Wage levels are very low in India's micro-enterprise sector, according to a report released on Monday.
The report on employment creation possibilities in the sector is co-produced by Azim Premji University's Centre for Sustainable Employment and the Global Alliance for Mass Entrepreneurship (GAME).
The report said the vast majority of microenterprises are tiny and run with less than three workers. Larger enterprises (job creators) have failed to increase their share in GVA (Gross Value Added) and employment.
A key policy focus should, therefore, be on increasing the scale of operation, it said. Industries that experienced good employment growth in rural India were apparel, tobacco, restaurants, and education. In urban India, they were health, education, tobacco, furniture, and sale of cars and motorcycles.
The health and education industries have been able to create productive and well-paying work opportunities in the microenterprise sector. If both health and education industries continue to grow as they have done, they will create roughly 2,60,000 employment opportunities every year just in the microenterprise sector alone, it said.
The microenterprise sector has displayed good growth in labour productivity, but wage levels are still very low. "As of 2015, not a single industry among the large employers showed average monthly wages of even Rs 10,000 per month, with the majority lying between six and eight thousand rupees", it said.
Among the major states, Delhi (as a city-state) stands out with the highest level of productivity, but Kerala, Himachal Pradesh, Gujarat and Maharashtra have higher wages. Wage rates vary from a low of Rs 4,000 per month in Assam to Rs 10,000 in Kerala.
Women-owned firms accounted for 20 per cent of all enterprises, 16 per cent of all workers, and nine per cent of aggregate value-added in the non-farm microenterprise sector. Improving the asset position of women-owned enterprises should be another key policy focus, the report said.
Women tend to be concentrated in industries like tobacco, paper and paper products, chemicals, apparel, textiles, plastics, beverages, education, miscellaneous manufacturing, and wood products.
On the other hand, female entrepreneurs are under-represented in some key industries such as food, retail, and health. And they are practically absent in industries such as transport and furniture.
Co-author of the report, and Associate Professor of Economics at Azim Premji University, Amit Basole, said there is tremendous potential for job creation in the sector given the right mix of policies that improve local infrastructure, build assets, and foster market linkages among microentrepreneurs.