India's Manufacturing Sector Reveals Stark Divergence in Job Growth
India's vast informal manufacturing sector has experienced stagnant job numbers for nearly a decade, while the formal manufacturing sector has seen a significant increase, marking a sharp divergence in growth trajectories between these two critical segments of the economy.
Employment Trends in Informal and Formal Manufacturing
An analysis of the latest unincorporated enterprises survey, released last month, indicates that employment in informal manufacturing remained largely flat. In 2025, approximately 3.5 crore people were employed in this sector, compared to 3.6 crore in 2015-16. Meanwhile, the number of informal enterprises rose slightly from 2 crore to 2.1 crore over the same period.
In contrast, data from the Annual Survey of Industries (ASI), which tracks the formal manufacturing sector, shows a robust growth in employment. By 2023-24, nearly 2 crore people were employed in formal manufacturing, representing a 37% increase over the 2015-16 figures. This disparity underscores a widening gap between the organized and unorganized segments of India's industrial landscape.
Expert Insights on Economic Stratification
Santosh Mehrotra, a visiting professor at the University of Bath, commented on this trend, noting that the organized sector has been gaining at the expense of the unorganized sector in recent years. However, he emphasized that this does not necessarily indicate a formalization of the economy. "Instead, it reflects the growing stratification of the economy, wherein a relatively small formal sector is witnessing a spurt in productivity and growth, while the vast informal sector, which supports a large portion of the population, is facing stagnation," Mehrotra explained.
Divergence in Worker Earnings and Profits
The divergence between the two sectors is also evident in worker earnings. Between 2015-16 and 2025, real emoluments per hired worker in informal manufacturing enterprises grew at a compound annual growth rate (CAGR) of 2.1%, increasing from Rs 59,806 to Rs 72,172.
In stark contrast, total emoluments paid to workers in the formal manufacturing sector, in real terms, grew at a CAGR of 4.5% between 2015-16 and 2023-24. Additionally, net profits in the formal manufacturing sector expanded at a CAGR of 4.4% during this period, further highlighting the sector's stronger performance.
This data points to a deepening economic divide, with the formal sector not only creating more jobs but also offering better financial rewards and profitability compared to the stagnant informal sector.
