During the 18th C.D. Deshmukh Memorial Lecture in Mumbai, Arvind Panagariya, Professor at Columbia University and former Vice Chairman of NITI Aayog, expressed concerns about the overwhelming dominance of small enterprises in India’s workforce. Addressing the employment pattern, Panagariya emphasized that the majority of the workforce being in small enterprises leads to low productivity for most workers.
Small Economic Units Challenge: Panagariya identified the prevalence of small economic units as a significant challenge, hindering the creation of high-productivity and high-wage jobs on a large scale. He noted that while large enterprises showcase higher worker productivity, their presence also compels efficiency among smaller enterprises, either as ancillaries or competitors. This, according to Panagariya, demands greater attention from policymakers, urging explicit recognition of the “small economic units” challenge.
Widespread Impact: The small-economic-units challenge extends beyond the workforce, affecting various aspects of Indian life. Panagariya highlighted the dispersion of the population in small habitations and the operation of Indian farmers on tiny agricultural holdings, both contributing to inefficiencies.
Current Workforce Distribution: As per the Periodic Labor Force Survey 2021-22, 72 percent of the workforce in the industry and services sectors is employed in enterprises with nine or fewer workers. Only 10 percent are employed in enterprises with 20 or more workers, indicating a limited presence of workers in large enterprises.
Panagariya’s insights underscore the need for strategic policymaking to address the challenges posed by the dominance of small enterprises in India’s economic landscape.*
