In India (as in many developing economies), the unorganized or small-scale sector is considerably larger than the organized sector in terms of employment and share of GDP. It contributes to more than 50% of the country’s GDP and employs 90% of the total workforce. Any research study which does not include the unorganized sector will depict an inaccurate picture. Hence the knowledge of India’s informal economy is a must to understand the country’s business environment.
Difficulties faced in research related to the unorganized sector
High quality data is a must for reliable research outputs. But given the large number of players in India’s unorganized sector, along with their geographical dispersion, it is difficult to collect accurate ground level data. Annual reports are often unavailable, websites rarely exist, and online information about these firms is scarce. Most of them operate in remote locations making it difficult to reach them. Another challenge faced includes the local language barrier.
Government data related to the unorganized sector is usually collected by organizations like NSSO, a division of the Ministry of Statistics. Most of their data is outdated and cannot be used to calculate an accurate estimation of the current market scenario.
While working on a market sizing exercise, our client believed that the market was worth $140 mn, and growing at a CAGR of 10%. They had totally neglected the contribution of the unorganized sector. When the latter was considered, the revised market size was $400 mn and growth too was higher.
How can we make our research output more reliable?
- Including an adequate proportion of unorganized players in the research sample will ensure that the results obtained are not biased towards the large players.
- The gathered data should be validated (triangulated) with more than one source to ensure its authenticity.
- In some cases, it is difficult to gather data directly from firms operating in the unorganized sector. In such cases, the data can be gathered by approaching distributors, dealers, agents, etc.
- The majority of unorganized firms in any major industry vertical have certain distinct characteristics. These players could be centered around clusters or have very similar operating ratios or products, etc. Identifying these characteristics and patterns can help make realistic assumptions.
It is fairly obvious then that given the importance of the sector, a market study must consider unorganized players to depict a realistic image of the market.