The State of India’s Unorganised Manufacturing Enterprises: Insights from NSSO Data

India’s manufacturing landscape often conjures images of large factories, assembly lines, and branded products. Yet behind this visible economy lies a much bigger, quieter one: millions of tiny workshops, home-based units, and family-run establishments that produce everything from bidis to bangles, garments to glassware. These are the unorganised manufacturing enterprises, and the National Sample Survey Organisation’s (NSSO) 56th round, conducted between July 2000 and June 2001, remains a foundational source for understanding their scale and structure.

What counts as an unorganised manufacturing enterprise? 🔗

The unorganised manufacturing sector covers all units that are not registered under Sections 2m(i) and 2m(ii) of the Factories Act, 1948. In practical terms, this means establishments employing fewer than 10 workers with power, or fewer than 20 without power, that fall outside the regulatory net of the Annual Survey of Industries (ASI). The NSSO 56th round was designed as a follow-up to the Fourth Economic Census of 1998 and focused entirely on this segment, covering enterprises under NIC-1998 two-digit codes 15 to 37, plus cotton ginning, cleaning and baling units. The survey methodology and sampling design are documented in detail by the Ministry of Statistics and Programme Implementation.

The three categories: OAME, NDME, and DME 🔗

The 56th round divided unorganised manufacturing units into three categories based on the nature and number of workers:

Own Account Manufacturing Enterprises (OAMEs) are units operated by family members without any hired worker on a regular basis. These are typically the smallest and most numerous. Non-Directory Manufacturing Establishments (NDMEs) employ at least one hired worker but fewer than six total workers. Directory Manufacturing Establishments (DMEs) are slightly larger, with at least one hired worker and six or more total workers. According to the Maharashtra government’s report on NSSO data, the number of persons employed per DME was more than six times that of an OAME, and gross value added per DME was several times higher as well.

The scale and distribution across rural and urban areas 🔗

The 56th round revealed that the unorganised manufacturing sector is dominated overwhelmingly by tiny, family-run units. Of all unorganised manufacturing enterprises in the country, about 86 per cent were OAMEs, 10 per cent were NDMEs, and only 4 per cent were DMEs. This skew is even sharper in rural India.

Rural areas: the OAME stronghold 🔗

In rural regions, the structure was striking: nearly 93 per cent of all units were OAMEs, with only 5 per cent NDMEs and 2 per cent DMEs. Most rural OAMEs were engaged in the manufacture of wood and wood products (excluding furniture) and articles of straw and plaiting materials, reflecting the traditional craft economy. NDMEs and DMEs in rural areas were more likely to be food product and beverage manufacturers, including units like rice mills and small dairies.

Urban areas: a more diversified structure 🔗

Urban India showed a more varied picture. NSS Report No. 479 recorded that in urban areas, OAMEs accounted for 71 per cent of enterprises, NDMEs for 21 per cent, and DMEs for 8 per cent. The higher share of NDMEs and DMEs in cities reflects denser markets, better access to hired labour, and easier integration with supply chains. Most urban OAMEs and NDMEs concentrated on the manufacture of wearing apparel and the dressing and dyeing of fur, while DMEs in cities were spread across food, textiles, chemicals, and metal products.

The unregistered manufacturing landscape was therefore not a uniform mass. It was a layered structure, with rural areas dominated by household-based own account units and urban areas hosting a slightly more complex mix of small establishments.

The economic weight of an “invisible” sector 🔗

The unorganised sector is often called the silent engine of the Indian economy. While its productivity per worker is low, its sheer size means it carries enormous weight in aggregate terms. As per studies based on NSSO and CSO data, the unorganised sector accounted for roughly 60 per cent of GDP in 1997-98, with non-agricultural unorganised activities making up a substantial share. Around the time of the 56th round, more than 86 per cent of the workforce was absorbed in the informal sector, a figure documented in the post-survey analyses of NSSO 1999-00 and 2004-05.

Contribution to exports 🔗

Unorganised manufacturing also feeds the export economy in ways that are often unnoticed. Items like handloom textiles, leather products, gems and jewellery components, handicrafts, and bidis are produced largely in unregistered units that supply intermediaries or larger exporters. The informal sector’s contribution to India’s exports has historically been estimated at around 40 per cent, especially in labour-intensive product lines that anchor the country’s trade competitiveness, as discussed in academic material on sectoral analysis.

Why productivity stays low 🔗

Despite this scale, the per-enterprise contribution is modest. The 62nd round and later rounds showed that gross value added per worker in unorganised manufacturing remained a fraction of that in the organised sector. More recent MoSPI surveys have shown that the unorganised non-farm sector employs about 19 per cent of the workforce but contributes only around 6 per cent of GDP, a productivity gap that reflects obsolete technology, fragmented markets, limited working capital, and weak access to credit and skill development.

Employment patterns and the dominance of self-employment 🔗

The 56th round confirmed that unorganised manufacturing is overwhelmingly self-employment-driven. Most workers are not on payroll. They are either owners of OAMEs working alongside unpaid family members, or they are hired on casual, piece-rate, or subcontracted terms. The few who are wage workers in NDMEs and DMEs rarely have written contracts, paid leave, or social security.

