Growth of India’s Small Businesses and Employment

India’s small businesses have shown remarkable growth in recent years. The sector has added approximately 11 million jobs from October 2023 to September 2024. This surge in employment has increased total jobs in the unincorporated non-agricultural sector to 120.6 million. Despite this growth, high inflation has limited wage increases, raising concerns for workers.

Overview of Small Business Growth

The number of small businesses has risen . In the 2023/24 period, small manufacturing units grew from 17.83 million to 20.15 million. Overall, the total number of small businesses in manufacturing, trade, and services increased from 65 million to 73.4 million. This growth represents a 12.84% increase in establishments.

Employment Trends

Employment in small businesses has grown robustly. The sector employed over 12 crore workers, marking a 10.01% increase. The “Other Services” sector experienced the highest growth at 17.86%, followed by manufacturing with 10.03%. This growth indicates a recovering labour market.

Wage Growth and Inflation

Average wages in small businesses rose by 13% to ₹141,071 ($1,656). However, this increase has not kept pace with inflation, which was around 5.5%. Consequently, wages in small businesses remain lower than the national average per-capita income of approximately $2,800.

Contribution to Gross Value Added (GVA)

The Gross Value Added (GVA) of small businesses has also seen growth. It increased by 16.52% during the survey period. The GVA per worker rose to ₹149,742, reflecting improved labour productivity. The “Other Services” sector drove this growth with a remarkable 26.17% increase.

Digital Adoption in Small Businesses

Digital penetration among small businesses is on the rise. The percentage of establishments using the internet increased from 21.1% to 26.7%. This trend indicates a growing reliance on digital tools for business operations, enhancing efficiency and reach.

Women in Entrepreneurship

The participation of women in small business ownership is increasing. The percentage of female-owned proprietary establishments grew from 22.9% to 26.2%. This trend marks the positive shift towards gender inclusivity in entrepreneurship.

Survey Methodology

The Annual Survey of Unincorporated Sector Enterprises (ASUSE) collects data from various sectors. It covers both rural and urban areas, excluding certain inaccessible regions. The survey employs a multi-stage stratified sampling method, ensuring comprehensive coverage. A total of 4,98,024 establishments were surveyed.

Key Findings Summary

The ASUSE 2023-24 results showcase the resilience of small businesses post-pandemic. They highlight substantial growth in establishments, employment, and productivity. However, challenges such as inflation and wage disparities remain.

Questions for UPSC:

1. Critically examine the role of small businesses in India’s economic growth and employment generation.
2. Discuss the impact of inflation on wage growth in the context of India’s unincorporated sector.
3. Explain the significance of digital adoption among small businesses in enhancing productivity.
4. With suitable examples, discuss the trends in female entrepreneurship within the small business sector in India.

Answer Hints:

1. Critically examine the role of small businesses in India’s economic growth and employment generation.

1. Small businesses contributed to the addition of approximately 11 million jobs, increasing total employment to 120.6 million.
2. The number of small businesses grew from 65 million to 73.4 million, representing a 12.84% increase.
3. Small manufacturing units, mainly family-owned, increased from 17.83 million to 20.15 million, showcasing sectoral growth.
4. The sector plays important role in sustaining livelihoods and contributes to the Gross Domestic Product (GDP).
5. Despite growth, challenges such as high inflation and persistent youth unemployment remain critical issues for the sector.

2. Discuss the impact of inflation on wage growth in the context of India’s unincorporated sector.

1. Average wages in small businesses rose by 13%, but this was below the retail inflation rate of about 5.5%.
2. Wages in the unincorporated sector remain lower than the national average per-capita income of approximately $2,800.
3. High inflation limits the real wage growth, impacting the purchasing power of workers in small businesses.
4. Wage disparities can lead to dissatisfaction among workers and affect overall productivity and morale.
5. Addressing inflation’s impact on wages is essential for improving the living standards of workers in the sector.

3. Explain the significance of digital adoption among small businesses in enhancing productivity.

1. The percentage of small businesses using the internet increased from 21.1% to 26.7%, indicating growing digital reliance.
2. Digital tools enhance operational efficiency, streamline processes, and improve customer reach in small businesses.
3. Adoption of digital platforms can facilitate better data management, marketing, and sales strategies.
4. Increased digital penetration supports innovation and competitiveness among small enterprises.
5. Digital adoption is crucial for small businesses to thrive in a rapidly evolving economic landscape.

4. With suitable examples, discuss the trends in female entrepreneurship within the small business sector in India.

1. The percentage of female-owned proprietary establishments increased from 22.9% to 26.2%, reflecting growing female participation.
2. Women are increasingly starting businesses in sectors like textiles, food processing, and handicrafts.
3. Government initiatives and support programs promote female entrepreneurship, encouraging women to enter the business landscape.
4. Examples include women-led cooperatives in rural areas and startups in urban centers focusing on sustainability.
5. The rise in female entrepreneurship contributes to economic diversity and empowers women socially and economically.