India's vast unincorporated sector, a critical engine for jobs and small-scale entrepreneurship, registered modest growth during the second quarter of the fiscal year 2025-26, as per the latest report from the Ministry of Statistics and Programme Implementation (MoSPI).
Urban Employment Fuels Quarterly Expansion
The period from July to September saw the total number of unincorporated establishments in the country increase slightly to 7.97 crore from 7.94 crore in the preceding quarter. Employment in this vital sector also edged upwards, reaching 128.6 million from 128.57 million. While this figure remains below the peak of 131.3 million recorded in the January-March quarter, it comfortably surpasses the 2023-24 annual estimate of 120.6 million.
This incremental growth was powered primarily by urban areas. Official data reveals that urban employment climbed by 4.5% to hit 69 million. In a contrasting trend, rural employment contracted by 4.7%, settling at 59.5 million. The ministry credited the urban surge to higher labour absorption and heightened activity in city-based enterprises.
Analysts view this divergence as indicative of a structural shift in India's employment landscape, with cities continuing to attract both skilled and casual labour. The diverse opportunities in urban markets—from retail and small-scale manufacturing to delivery, logistics, and construction services—help sustain employment even as rural areas experience stagnation.
Manufacturing Emerges as a Bright Spot
The unincorporated manufacturing segment, a cornerstone of the informal economy, showed signs of a strong revival. Establishments in this segment grew by 5.3%, while employment saw a more substantial jump of 7.2%. MoSPI described this quarter as a notable recovery for the manufacturing sector.
This growth is significantly supported by the mobility of casual and migrant workers, who fluidly move between agriculture and industry. This flexibility allows employment numbers to rise more sharply than the count of establishments, showcasing the sector's adaptive nature.
Economists emphasize that this revival is crucial as it not only creates jobs but also stimulates local economic activity. These small manufacturing units often act as suppliers to larger corporations or operate within urban clusters, generating positive multiplier effects for the broader economy.
Policy Implications and Future Outlook
The Quarterly Bulletin on Unincorporated Sector Enterprises (QBUSE) data presents a cautiously optimistic picture. The sector's ability to maintain employment amidst global economic uncertainties underscores its stabilizing role in India's job market.
Sustaining this momentum will likely depend on continued labour absorption, digital adoption, and sectoral diversification. Technology-driven solutions like digital marketplaces and mobile payment platforms can empower these enterprises, enhancing their efficiency and market reach.
Furthermore, targeted policy measures focusing on skill development, easier access to credit, and infrastructure support for small urban enterprises could help consolidate the gains in employment and entrepreneurial activity. Strengthening this sector is fundamental to ensuring a robust and inclusive foundation for India's economic growth.
