How the growth of self-employed entrepreneurs is a bitter-sweet success

While the distribution of self-employed entrepreneurs could be a bit better, their growth in the face of falling formal jobs is a redeeming feature - a bitter-sweet success

Prime Minister Narendra Modi has often emphasised the importance of entrepreneurship. Entrepreneurs do not make a claim on a job available in the labour market but, they provide jobs to others who are in the labour markets looking for jobs. A sufficient increase in entrepreneurs could solve the problem of lack of jobs.

In this respect, the government has floated several schemes to promote entrepreneurship. There are three schemes under MUDRA — Shishu, Kishore and Tarun. Then there is Stand-Up India and Start-Up India.

Even schemes such as Prime Minister’s Employment Generation Programme, Deen Dayal Upadhyay Grameen Kaushalya Yojana and Deen Dayal Antyodaya Yojana-National Urban Livelihoods Mission essentially promote self-employment. These have gained different levels of success. According to a compilation by Radheshyam Jadhav in The Hindu Business Line of December 12, these have generated 2.7 million jobs since 2014-15, but generation through these peaked in 2016-17.

Self-employment got a major fillip with the success of app-based taxi services like Ola and Uber. The lack of formal jobs can also drive people to self-employment.

Whether through the efforts of the government or through the market forces that threw up new opportunities to promote entrepreneurship, or through desperation in the face of no better opportunities, we find that entrepreneurship is on the rise.

Who should we classify as a self-employed entrepreneur? Of course, it is your now nearly ubiquitous taxi driver. But classifying others need judgement that can be contentious. The first such is that farmers will not be considered as self-employed entrepreneurs. Somehow, they are a classification by themselves. Similarly, agricultural and wage labourers are not classified as entrepreneurs. This is understandable because they merely make their labour available for hire and do not invest capital like the Uber driver. All salaried employees are naturally not entrepreneurs. But, we also exclude businessmen who own large enterprises like factories from the classification of self-employed entrepreneurs. They do invest capital but they are still different from the self-employed entrepreneur.

Broadly, a self-employed entrepreneur can be one of three kinds. First, is a set of qualified professionals who run their own enterprise (such as dentists, lawyers, professional chartered accountants). The second set consists of not-similarly qualified professionals who nevertheless run their own small enterprises. These are owners of small shop, small garage, a vehicle etc. They mostly run these themselves. The third kind is the street hawker, trader and other similar entrepreneurs who do not own (or operate on) any substantial fixed premises or assets.

By this definition, there were 41.9 million self-employed entrepreneurs in India in January-April 2016. Over two-and-a-half years since then, that is, by May-August 2018, the count of self-employed entrepreneurs climbed up to 63.9 million. Their count has increased in every survey conducted by us since 2016. CMIE conducts its Consumer Pyramids Household Survey comprehensively every four months. Thus, it has completed eight comprehensive surveys since 2016 and in each of these, the count of self-employed entrepreneurs has increased.

Over the same period, the total count of the employed has stagnated or even declined a bit. Evidently, the share of self-employed entrepreneurs in total employed has also gone up. In January-April 2016, they accounted for 10.4 per cent of all employed people. In the following surveys, the share increased to 11.1 per cent, then 11.9 per cent, 13.2 per cent, 13.7 per cent, 14.4 per cent, 15.5 per cent and then 16.1 per cent by May-August 2018.

Which of the three categories of self-employed entrepreneurs grew during this time and which did not? Results here are a bit disappointing.

Qualified self-employed entrepreneurs (doctors, lawyers, CAs types) have a very low share in the total self-employed entrepreneurs. In January-April 2016 they accounted for only 3.8 per cent of the total self-employed entrepreneurs. What is disappointing is that this share (and also their count) has declined. The share fell from 3.8 per cent to 1.5 per cent by May-August 2018. The count fell from just 1.6 million to 0.98 million.

Self-employed entrepreneurs of the Ola and Uber kind have been on the rise. They totalled 28.4 million in January-April 2016 and grew to 47.6 million by May-August 2018. Their share grew from two thirds to three fourths of all self-employed entrepreneurs during this period.

The count of small traders and hawkers — the pakora frying types grew in number but fell in their share. Their count has grown from 11.9 million to 15.4 million but, their share has declined from 28.4 per cent to 24 per cent.

While the distribution of these self-employed entrepreneurs could be a bit better, their growth in the face of falling formal jobs is a redeeming feature — a bitter-sweet success.

The author is managing director and CEO, Centre for Monitoring Indian Economy P Ltd