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MOSL: Fuel or Engines (Economy)-How is unorganized manufacturing doing? Unorganized segment outperforms organized segment

​Fuel or Engines (Economy): How is unorganized manufacturing doing? Unorganized segment outperforms organized segment during slowdown

The recent quinquennial survey released by National Statistical Survey Office (NSSO) indicates that the number of hired workers in unorganized manufacturing declined for the first time in two decades; however, self-employment grew after a decade of decline. Overall, employment in the manufacturing sector (organized + unorganized) during the last five years grew at the fastest pace in a decade.

Further, like in the previous slowdown of the late 1990s, real GVA in unorganized manufacturing has grown faster than real GVA growth in the organized segment. This is primarily because productivity in the unorganized segment grew strongly, while it slowed in the organized segment.

Though all details of this survey are not yet published, the outstanding loan per enterprise in the unorganized segment – as per the 2010-11 survey – was only 0.02% of that in the organized segment. If this is due to institutional financiers’ unwillingness to support the unorganized segment, the economy may be losing out on entrepreneurial talent. If so, policy makers need to be more sensitive about the lack of institutional financing to the unorganized segment.