According to the latest Economic Census, the all-India average employment per establishment reduced from 2.88 in 1990 to 2.75 in 1998 and to 2.41 in 2005. The Central Statistical Organisation defines establishment as a business predominantly carrying out a single economic activity.
While the trend can be explained by the fact that the growth in the number of establishments is higher (4.69 per cent) than the growth in employment (2.78), experts are divided on what has caused such a high growth in the number of establishments.
"Nobody is sure about the reasons for this trend. There could be a number of explanations for this. One is that essentially it is a push phenomena. People do not get good livelihood from agriculture, so out of distress they open up their own shops. The other reason could be that people see new opportunities in opening their own establishments," said Pronab Sen, chief statistician of India.
Interestingly, the growth in the number of establishments is higher in rural areas than in urban areas.
While the growth rate of establishments in rural areas increased from 2.25 per cent in 1998 to 5.37 per cent in 2005, in urban areas, it increased from 2.51 per cent in 1998 to 3.69 per cent in 2005.
"This could be because of the services sector, which is fast expanding in rural areas. As services like transport and telecom are low labour-intensive, the employment per establishment is declining. This actually increases output per worker, thus creating more efficiency," said V Shunmugam, chief economist, Multi Commodity Exchange.
In case of agricultural establishments, the average employment per establishment which was 2.04 in 1990 declined to 1.94 in 1998 and 1.80 in 2005.
A similar trend has been observed in non-agricultural establishments. The average employment size per establishment has come down from 2.97 in 1990 to 2.85 in 1998 and to 2.58 in 2005.
Average employment size in own account establishments was 1.33 as against 4.38 in establishments with hired workers in 2005. A decreasing trend has been noticed in both these types of establishments.