This pattern has been remarkably persistent. Recent estimates from Data For India show that three-quarters of unorganised manufacturing enterprises in the country are concentrated in just four industries: textiles, apparel, food, and tobacco products, with apparel alone accounting for nearly half. Five states – West Bengal, Uttar Pradesh, Maharashtra, Gujarat, and Tamil Nadu – house about half of all such enterprises.

Women workers: the most invisible workforce 🔗

Of all the findings from NSSO data on unorganised manufacturing, none is more important than what it reveals about women’s work. Women are disproportionately concentrated in this sector, and within it, they occupy the most precarious positions.

Where women are clustered 🔗

According to research summarised by India Development Review, women-headed firms accounted for 45 per cent of all enterprises in unorganised manufacturing in 2015-16, and a staggering 95 per cent of these were operating from home. The 2019-20 Handloom Census found that of 35 million unorganised handloom workers, 25 million were women. Bidi rolling, agarbatti making, papad and pickle preparation, garment stitching, and incense work continue to employ women in vast numbers.

The home-based work penalty 🔗

Operating from home is not just a matter of convenience. It is shaped by gendered social norms that place the burden of unpaid domestic work on women, which restricts mobility and limits the scale at which they can operate. A study published in Small Business Economics found that almost 95 per cent of female-owned unorganised manufacturing firms operate from within household premises, and this location alone explains roughly 19 per cent of the gender gap in firm productivity even after controlling for size, assets, and other conventional factors.

Wages, safety, and recognition 🔗

Women in the unorganised sector face overlapping disadvantages. Wages are lower, hours are longer, and many of them are unpaid family helpers whose work is not even recorded in official statistics. The International Monetary Fund’s working paper on women workers in India highlights that the unorganised sector accounts for nearly 90 per cent of manufacturing establishments in India, and women’s labour force participation here is shaped by structural constraints rather than free choice.

Occupational safety is another concern. Bidi rollers face chronic respiratory illness; brassware and glass workers face burns and toxic exposures; agarbatti and incense workers handle chemicals without protective gear. With no formal employer-employee relationship in most cases, accountability is diffuse and labour laws are rarely enforced.

Why the NSSO 56th round still matters 🔗

The 56th round established the statistical baseline against which all later rounds, including the 62nd, 67th, and the recent Annual Survey of Unincorporated Sector Enterprises, are compared. It documented for the first time the full structural map of unorganised manufacturing post-liberalisation, capturing the OAME-NDME-DME hierarchy, the rural-urban split, and the activity-wise concentration that continues to define the sector today.

It also exposed three uncomfortable truths that policy has struggled to address: the dominance of micro-units with no path to scaling up, the persistent informality of employment relationships, and the gendered nature of vulnerability within the sector. Schemes like the e-Shram portal, PM Vishwakarma, and the Code on Social Security 2020 are attempts to bring this workforce into formal recognition, but the gap between policy intent and ground reality remains large.

Looking ahead 🔗

India’s unorganised manufacturing sector is neither a relic of the past nor a transitional phase that will disappear with growth. It is a permanent feature of the economy, employing millions and feeding both domestic consumption and export markets. The NSSO 56th round, and the surveys that followed it, give us the tools to see this sector clearly, to count its workers, to measure its output, and to identify where intervention is most needed.

For women workers in particular, the data underscores a difficult reality. Their work sustains entire industries, yet much of it remains hidden inside homes, undercounted in statistics, and unprotected by law. Without disaggregated data, targeted credit, skill development, and social security, the structural disadvantages they face will continue to reproduce themselves across generations.

What do you think? Should India’s policy response to the unorganised manufacturing sector focus on formalising these enterprises, or on extending social security and worker protections while letting them remain informal? And how do we ensure that the millions of women who power this sector from inside their homes are counted, valued, and protected?

References

1. https://www.mospi.gov.in/sites/default/files/publication_reports/479_final.pdf
2. https://mahades.maharashtra.gov.in/files/report/nss_56_2.2_vol_1.pdf
3. https://casi.sas.upenn.edu/sites/default/files/iit/UNNI%20India%20Case%20Study%20for%20ILO%20stats%20book.pdf
4. https://ijirt.org/publishedpaper/IJIRT156850_PAPER.pdf
5. https://egyankosh.ac.in/bitstream/123456789/6063/1/Unit-3%20Sectors
6. https://theprint.in/economy/unorganised-non-farm-sector-employs-19-of-workforce-but-accounts-for-6-of-gdp-shows-mospi-data/2136966/
7. https://www.dataforindia.com/unorganised-manufacturing/
8. https://idronline.org/article/gender/how-many-women-does-indias-manufacturing-sector-employ/
9. https://link.springer.com/article/10.1007/s11187-022-00637-2
10. https://www.imf.org/external/pubs/ft/wp/2015/wp1555.pdf