Digital Transformation Fuels Business Growth in India’s Informal Sector
The adoption of digital technologies for business activities in India is experiencing a significant uptick, particularly in the use of Unified Payments Interface (UPI) for transactions. This shift is evidenced by a recent survey from the Ministry of Statistics and Programme Implementation (MoSPI), which highlights a broad increase in internet usage for business purposes—from 7.7 percent to 13.5 percent in rural areas and from 21.6 percent to 30.2 percent in urban locales during the 2022-23 period. These statistics underscore the rapid integration of digital payment methods, even within the informal sector.
Increased Digital Adoption Across Demographics
The MoSPI survey outlines a broader embrace of digital tools beyond the confines of urban centers, with rural areas demonstrating a 7.2 percentage point overall growth in internet usage for business. This trend points to the diminishing digital divide and shows increased access to financial technologies in the informal sector.
Furthermore, the survey reveals that 25.6 percent of the total workforce in the informal sector, from 2022-23, comprised women. Notably, in establishments operating without permanent employees, women represented 31 percent of the workforce. This data highlights the critical role women play in the sector. Another point of significance is that 54 percent of incorporated establishments in the manufacturing sector were managed by women entrepreneurs, showcasing their growing influence.
Impact of COVID-19 and Economic Recovery
The informal sector bore the brunt of the economic distress caused by the second wave of the COVID-19 pandemic. Many establishments shut down, and employment figures dipped significantly. However, a steady recovery began post the July quarter of 2021. The number of unincorporated establishments rose from approximately 600,000 in 2021-22 to 650,000 in 2022-23, marking a 5.9 percent increase.
Breaking down the data by sectors, ‘other services’ accounted for a substantial share at 37.9 percent in 2022-23, followed by trade at 34.7 percent, and manufacturing at 27.4 percent. Retail alone comprised over 40 percent of establishments within the sector, inclusive of about 30 percent in retail trades and around 11 percent in apparel manufacturing.
Regional Distribution and Financial Insights
Geographically, Uttar Pradesh reported the highest number of both rural and urban establishments, followed by West Bengal and Maharashtra for two consecutive years, 2021-22 and 2022-23. This regional distribution indicates particular economic hubs within India that drive informal sector growth.
Financially, the sector’s fixed assets swelled from Rs 2,81,013 crore in 2021-22 to Rs 3,18,144 crore in 2022-23, reflecting robust capital investment. The survey also noted an increase in outstanding loans per enterprise from Rs 37,408 crore in 2021-22 to Rs 50,138 crore in 2022-23, indicating improved access to credit.
Conclusion
The findings from the Annual Survey of Unincorporated Sector Enterprises (ASUSE) for 2021-22 and 2022-23, announced by MoSPI on June 14, highlight a transformative period for India’s informal sector, driven by enhanced digital adoption and significant capital investment. The sector’s resilience post-pandemic, combined with greater financial inclusion and the pivotal role of women, points toward a more inclusive and digitally-enabled economic landscape.
For more detailed insights, visit Ministry of Statistics and Programme Implementation.
