Self-employment increases

In October 2021, employment declined by 5.5 million in India to 400.8 million from 406.2 million in September. 

This is particularly disappointing because it belies hopes raised in mid-October ahead of the Indian festive season when weekly estimates showed an increase in the employment rate. This gain was lost in the second half of the month. As a result, an 8.5 million increase in employment pencilled in September was rolled back in October by a substantial 5.5 million. Nevertheless, it is a consolation that employment was still above 400 million. Such a level was achieved only twice in the preceding 19 months of the pandemic — in January and September 2021.

An oddity in the 5.5 million fall in employment in Oct­ober was that it was accompanied by a massive 5.3 million increase in people who declared themselves employed as business persons. This is odd because these are not the best of times to start a business in India. Demand is weak and capacity utilisation is low. Household incomes are largely depressed. In October, less than 10 per cent of households reported an increase in income compared to a year ago, and 40 per cent reported a decline in nominal terms. The rest reported no change. Worse still, less than 5 per cent reported an improvement in their propensity to buy non-essentials. And, RBI’s OBICUS (Order Books, Inventories and Capacity Utilisation Survey) continues to show a worsening capacity utilisation. The latest survey of June 2021 shows utilisation ratio of just 60 per cent.

Further, October 2021 was a difficult month. Unemployment rose to 7.8 per cent from 6.9 per cent in September. Labour was discouraged and its participation rate dropped in the festive month to 40.4 per cent from 40.7 per cent in September. While some labour exited the markets during the month, others took to “business”. The festival season provided opportunities to become a business person, possibly temporarily. We believe that the increase in people declaring themselves to be business persons is actually an increase in self-employment. People who cannot find themselves an acceptable job take to self-employment. The festival season provided an opportunity to do this.

This increase in employment as businesspersons seen in October 2021 is thus likely to be a mere reflection of difficult employment conditions and not an increase in real and sustainable entrepreneurship.

We have noticed a steady increase in the self-employed since 2016 when CMIE’s Consumer Pyramids Household Survey (CPHS) started capturing data on employment. CPHS classifies entrepreneurs into three kinds. First are the “Businesspersons” who own and manage capital as an enterprise in the form of an establishment like an office, workshop, shop, factory, etc. These are distinct from a second category who run their own professional enterprise — such as doctors, lawyers, chartered accountants and the like — who are classified as “Professionally Qualified Self-employed Entrepreneurs”. The third is the category of “Self-employed Entrepreneur”. This includes self-run businesses of taxi operators, barbers, gym owners, beauticians, estate agents, brokers, religious professionals, trainers, models, astrologers, etc.

Businesspersons who own and manage capital in the form of shops, factories, etc have been seeing a decline since late 2018

Employment in the third category — self-employed entrepreneur — has been rising. In 2016, they accounted for 62 per cent of all types of entrepreneurs. This proportion rose to about 73 per cent from 2017 through 2019. Then, in 2020, it shot up to 77 per cent. And in 2021, till August, its share had inched up further to 80 per cent.

Growth in employment as self-employed entrepreneurs suffered during the lockdown of April 2020. Employment in this category during January-April 2020 (Wave 19 of CPHS) dipped to 57 million from 57.7 million in the preceding Wave. This was the first instance of a drop in the count of self-employed entrepreneurs. Since then, the count has seen volatility. As Covid-19 restrictions eased, employment in this category shot up to 62 million during September-December 2020. But then it fell back to 57.8 million during January-April 2021 and to 57.5 million during May-August 2021 apparently because of the second wave of Covid-19. As vaccination has spread and the caseload has reduced, it is likely that self-employment has started to look up again.

It is unlikely that the other forms of business employment would have increased. Businesspersons who own and manage capital in the form of shops, factories, etc have been seeing a decline since late 2018. This decline is unlikely to be reversed during these times. Their count fell from 20.2 million during September-December 2018 to 14.8 million by May-August 2020. Then, after a brief recovery during September-December 2020, it dropped again to reach 13.5 million by May-August 2021.

Employment among the professionally qualified self-employed entrepreneurs was rising smartly from 2017 till 2019. There were an estimated 1.39 million professionally qualified self-employed entrepreneurs in India during September-December 2019. However, the Covid-19 induced curbs have led to their numbers falling to just 0.94 million during May-August 2021.

People who cannot find acceptable jobs and can become self-employed entrepreneurs indulge themselves but they mostly cannot provide employment to others. This is evident from the fact that while self-employed entrepreneurship is increasing, overall employment is not. On the contrary, the 5.3 million increase in employment in businesspersons in October was accompanied by a 19.6 million fall in employment in daily wage labourers and small traders. Evidently, employment conditions continue to remain grim in spite of this curious increase in entrepreneurship.

The writer is MD & CEO, CMIE P Ltd