An analysis of the latest unincorporated enterprises survey released last month showed that 3.5 crore people were employed in informal manufacturing in 2025, as compared to 3.6 crore in 201516, while the number of enterprises rose to 2.1 crore from 2 crore.In contrast, data from the latest annual survey of industries (ASI), which tracks the formal manufacturing sector, showed that a little under 2 crore were employed in 2023-24, up 37% over 201516 (see graphic).Santosh Mehrotra, visiting professor at the University of Bath, said that in the past few years, the organised sector has gained at the expense of the unorganised sector, but added that this does not imply formalisation of the economy. “Instead, it reflects the growing stratification of the economy, wherein a relatively small formal sector is witnessing a spurt in productivity and growth and the vast informal sector which is the mainstay of the vast population is facing stagnation,” he added.
The divergence between the two sectors is also visible in the worker’s earnings.Between 2015-16 and 2025, in real terms, the emoluments per hired worker in informal manufacturing enterprises grew at a compound annual growth rate (CAGR) of 2.1% to Rs 72,172 from Rs 59,806.
In contrast, total emoluments paid to workers in real terms in the formal manufacturing sector grew at 4.5% CAGR between 2015-16 and 2023-24. The net profit in the formal manufacturing sector, meanwhile, grew at 4.4% CAGR during this period.
