In her speech for the Union Budget 2025-26, Finance Minister Nirmala Sitharaman laid out the tenets for Developed India (Viksit Bharat) by 2047. Two of them are: “Hundred per cent skilled labour with meaningful employment; and seventy per cent women in economic activities.” By all arguments, employment, and particularly more women joining the workforce, is the springboard to encash the “demographic dividend” that India is endowed with.
Unemployment is widely perceived to be a challenge that Budget 2025-2026 should have targeted to revive the sluggish consumption. Rise in consumption — as a result of gainful employment — will, in turn, boost the economy. But it is clear that for years now, India’s employment bucket has increased but has not been able to boost income. Why is to so? The answer: the rising number of self-employed in the employed group.
The Economic Survey 2024-25, presented the day before the Union Budget on February 1, painted a rosy picture of rising employment or decline in unemployment rate in India. The rise in self-employment is driving down the unemployment rate in the country, the Survey says.
One is considered self-employed if he or she works with his or her own set up or employs people for own ventures. The definition of self-employment is wide: It ranges from a tea stall to working in a farm to practicing doctors. Under this category, there are two types: Those who are account workers or employers and those who are helpers in household enterprises. The latter type is basically unpaid work undertaken in one’s own economic activities.
The Survey celebrates this transition: “This shift reflects growing entrepreneurial activity and a preference for flexible work arrangements.”
According to the Economic Survey 2024-25, self-employed workers constitute 58.4 per cent of workforce in 2023-24, a significant increase from 52.2 per cent in 2017-18. This should be read in conjunction of the data for regular/salaried jobs. These jobs, considered remunerative and sustained, have reported decline: “the share of workers (male and female) in regular/salaried jobs decreased from 22.8 per cent to 21.7 per cent during 2018-24.”
Further, the Survey interprets the shift to self-employment as an escape from casual employment which is non-remunerative and often not certain. The number of casual workers in the total employed population has declined from 24.9 per cent in 2017-18 to 19.8 per cent in 2023-24. The Survey says, “(This) indicates a shift toward more structured forms of self-employment. These changes suggest an evolving workforce that embraces flexibility and independence in response to industry transformations and individual preferences.”
On the tenet of getting more women into the workforce as Sitaraman laid out in her speech, India is reporting more women joining the workforce in recent years. There are more women self-employed than men in the workforce. But, again, their number in regular wage/salaried employment force has come down. Says the Survey, “In rural India, women’s participation in regular wage jobs fell from 10.5 per cent in 2017-18 to 7.8 per cent in 2023-24, coinciding with an increase in women working as “own account workers/ employers” or “helpers in household enterprises”. In urban areas as well, women doing regular wage/salaried jobs have come down.
Usually, self-employment can be interpreted as a sign of entrepreneurship. But not in case of India, or for that matter in the developing countries. Going by global data on employment, self-employment is high in poor and developing countries. Usually, countries with low per capita income have higher self-employed populations. One can say that most of the world’s poor are self-employed. These are the people without a job contract and include a significant number of people who do unpaid household enterprise work.
A high level of self-employment is an indicator that there are no other alternatives; the people, therefore, stick to these non-rewarding jobs. In India, a daily wage job fetches more than a self-employment option. In India, like in other countries, this option attracts most of the small and marginal farmers as well as the landless. This indicates the deep employment crisis the country is facing, but the high rate of self-employment gets reflected as a decrease in unemployment rate.
In a study by economists CP Chandrasekhar and Jayati Ghosh in 2023, “In April-June 2022, real remuneration of urban self-employed workers was still 11 per cent lower than in April-June 2019. In other words, self-employed workers in urban India in mid-2022 on average were earning significantly less than they had earned three years earlier!” They add, “Note that rural earnings from self-employment are significantly lower than in urban areas, with a gap of around 40 per cent between the two.”