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India's Self-Employment Soars, Income Stagnates
21 Jul
Summary
- Self-employment rose to 56.2% by 2024-25, shifting to subsistence sectors.
- Entrepreneur income declined in real terms due to inflation and reforms.
- Worker productivity remains critically low, one-third of global average.
Between 2017-18 and 2024-25, India experienced significant structural economic changes. Self-employment within the workforce increased from 52.2% to 56.2%, primarily in agriculture, mining, manufacturing, and construction, often in subsistence-oriented family businesses.
Despite a rise in employee compensation, the real income for self-employed entrepreneurs saw a decline. This was exacerbated by inflation and labor reforms that increased wages for hired workers, reducing owners' residual earnings. Many small enterprises lacked adequate support mechanisms.
The share of labor compensation in net value added increased from 38% to 43% during this period. However, India's labor productivity remains exceptionally low, with output per hour worked significantly below the global average, influenced by the dominance of small establishments and subsistence sectors.
Policy recommendations suggest a shift towards supporting one-person employee-cum-entrepreneurs and family-run outfits. This includes providing collateral-free credit, management and marketing assistance, skill development, and regulatory freedom to foster growth.
