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Modi government’s efforts to help India’s 11.1 crore informal workers in MSMEs have fallen short

The criteria for relief packages for the sector excluded more than 90% of medium and small industries.

Little has changed for informal, migrant workers who work in the country’s medium and small industries, and were one of the worst affected by the Covid-19 pandemic, according 

to an IndiaSpend analysis of government support for smaller enterprises and informal workers during the pandemic.


The government’s attempt to register informal workers, to make it easier for them to access benefits, has only been partially successful, while programmes for migrant workers in the state they come from were only pilots and did not help migrant workers long term, our analysis showed. In addition, criteria for relief packages for the sector excluded over 90% of MSMEs and there were few programmes in urban areas to help migrants returning to work.


Medium   and   small    industries    employ    about 11.1    crore workers,    most    of them informal and many of them migrants. As employment hubs in urban India shut down abruptly with the imposition of a nationwide Covid-19 lockdown in late March 2020, the largely informal workforce lost work overnight, prompting a mass exodus of migrant workers to their villages. About 4 crore migrant workers returned home, the Reserve Bank of India estimated in a September 2020 report.


The reverse migration disrupted labour supply in urban areas, impacting MSMEs’ productivity, the RBI said. Production in the sector fell from an average of 75% of capacity to just 13% in May 2020, two months into the lockdown, according to a June 2021 report in the Economic and Political Weekly.


Covid-19’s impact

The sector contributes around 30% of the gross value added (a productivity measure of a sector’s output). Just 13% of India’s 6.3 crore medium and small industries were registered by August 2021, thus most workers in the sector are informal labourers, who do not have the employment, job or social security afforded to employees in formal sector enterprises.


About 73% of all rural female workers and 67% of urban female workers in the construction sector and 59% of rural and 51% of urban women workers in manufacturing are migrant workers, said RBI, adding that there are no reliable estimates of migrant workers.

Medium and small industries also took a bigger hit because the spread of the pandemic was initially in states which house a large proportion of MSMEs, the RBI said. Besides the disruption in labour and material supply, the sector also suffered shocks from a fall in domestic and external demand.


By June 2020, 35% of medium and small industries and 37% of self-employed persons began shutting down operations, the Business Standard reported based on a survey by the All India Manufacturers Organisation. On average, medium and small industries retained only 44% of their workforce, and 69% reported an inability to survive longer than three months, when the survey was released in June 2020.


The second Covid-19 wave was another jolt to the sector, which had only just begun to pick up in the aftermath of the first wave. Migrant workers who had started returning to urban employment centres found themselves out of work again, IndiaSpend reported in June.