Own Account Manufacturing Enterprises in India: Growth Trends and Challenges

India’s manufacturing landscape extends far beyond the gleaming factories and registered industrial units that dominate headlines. Tucked into urban bylanes, small workshops, and household kitchens are millions of tiny units where a single person or family produces goods without hiring any outside worker. These are called Own Account Manufacturing Enterprises (OAMEs), and they form the backbone of India’s unorganised manufacturing sector. Understanding how they function, where they are growing or shrinking, and who works in them, especially women, reveals a great deal about how the economy actually operates for the majority of its workers.

What are Own Account Manufacturing Enterprises? 🔗

The Indian manufacturing sector is broadly divided into two segments: organised and unorganised. The unorganised segment is further classified into three categories based on the number of workers employed. As defined by the National Sample Survey Office, an OAME is a manufacturing enterprise that runs without any hired worker employed on a fairly regular basis, relying entirely on family labour. In contrast, a Non-Directory Manufacturing Establishment (NDME) employs at least one hired worker but fewer than six total workers, while a Directory Manufacturing Establishment (DME) employs six or more workers.

This classification matters because OAMEs sit at the very bottom of the manufacturing pyramid. They are micro household units, often operating out of a single room, with minimal capital investment, no formal registration, and no access to the protections that come with being a registered enterprise. A potter shaping clay pots, a tailor stitching garments from home, a couple rolling bidis in their living room, a woman making papad or pickles for sale, these are all OAMEs.

Key characteristics of OAMEs 🔗

Several features distinguish OAMEs from larger manufacturing units. First, they are family-based operations where the owner, spouse, children, or other relatives contribute labour without formal wages. Second, they operate with extremely low capital, often using basic hand tools rather than machinery. Third, they are predominantly informal, meaning they lack registration, written contracts, social security, and access to institutional credit.

In urban settings, OAMEs are typically squeezed into congested residential neighbourhoods, slum clusters, or small commercial pockets. The home doubles as the workplace, which blurs the boundary between domestic and economic activity. This is especially significant for women, whose labour in such units often goes uncounted because it is treated as an extension of housework. The eGyanKosh module on Sectors notes that the OAME category dominates both rural and urban areas, although NDMEs and DMEs are relatively more concentrated in urban locations.

Growth trends in the OAME sector 🔗

The trajectory of OAMEs over the past few decades tells a complicated story of survival, stagnation, and quiet transformation. Successive rounds of NSSO surveys, covering 1994-95, 2000-01, 2005-06, and 2010-11, have tracked the unorganised manufacturing sector across roughly 17 years of major economic change.

Stagnation and contraction in rural OAMEs 🔗

Research analysing these NSSO rounds finds that the period between 2005-06 and 2010-11 saw a notable decline in the number of rural OAMEs, even as urban OAMEs grew and the larger NDMEs and DMEs expanded their share. Many traditional rural household industries, such as handlooms, wood products, and small repair work, lost ground as cheaper, machine-made goods from organised factories flooded the market. Mechanisation, changing consumer preferences, and shifts in rural demand reduced the viability of many micro household producers.

The persistence of urban OAMEs 🔗

Urban OAMEs, however, have shown more resilience. They cluster around densely populated cities where small producers can serve local markets quickly and cheaply. Studies on the distribution of firm size in India consistently show that a very large portion of manufacturing employment is accounted for by firms with five workers or fewer, and the overwhelming majority of these micro enterprises are OAMEs. This points to what economists call the “missing middle” in Indian manufacturing: a heavy concentration at the very small end and at the very large end, with very few medium-sized firms in between.

Dominant sectors: food, tobacco, textiles, and apparel 🔗

The unorganised manufacturing sector is heavily concentrated in a few industries. According to recent analysis by Data For India, three-quarters of unorganised manufacturing enterprises operate in just four industries: textiles, apparel, food, and tobacco product manufacturing, with nearly half engaged in apparel alone. Within OAMEs specifically, food products, wood products, textiles and apparel, and tobacco (especially bidi-making) form the bulk of activity.

Chemical-related manufacturing, including incense sticks, agarbatti, soaps, and small-scale plastic products, also features in urban OAMEs. West Bengal alone hosts half of India’s unorganised manufacturing enterprises engaged in tobacco products, a fact that ties the geography of OAMEs tightly to the geography of bidi-rolling and similar home-based work.

Why OAMEs continue to exist 🔗

If OAMEs are so small, vulnerable, and economically marginal, why do they survive in such large numbers? Several factors explain their persistence.

