India’s dramatic transformation since 1989, there has only been a small decline, if any, in the share of workers in the unorganized sector for manufacturing.<sup>3</sup> The patterns also hold in Table 1b’s account of the establishment size distribution in services. The estimated size of the unorganized sector for services depends upon definitions. Using our simple cut-off of five employees, the unorganized sector would still account for 76% of services employment in 2001, well above the comparable 9% for the United States. If using a 20 employee cut-off, the unorganized sector accounts for 90% of services employment in 2006. The share of services in the unorganized sector declines 3% from 2001 to 2006. Our panel is unfortunately too short to identify whether this decline is a short-term fluctuation (similar to the 2%-4% jumps in manufacturing in Table 1a) or part of a long-term trend.

Table 2 lists the 20 states that are in our sample and their unorganized sector shares. These 20 states are a subset of all 35 states/union territories. The 15 exclusions were due to three potential factors: 1) the state was not sampled across all of our surveys, 2) the small sample size for the state raised data quality concerns, or 3) persistent conflict and political turmoil existed in the region. Our explicit criteria with respect to size are that the district has a population of at least one million in the 2001 census and has 50 or more establishments sampled. The exclusions are minor in terms of economic activity, and the resulting panel accounts for over 90% of employment in the manufacturing and services sectors throughout the period of study.

Among major states, the unorganized sector shares are particularly high in Bihar, Orissa, Uttar Pradesh, and West Bengal. These four states have an unweighted average share exceeding 85% across our six surveys. In contrast, low unorganized sector shares are evident in Gujarat, Haryana, Maharashtra, and Punjab, as well as some of the smaller states. These states have an unweighted average share of employment in the unorganized sector of less than 70%. This regional distribution in part correlates with economic advancement of regions (Ghani 2010a).

Tables 3a and 3b provide similar unorganized sector shares by two-digit NIC industry in manufacturing and services, respectively. Within manufacturing, unorganized shares exceed 95% in industries related to wood products and furniture, with industries related to tobacco, textiles, and food products coming next. At the opposite end, unorganized shares of 20% or less are often evident in industries related to computer, communications, motor vehicles, and base metals. Among services industries, unorganized sector shares exceed 90% in industries related to sanitation, personal service activities, communications, and transportation and railway. Industries related to education and computers have lower rates again. These patterns suggest that more 3 Hsieh and Klenow (2011) also emphasize these establishment size distribution differences and further link them to differences between India and the United States via establishment age and size. Trivedi et al. (2011) provide a broad study of the recent performance of India’s manufacturing sector.

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