jobs, particularly affecting women in agricultural roles.
• Despite expectations, there's no clear movement of surplus labour from informal sectors (e.g., agriculture, construction) to formal sectors (e.g., manufacturing, high-productivity services).
• In 2022-23, informal sector employment decreased by 1.5%, with a simultaneous increase in unincorporated enterprises by 16.56 lakh units.

Informal Sector

• About: Workers and enterprises operating outside government regulation constitute the informal sector.
• Social Security Benefits: Employees in the informal sector do not receive entitlements to social security benefits unlike their formal sector counterparts.
• Job Security and Fixed Hours: Workers in the informal sector face uncertainties regarding job security and work hours.