For decades, India’s unorganized sector has remained a mainstay of employment in the economy, even as its share of economic output has declined.
Large companies and factories have failed to generate jobs at the pace required to absorb a growing labour force. In that vacuum, the unorganized sector—small shops, workshops, grocery stores, tiny manufacturing units and street vendors—remains the fallback.
Yet compiling reliable data on these enterprises has long been a challenge. Many lack fixed addresses. Most rely on household members rather than hiring from the market. The latest Annual Survey of Unincorporated Sector Enterprises (ASUSE) reveals mounting stress beneath this vast ecosystem.
Declining influence
The government refers to the unorganized sector as “unincorporated” establishments and tracks them through ASUSE. The survey covers enterprises not registered as companies or large factories, excluding and construction.
For calendar year 2025, the government estimates 79.2 million such entities, up from 73.4 million in 2023-24.
These enterprises generated about ₹20 trillion in output in 2025, compared to ₹15.4 trillion in 2015-16. But their footprint in the economy is shrinking. Their share in India’s gross value added has fallen from 9.1% in 2015-16 to 6.3% in 2025.
Of the three broad sector categories that make up the unorganized sector, manufacturing recorded the slowest growth. As a result, the share of the unorganized sector in overall manufacturing output has declined from 12.5% in 2015-16 to 8.9% in 2025.
Value at risk
The unorganized sector faces an existential crisis of sorts.
Over the past decade, it has faced multiple challenges: demonetization, the introduction of the goods and services tax (GST), and intensifying competition, especially in manufacturing from Chinese companies. More recently, they have also been affected by the widening presence of grocery-delivery apps like , which can source goods directly from manufacturers, thereby capturing the entire margin across the delivery value chain.
Against this backdrop, productivity in the unorganized sector has stagnated. Average gross value added per worker, after adjusting for retail inflation, has declined over the last 10 years—from ₹83,195 per worker in 2015-16 to ₹80,243 in 2025.
In ‘own account enterprises’—which hire no outside workers and are entirely dependent on family labour, and account for 86% of all enterprises in the unorganized sector—the productivity of workers is basically half that of workers in units that are big enough to hire at least some outside labour.
Sectoral stress
The stress shows up in inflation-adjusted productivity numbers for all three broad categories in the unorganized sector, for which the government releases the data: , trade and other services.
Productivity in unorganized manufacturing rose in 2022-23, but has since reverted to 2015-16 levels. Trade and other services, which account for about 80% of value added across all unincorporated enterprises, have their own challenges.
Trade, which covers shops and retail establishments, is recovering after its 2022-23 low, but is far from its 2021-22 levels. Productivity decline in other services has been more long-lasting.
The broader crisis is structural. If productivity stagnates in real terms, enterprises remain too small to scale up or compete with capital-rich firms that benefit from economies of scale. Workers earn less. In theory, labour should migrate to higher-paying organized jobs—but those jobs are not being created at scale.
Stagnant wages
If productivity stagnates or falls, wage growth eventually slows down too. Since the bulk of units in don’t hire outside labour, wages or worker compensation are not a meaningful concept for such enterprises.
Any money earned by such units from selling goods or services is essentially a single kitty, used by the household to support itself.
Thus, the survey calculates total emoluments only for units that hire outside labour. It includes payments in both cash (salary, bonus) and kind (provision of common facilities such as a canteen). As with productivity, such emoluments have stagnated in real terms, growing at an annual average of less than 1 percentage point over the past decade.
Uttarakhand, Kerala, and Telangana have the highest mark-up to the national average. The key issue is how this compensation growth compares with salary earners in large or medium companies. If salary growth is higher in such companies, it widens income and earnings inequality in the economy as a whole.
Unorganized discount
Salaried workers are a minority in India. They make up about a quarter of the workforce, though their share has risen over 2020. Average emoluments received by workers in unorganized units continue to be significantly lower than the average wages of salaried workers as calculated by the Periodic Labour Force Survey (PLFS) in 2025.
In nominal terms (without adjusting for inflation), the average salaried worker earns about 1.85 times the average hired worker in an unorganized unit, and the gap is wider compared to 2023-24. To be sure, some proportion of salaried workers would be employed by unorganized units as well.
The main issue facing the economy is how to get companies to hire at a rate that can ‘pull’ workers out from the unorganized sector and into the larger corporate sector, where they stand a chance to earn more and also match the pace of growth in the overall labour force.
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