The June quarter saw a sharp decline in India’s unincorporated non-farm sector, with drops in establishments and employment, highlighting a divergence from the robust growth in the formal economy.
India’s unincorporated non-farm sector lost pace in the June quarter, even as it remained larger than a year earlier, according to the National Statistics Office. The latest quarterly bulletin showed that both the number of establishments and the workforce slipped from the March quarter, marking the sharpest sequential fall since the agency began publishing the series in early 2025.
The sector was estimated to have 86.7 million establishments in April-June 2026, up 9.2% from a year earlier, while employment reached 137 million, a rise of 6.55%. But the quarter-on-quarter picture was weaker: establishments fell 5.4% from January-March and jobs dropped 9.7%, a sharp reversal from the double-digit expansion seen in the previous quarter.
The decline was led by rural India. Rural establishments fell almost 10% from the March quarter, while rural employment dropped 13.4%. Urban activity was steadier, with the establishment base broadly unchanged and employment down 6.3%. By sector, manufacturing and trade both saw notable pullbacks, while “Other Services” was the only broad category to post a marginal rise in establishments.
The data also point to a continued shift towards self-employment. Working owners accounted for 62.4% of workers in the June quarter, up from 60.2% a year earlier, while the share of hired workers slipped to 22.8% from 24.4%. Digital adoption continued to deepen, with 82.2% of establishments reporting internet use, although the share using online financial services such as Unified Payments Interface, or UPI, edged down slightly.
The slowdown in the informal sector comes against a backdrop of stronger formal-sector indicators. Business Standard reported that industrial output rose 7.3% in June, a 23-month high, while total exports in the April-June period increased by 11.37% to $232.73 billion. Bank credit to industry also accelerated to 19.2% in June, and CRISIL estimated that India Inc’s revenue growth hit a two-year high in the same quarter. Together, the figures suggest that while parts of the formal economy were gathering pace, the smaller unincorporated businesses that employ a large share of India’s workforce were under more pressure.
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