The Truth Behind India’s ‘Self-Employment’ Boom

Newsreel Asia Insight #36
Nov. 6, 2023

India’s recent labour figures reveal a striking rise in self-employment, but the reality behind these numbers is less about entrepreneurial spirit and more about increased family labour without financial gains.

In a startling leap reported by the Periodic Labour Force Survey Annual Report for 2022-2023, the count of unpaid workers, who are included with those who are “self-employed,” has shot up to 95 million from 40 million in just half a decade.

Conversing with M.K. Venu, the founding editor of The Wire, labour economist Prof. Santosh Mehrotra highlighted that unlike 92 other countries following the International Labour Organization’s guidelines, India counts these unpaid family workers as employed.

According to Mehrotra, countless Indians are the unseen backbone of family-run shops and enterprises, contributing without financial compensation, largely due to the scarcity of alternative employment.

The decline in India’s unemployment figures to a six-year low of 3.2 percent should also raise eyebrows, as it doesn’t necessarily signal job creation but could imply a shift towards self-employment amid sparse job openings.

Such a dip in the unemployment rate might be misleading, camouflaging the real picture of people’s livelihoods behind a facade of self-employment, which often means financial instability and unrecorded economic distress.

In April, The Hindu Businessline reported that a substantial majority—exceeding half—of India’s workforce is self-employed. This trend is markedly pronounced in rural locales and among female workers, it said, explaining that the presumption is that rural self-employment spikes due to prevalent small-scale farming. However, the phenomenon extends beyond agriculture, with self-employment accounting for about half of the rural non-farm labour force as well, it noted.

India’s self-employment landscape is surging partly due to the COVID-19 pandemic and the government’s push for self-reliance through its Atmanirbhar Bharat initiative, the Policy Circle magazine noted in August. As the nation’s population climbs, the ranks of traditional businessmen and thriving entrepreneurs thin—a stark contrast to the boom in self-employment, hinting at an economic tide that’s less than favourable.

The Centre for Monitoring Indian Economy has also noted that this shift isn’t a renaissance of entrepreneurship but a reflection of the economy’s tight job market.

Besides, self-employed folks aren’t the magnates of high finance or captains of industry; they’re the gig economy’s backbone, Policy Circle explained, saying they’re the taxi drivers weaving through India’s bustling streets, the local beauticians, the real estate agents brokering urban dreams, and also the astrologers “charting destinies.” Unlike businesspeople who anchor significant enterprises requiring hefty capital and teams, these self-employed individuals are often solo acts.

Before the pandemic, commented the magazine, the government had quipped that selling pakoras was better than joblessness—an offhand suggestion that now rings prophetic. Many embraced the spirit of that advice, turning to unconventional work paths in a landscape where government jobs are no longer the sole aspiration.

Furthermore, the marginal wage increase from 19,450 to 20,039 rupees over five years, as noted by Mehrotra, signals economic sluggishness, barely keeping up with inflation and reflecting a deep-seated devaluation of labour.

The ripple effects of this stagnation extend far and wide, impacting consumer spending and consequently stunting business growth across sectors — a red flag for the health of the economy.

But beyond the dry statistics lies a harsh reality of injustice. Imagine millions tirelessly contributing to their family enterprises with zero pay — the informal job market, once a fallback, now ensnares them.

The invisible contributors to India’s economy — family workers, disillusioned youth, unrecognised women — paint a truer picture of the nation’s economic health than any spreadsheet can.

Their well-being is a measure of India’s prosperity, transcending the success of the affluent few. True national wealth is assessed not by the peaks of riches but by the well-being of the collective populace.