India formalised Rs 26 lakh crore of the economy in seven years: SBI Research

Indian economy is turning more formal

India has formalised Rs 26 lakh crore of the economy in seven years, State Bank of India researchers noted in a report released on June 21.

Estimating the share of the informal economy from the recently released Annual Survey of Unincorporated Sector Enterprises, SBI researchers found that the share of the informal economy had fallen to 23.7% in FY23 from 25.9% in FY16.

“Distribution of labour force (~568 million) shows 45% of the labour force is still informal, with the usual suspects of agriculture (25.5%) and services (13.9%) accounting for close to 40% of total workforce / 88% of the informal workforce,” the report pointed out.

The researchers said the e-Shram portal, which has registered 297 million unorganised workers, could further fast-track the formalisation process.

The report further noted that the bottom of the pyramid accounts for 43% of the private final consumption expenditure.

SBI classifies those earning less than $3.65 daily at the bottom of the pyramid.

“According to the World Bank data, at 2017 international prices, 44% of our population spent less than $3.65 per day,” it noted.

Private final consumption expenditure grew 4% in FY24 when the economy logged 8.2% growth.

The ASUSE data released by the ministry of statistics and programme implementation earlier this month showed that the number of informal establishments increased more in rural areas between 2022-23 and 2010-11 than in urban areas.

Services accounted for a larger share of informal enterprises during this period.

Rural enterprises also witnessed a faster increase in value added at 2.7 times during this period compared with urban establishments at 2.3 times.

“GVA per establishment contribution of urban enterprises is more. However, the pace of increase is rapid for rural establishments, with a larger increase in all the three sectors, i.e. manufacturing, trade and other services,” SBI said.

India's informal rural service sector enterprises share in  economy declined to 8.8% in 2022-23 from 13.8% in 2010-11.