Value dips as staff rises: The curious case of unincorporated manufacturing

Productivity per worker in small-scale manufacturing declines as firms hire more staff, according to a new government report

A new government report on small, unregistered businesses shows a surprising trend in manufacturing: As these units hire more staff, the economic value each worker generates drops.

 

The Ministry of Statistics and Programme Implementation recently released the fourth edition of its Annual Survey of Unincorporated Sector Enterprises (ASUSE), offering insights into the productivity of unincorporated enterprises. The ASUSE 2025 report showed that as the number of workers employed increased at an unincorporated manufacturing enterprise in 2025, the gross value added (GVA) per worker declined.

 

The report defines an unincorporated enterprise as a non-agricultural establishment not incorporated or registered under the Companies Act of 1956 or the Companies Act of 2013. Assets and liabilities of an unincorporated enterprise belong to the owners, not the enterprise itself. There is no separation between the entity's owner and the entity itself.

 

The GVA per worker for rural manufacturing units employing more than 20 workers was ₹1,24,000 in FY25 – the lowest among all such businesses employing four or more workers.

 

This means that the GVA of manufacturing establishments with more than 20 workers was not significantly higher than that of units employing fewer hands. This is akin to disguised unemployment, which is seen in Indian agriculture, where the contribution of an additional worker is almost zero.

 

On the other hand, the GVA per worker in urban manufacturing units employing more than 20 workers was higher at ₹ 2,19,000 in FY25. This equalled the median GVA per worker of all urban manufacturing establishments surveyed in the report. 

 

Further, data from FY24 to FY25 showed that GVA per worker declined in manufacturing units employing 8, 14, 15, 18 and more than 20 workers. The worst decline, of nearly 19 per cent, was at manufacturing units employing over 20 workers. Conversely, GVA per worker increased across all other categories of manufacturing enterprises. 

 

Fixed assets available per worker in rural manufacturing units fell from ₹1,14,000 in FY24 to ₹93,000 in FY25. Fixed assets per worker in urban manufacturing units increased marginally from ₹1,32,000 in FY24 to ₹1,39,000 in FY25. Overall, however, there was a decline in fixed assets available per worker in all manufacturing unincorporated units. This trend highlights a potential decrease in labour productivity in unincorporated manufacturing establishments.