The Digital Paradox: Why ICT Adoption Isn’t Paying Off for India’s Unorganized Sector

Within India, the unorganized sector comprises small and informal firms that account for a huge proportion of employment and production. Over 865,000 firms make up India’s unorganized sector, which is undergoing a slow and uneven digital transformation. Only 72,753 firms (8.4%) had computers, according to an analysis undertaken using the data from the Annual Survey of Unorganized Sector Enterprises (ASUSE, 2021–24). Computer adoption was concentrated in urban areas (53%) and male-owned firms (92%). There is a clear digital divide between urban and rural areas, as evidenced by the fact that only 7.2% of rural firms reported using ICT.

In our analysis, we have studied a firm’s performance through its profitability. The empirical analysis drew unit level data from three consecutive rounds (2021–22, 2022–23, 2023–24) of the Annual Survey of Unorganized Sector Enterprises (ASUSE), which is published by the NSO, Ministry of Statistics and Programmed Implementation (MoSPI). We undertake non-parametric methodologies to address the impact of computer adoption across different sectors and states. Our results reveal that firms that have adopted computers are generally urban-based, male-owned, and capital-intensive, with higher literacy levels among their workforces.

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