Has Manufacturing Share in Employment Stagnated in India? Taking a Close Look

Abstract

Media articles and scholarly writings in academic journals and books often state that the share of Indian manufacturing in total employment in the economy has been stagnant. This recognized stagnancy in the manufacturing sector’s employment share is interpreted as reflecting a poor performance of Indian manufacturing in employment generation. This view, commonly held, is scrutinized in the paper. The paper notes that the organized (formal) manufacturing sector has performed quite well in creating jobs. The growth in employment in organized manufacturing has been rapid (4-5% per annum), resulting in shifts of workers from the unorganized sector to the organized sector with concomitant gains in productivity and labour income. As regards the share of manufacturing in total employment in the economy, the employment estimates based on employment data from household surveys show an increase in the manufacturing employment share between 1999-2000 and 2011-12, but not thereafter. However, based on employment estimates derived from employment data of enterprise surveys, some empirical evidence is presented in the paper, which indicates that the percentage of aggregate manufacturing, organized and unorganized segments combined, in total employment in the economy, has not been constant or virtually constant in the last 20 years. Instead, it seems fitting to say that the share has grown slowly.

Keywords: Manufacturing employment share, Organized manufacturing, Employment data, Household and enterprise surveys

JEL Classification: J21