Gross-Value-Added (GVA) in the economy by unincorporated enterprises was still 1.6 per cent below FY16 levels
MUMBAI: Demonetisation coupled with Goods and Tax Services (GST) and the COVID-19 pandemic is estimated to have wiped off Rs11.3 trillion or 4.3 per cent from the country’s gross domestic product (GDP) in 2022-23 fiscal, says India Ratings and Research.
The severe impact of this macroeconomic shock led to the shutting down of 63 lakh enterprises in the unorganized sector leading to 1.6 crore job losses during the period from 2015-16 to 2022-23 , according to the estimates of India Rating’s principal economist Sunil Kumar Sinha.
Interestingly, it was during this period that the formalisation of the economy was further strengthened paving the way for robust tax collections. While the government was keen on the formalisation of the economy, the scant attention given to the unorganised sector had severe impact on employment generation, Sinha said.
In FY23, the Gross-Value-Added (GVA) in the economy by such unincorporated enterprises was still 1.6 per cent below FY16 levels. Moreover, their compounded annual growth rate (CAGR) was 7.4 per cent between FT 11 and FY16 but slid into a 0.2 per cent contraction since then, the rating firm reckoned based on the recently released findings of the official Annual Survey of Unincorporated Sector Enterprises (ASUSE).
As per the survey, the number of establishments in the non-agricultural sector rose to 6.5 crore in FY23 from 5.97 crore in FY22, with employment rising to 10.95 from 6.5 crore workers. However, this was lower than the 11.3 crore people employed in the sector in the “pre-shock period’ of FY16. This was primarily due to a decline in manufacturing jobs which stood at 3.06 crore in FY16.
The latest data suggests that the real GVA of unincorporated firms in manufacturing, trade, and other services (MTO) was Rs.9.51 trillion in FY23, which was an 18.2 per cent share in India’s real MTO GVA, falling sharply from 25.7 per cent in FY16.
The unorganized sector contributes over 44 per cent to India’s GVA and employs almost 75 per cent of the workforce employed in non-agricultural enterprises, as per the 2022-23 Periodic Labour Force Survey.
The size of the unincorporated sector enterprises (USE) was Rs15.4 trillion in FY23, growing at a CAGR of 4.3 per cent between FY16 and FY23, compared with a CAGR of 12.9 per cent recorded between FY11 and FY16.