First, they serve as a refuge for surplus labour. With formal manufacturing creating relatively few jobs and agriculture shedding workers, millions of households turn to micro manufacturing as a fallback. Second, they offer flexibility for those who cannot enter wage employment, particularly women with childcare and household responsibilities. Third, they exploit low entry barriers: a sewing machine, a chulha for cooking-related production, or a small set of hand tools is enough to start.

However, persistence is not the same as prosperity. OAMEs typically generate very low value addition per enterprise, suffer from obsolete technology, weak marketing links, and overall stagnation in production and sales, as research on dualism in manufacturing has documented. The productivity gap between OAMEs and organised factories is enormous, and it has been widening rather than narrowing.

Impact on women workers 🔗

The story of OAMEs cannot be told without examining the experience of women, who form a substantial part of this workforce, though their work is often invisible.

The gendered distribution of OAME workers 🔗

Women’s participation in OAMEs is shaped by social norms that restrict their mobility, combined with the economic compulsion to earn. Home-based manufacturing allows them to contribute income while continuing to manage domestic responsibilities. NSSO data analysed in earlier studies on sectors shows that while the gender gap among OAME workers in rural areas is relatively narrow, urban OAMEs display a more pronounced gender divide, with women concentrated in specific low-paying activities.

In the broader informal manufacturing workforce, women make up about 43 per cent, and they are largely employed in low-skilled, low-wage segments. Tobacco, in fact, is the only manufacturing industry where women outnumber men, a reflection of how bidi-rolling has historically been organised as home-based piece-rate work.

Concentration in specific industries 🔗

Women in OAMEs are heavily concentrated in a handful of activities: bidi-rolling, agarbatti-making, food processing (papad, pickles, snacks), garment stitching, embroidery, basket weaving, and small handicrafts. These are activities that can be performed at home, often in spare hours between cooking and childcare. The feminisation of informal labour has meant that more women are working, but mostly in insecure, underpaid, and flexible forms of employment that reinforce existing gender hierarchies.

Challenges faced by women in OAMEs 🔗

Women in OAMEs confront multiple challenges that intersect with their economic vulnerability. Invisible labour is perhaps the most fundamental: because their work happens at home and uses family labour without formal wages, it is frequently treated as part of household duties rather than economic production. This erases their contribution from official statistics and weakens their claim to worker rights.

Low and unstable earnings are another concern. Most home-based workers operate on piece rates set by middlemen, with margins squeezed at every level. No social protection follows from this informal status, no provident fund, no health insurance, no maternity benefit, no pension. Over 90 per cent of employed women are in the informal sector, where access to social security and legal safeguards is minimal.

Occupational health hazards are also acute. Bidi-rollers inhale tobacco dust for hours; agarbatti workers handle chemicals; food processors face heat and burns. Yet these risks are rarely acknowledged because the home is not recognised as a workplace. Add to this the double burden of unpaid domestic work and care responsibilities, and the picture becomes one of intense labour with very low returns.

Policy gaps and the way forward 🔗

Despite the size and importance of the OAME segment, policy attention has been uneven. Initiatives like Udyam registration under the Ministry of MSME aim to bring micro enterprises into the formal fold, but registration rates among the smallest OAMEs remain very low because many owners lack documentation, financial literacy, or any expectation that registration will help them. Schemes for self-help groups, micro credit, and skill development have reached some women, but their coverage is uneven and outcomes vary widely.

Strengthening OAMEs requires more than just registration drives. It calls for better access to credit, market linkages that bypass exploitative middlemen, technology upgrades suited to micro scales of production, and explicit recognition of home-based workers as workers under labour law. For women in particular, recognising their contribution and extending social security would mark a fundamental shift in how the Indian economy values their labour.

What do you think? Should home-based manufacturing units run entirely by family labour be formally recognised as workplaces under Indian labour law, and how might such recognition change the lives of the women who work in them?

References

1. https://www.mospi.gov.in/sites/default/files/publication_reports/479_final.pdf
2. https://egyankosh.ac.in/bitstream/123456789/6063/1/Unit-3%20Sectors
3. http://old.iariw.org/dresden/uppal2.pdf
4. https://www.adb.org/sites/default/files/publication/28418/economics-wp213.pdf
5. https://www.dataforindia.com/unorganised-manufacturing/
6. https://www.raijmr.com/ijrhs/wp-content/uploads/2017/11/IJRHS_2016_vol04_issue_06_06.pdf
7. https://www.drishtiias.com/daily-updates/daily-news-analysis/rising-informality-of-women-in-manufacturing-workforce
8. https://www.impriindia.com/insights/feminisation-of-labour-in-india-gender/
9. https://www.drishtiias.com/daily-updates/daily-news-analysis/female-labour-force-participation-in-india
10. https://msme.gov.in/know-about-msme