Self-Employment: Problem or Solution?

The Hindustan Times article “Self-employment is a problem rather than solution for India’s job challenge”, published February 8, 2018, adds to the ruckus created over the Prime Minister talking about pakoda-sellers being employed. The piece uses ILO unemployment figures, which shows that India is faring better than other OECD countries in terms of employment numbers, but goes on to say that the country has a problem of quality employment.

The issue with the article is that it views self-employment as a problem to job creation rather than a solution. Further, the implication, as made by the article, seems to be that only formal sector jobs can be considered as quality employment.

Let us analyse the arguments presented by the piece.

Is Self-Employment ‘Petty Employment’?

The article keeps talking about how “petty employment” is on the rise, and the implication here is that pakoda-sellers are holding petty jobs, which has been equated, as by former Finance Minister P. Chidambaram with begging. It must be recalled that companies like Bikanervala and Haldiram’s started their operations on a small scale in Bikaner, Rajasthan, and have multiple outlets now, employing several people in the process of making and selling snacks. So, should we say these snacks-selling companies, and those working there, are involved in petty jobs?

Enterprises begin small and then become big. That is a logical progression for many. In fact, snack-sellers are small-scale entrepreneurs, who may extend their operations to a larger scale in future, means permitting. It is an honest and self-reliant profession, and calling it petty employment seems to be insensitive and in poor taste.

Formal Jobs & Quality Employment

The writer’s implication seems to be that quality employment means the formal job sector only, and excludes self-employment from it, which is a wrong way to look at employment. There are several businesses that are local and small in scale, and yet, they generate enough revenue.

Talking about the need for formal jobs, these are created as and when there is demand. This is especially true for the private sector. Despite the fact that many government enterprises are facing the problem of bad loans, the Indian government and PSUs go above and beyond the required number of employees to create vacancies for public welfare. But the fact that India’s population is huge cannot be discounted from the argument that there is only so much that the formal sector can do to create jobs.

Therefore, self-employment is a legitimate and gainful means of making a living for many people. That is a very important means of creating employment in a country with more than one billion people. So, self-employment is not a problem but a real solution to unemployment in the country.

Lower Earnings & Lower Cost of Living in India

There is no denying that a fairly large size of the Indian population is still in poverty. However, earnings are also a reflection of the cost of living in a country. The cost of living in India is considerably low, in comparison to developed and even some developing nations.

The article cites ILO figures for unemployment, where India fares better than many other OECD nations. Even if there is a large population involved in self-employment on a small scale, it is surely a good sign and better than being unemployed? Unemployment leads to destruction of lives and families and also anti-social activities. It is therefore a good thing that many people are resorting to self-employment, which helping them and their families sustain themselves and even grow and develop their businesses. Also, it is from such small-scale businesses that large ones tend to emerge.

What is Being Done to Generate Self-Employment?

The most important question is whether the government is doing enough to give a push to the informal job sector — the entrepreneurs and small businesses where people are self-employed and even employ others. The MUDRA scheme was launched keeping in mind the fact that the majority of Indian jobs are in the informal sector.

From 3.48 crore loans sanctioned in 2015-16, the volume has increased to 3.97 crore loans sanctioned under PMMY in 2016-17. Out of these 3.97 crore loans sanctioned in 2016-17, 2.91 crore were availed by women entrepreneurs.

In Budget 2018, corporate tax rate has been slashed to 25% for companies with an annual turnover up to Rs 250 crore from Rs 50 crore, which will directly benefit the MSMEs.

Further, in the agricultural sector, institutional credit has been raised from Rs 10 lakh crore in 2017-18 to Rs 11 lakh crore for the year 2018-19. Also, a 100% deduction in respect of profits to Farmer Producer Companies (FPCs), having turnover up to Rs 100 crore, has been announced for a period of 5 years.


It is not only the formal job creation process, but through empowering new self-employed individuals, that we can create more jobs for an ever-increasing workforce. The idea is not just to create jobs, but also job creators, and the government is trying to do just that.

To conclude, let us point out the most fundamental flaw in the logic of those who argue that self-employment is a problem and not real employment. Citing the examples of other countries here does not help because the Indian reality is very different from that of OECD nations, etc. First of all, India a market of 1 billion people. Thus, these self-employed individuals, these small-scale entrepreneurs, do not really have to build their own McDonalds or KFCs as international chains – there is an extremely big domestic market for them to exploit within India. The argument that their incomes are low must also be seen in a relative context – if the incomes are low in comparison with developed markets, the cost of living here is also low in comparison to developed markets. Would not be a big injustice to keep them from optimally serving this vast domestic market and also earning from it?