As per ILO, Self-employed workers are those workers who, working on their own account or with one or a few partners or in cooperative, hold the type of jobs defined as a \”self-employment jobs.\” and, in this capacity, have engaged, on a continuous basis, one or more persons to work for them as employee(s).Self-employment jobs are the jobs where the remuneration is directly dependent upon the profits derived from the goods and services produced.
As per latest Periodic Labour Force Survey (PLFS) report, self-employment between 2009-10 to 2017-18 among,
- Rural men increased to 57.8% from 53.5%.
- Rural women increased to 57.7% from 55.7 %.
- Urban men decreased to 39.2% from 41.1%
- Urban women decreased to 34.7% from 41.1%
In the urban areas, there is a decline in the percentage of self-employed or casual labour due increase in the percentage of people working on regular wage or salary.
Factors contributing to growth of self-employment in India
Government schemes and policies
The government has launched many schemes to incentivize and promote self-employment in India such as Pradhan Mantri Mudra Yojana (PMMY), Pradhan Mantri Rojgar Protsahan Yojana, Skill India Mission etc.
Growth led by services industry
In the last decade, although the economy grew steadily, it was primarily led by services industry. This growth led to the creation of many highly skilled jobs. Without a parallel focus on improving skill-level across the workforce, those with low skills were left behind in the economic journey India was undertaking. It was this portion of the workforce which then turned towards self-employment.
Underdeveloped macro-financial system in India
low returns on bank deposits, risk related to investments in stock market and real estate etc. force people to use their wealth for starting their own business.
Issues related to self-employment in India
Dominated by agriculture
About 60% of self-employed are engaged in agriculture which is less productive and this share is significantly higher in rural areas than urban ones.
Only a small fraction acts as job creators
As the data reveals, only 4 % of India’s self-employed actually hire workers from outside.
Below average earnings
Most self-employed people in India make very little money. According to PLFS report, the average monthly earnings for all self-employed workers stood at ₹8,000 per month, much lower than the average monthly earnings of regular workers.
Gender pay gap is highest in the category of those who are self-employed, where in rural areas, male workers earn 2.67 times more than female workers, and in urban areas, a male worker earns three times what female workers earn.
Mostly unregistered
The self-employed are tagged ‘formal’ only after they’ve registered with some branch of the government and /or pay taxes.
According to a National Sample Survey Organisation report, 63 million enterprises in India have no registration, out of which 96% are run by individuals and most of them pay no GST as their volume of business is below Rs 20 lakh.
Ineffectiveness of schemes
Through a host of schemes, like the MUDRA, the government has sought to provide capital to people who wish to start something of their own. But still, many such schemes are yet to either reach their intended benefactors or are still too small in their ambit to create a significant change.
Systemic inefficiencies
The jobs market in India is still plagued with systemic inefficiencies and delays mainly in the registration process. Due to this most startups or owner managed enterprises end up becoming a part of the unorganized sector of the economy.
Casualization of Indian Workforce
The distribution of workforce in different status indicates that over the last four decades (1972-2012), people have moved from self-employment (mostly in agriculture) and regular salaries employment to casual wage work. Yet self-employment continues to be the major employment provider.
Scholars call the process of moving from self-employment and regular salaried employment to casual wage work as casualization of workforce. This makes the workers highly vulnerable.
In rural areas, self-employment is the major source of income for almost half of the households, followed by casual labour.
In urban areas, the proportion of households deriving major income from regular wage or salary earnings is the highest.
Overemphasis on services and neglect of the manufacturing are mainly responsible for this phenomenon. The number of people seeking jobs are growing in India and they need to be constructively engaged to avoid socioeconomic conflict and arrest the increasing informalisation in the economy.
Experts argue that the growth of manufacturing will be the key growth in income and employment for multiple reasons. For every job created in the manufacturing sector, three additional jobs are created in related activities. The other is that manufacturing in India is scalable and has higher labour absorption in comparison to services.
Following steps can be taken to develop and promote the ecosystem of self-employment in the country:
- Access to capital: Since the provision of capital becomes vital to transform a self-employed individual to an entrepreneur, increasing the access to such capital is vital. Improved cash flow will enable reinvestment to expand businesses, and thus create more jobs.
- Access to good quality skill-training that can provide some strength to the self-employed community. These programs can help them to either stop being self-employed and join regular and better-paying jobs or can help them become better at being self-employed.
- Formalisation of informal self-employment ventures will provide them more access to credit. Make it easier to start a business and register it.
- Simplifying Taxation policy for startups that will prevent tax evasion.
- Overcoming Bureaucratic hurdles and systemic inefficiencies thus easing the registration process for setting up personal ventures.