Skip to main content
SpringerLink
Log in

Manufacturing Trade and Employment Linkages in India

  • Chapter
  • First Online:
Manufacturing and Jobs in South Asia

Part of the book series: South Asia Economic and Policy Studies ((SAEP))

  • 306 Accesses

Abstract

The manufacturing sector in India contributes around 15% of its GDP, a share which is significantly lower than the newly industrialised countries of Asia and those of many industrialised nations (who have a lower share now compared to the earlier industrialisation phase). Apprehensions run high that without steady expansion of the manufacturing sector, India is set to lose out on its demographic dividend where a large fraction of the workforce would be languishing in less productive farm and non-farm activities. The share of manufacturing in total employment increased to 12.2% in the first-half of the last decade and declined to 11% in the second-half of the decade indicating higher capital intensity.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 149.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 199.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 199.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    Twelfth Five-Year Plan (2012–17) Document.

  2. 2.

    Ministry of Commerce and Industries, October, 2018, http://commerce-app.gov.in/meidb/comq.asp?ie=i.

  3. 3.

    Kumar (2017) explained that the share of manufacturing began to decline after a certain level of per capita income was reached as services began to attain a greater prominence, as happened in most of the industrialised countries. However, de-industrialisation happening in developing countries is an issue that warrants attention. Agarwal (2015) summarised that the share in the middle-income countries had increased before 1990s but has tended to decline since then. The exact timing of the reversal from an increasing share of manufacturing in GDP to a decreasing share varied between the regions. In East Asia Pacific (EAP) and Sub-Saharan Africa (SSA), it started decreasing after the period 1974–82, whereas in the Latin America and Caribbean (LAC), the decline has been particularly sharp since the 1983–90 period. There is a further difference in the performance of the sector in more recent years. Its share has declined continuously in LAC and Sub-Saharan Africa (SSA), whereas in East Asia and Pacific (EAP) it has been almost constant and in South Asia (SA), there has been an overall increase though with fluctuations.

  4. 4.

    The recent World Bank study on South Asia and Manufacturing arrives at similar conclusions.

  5. 5.

    https://www.seeker.com/ai-threatens-to-replace-millions-of-white-collar-workers-2201607545.html.

  6. 6.

    Research on opportunities of market access, value addition, competitiveness, agglomeration, innovation, integration and challenges of market competition, industrial structure, capacity gaps, etc. has been less frequent and prominent. These factors along with others highlighted above affect performance of the manufacturing at the sectoral level. These also define the scope of firm level analysis for policy design, regulation and organisational innovations.

References

  • Agarwal M (2015) Make in India: state of manufacturing in India. RIS policy brief no. 73

    Google Scholar 

  • Ahluwalia I (1991) Productivity and growth in Indian manufacturing. Oxford University Press, New Delhi

    Google Scholar 

  • Amirapu A, Subramanium A (2015) Manufacturing or services? An Indian illustration of a development Dilemma. Centre for Global Development, Working paper no. 409

    Google Scholar 

  • Asghar M, Yousuf MU, Ali S (2014) Impact of trade liberalization on employment: review of SAARC countries

    Google Scholar 

  • Athukorala PC, Rajapatirana S (2000) Liberalization and industrial transformation: lessons from the Sri Lankan experience. Econ Dev Cult Change 48(3):543–572

    Article  Google Scholar 

  • Balakrishnan P, Pushpangadan K (1994) Total factor-productivity growth in manufacturing industry—A fresh look. Econ Political Wkly 29(31)

    Google Scholar 

  • Baldwin JR, Brown WM (2004) Regional manufacturing employment volatility in Canada: the effects of specialisation and trade. Pap Reg Sci 83(3):519–541

    Article  Google Scholar 

  • Basu K, Maertens A (2009) The growth of industry and services in South Asia. In: Ghani E, Ahmed S (eds) Accelerating growth and job creation in South Asia. Oxford University Press, pp 91–140

    Google Scholar 

  • Bhagwati J, Dehejia VH (1994) Freer Trade and Wages of the Unskilled-Is Marx Striking Again? In Bhagwati, Kosters, pp 36–75

    Google Scholar 

  • Brooks DH, Go EC (2012) Trade, employment and inclusive growth in Asia. In: Policy priorities for international trade and jobs, p 327

    Google Scholar 

  • Chaudhuri S (2015) Premature deindustrialization in India and re thinking the role of government. Fondation Maison des sciences de l’homme Working Paper Series FMSH-WP-2015-91

    Google Scholar 

  • Currie J, Harrison A (1997) Sharing the costs: the impact of trade reform on capital and labor in Morocco. J Labor Econ 15(S3):S44–S71

    Article  Google Scholar 

  • Dasgupta S, Singh A (2006) Manufacturing, services and premature deindustrialization in developing countries—A Kaldorian analysis. UNU-WIDER research paper no. 2006/49

    Google Scholar 

  • Deshpande LK (2004) Liberalisation and labour: labour flexibility in Indian manufacturing. Institute for Human Development

    Google Scholar 

  • EXIM Bank (2016) Inter-linkages between exports and employment in India. Occasional paper no. 179

    Google Scholar 

  • Felipe J, Mehta A, Rhee C (2014) Manufacturing matters but it’s the jobs that count. ADB economics working paper series no. 420

    Google Scholar 

  • Gaston N, Trefler D (1997) The labour market consequences of the Canada-US Free Trade Agreement. Can J Econ 18–41

    Article  Google Scholar 

  • Ghose AK (2000) Trade liberalization, employment and global inequality. Int'l Lab Rev 139:281

    Article  Google Scholar 

  • Goldar B (2000) Employment growth in organised manufacturing in India. Econ Polit Wkly 1191–1195

    Google Scholar 

  • Goldar B (2002) Trade liberalization and manufacturing employment: The case of India. ILO

    Google Scholar 

  • Goldar BN (2011) Growth in organized manufacturing employment. Econ Political Wkly February

    Google Scholar 

  • Goldar BN (2014) Globalisation, growth and employment in the organised sector of the Indian economy. IHD working paper no. WP 06/2014

    Google Scholar 

  • Greenaway D, Haynes M, Milner C (2002) Adjustment, employment characteristics and intra-industry trade. Weltwirtschaftliches Archiv 138(2):254–276

    Article  Google Scholar 

  • Hasan R, Mitra D, Ramaswamy KV (2007) Trade reforms, labor regulations, and labor-demand elasticities: empirical evidence from India. Rev Econ Statis 89(3):466–481

    Google Scholar 

  • Himanshu (2011) Employment trends in India: a re-examination. Econ Political Wkly 46(37), September

    Google Scholar 

  • Hoekman B, Winters LA (2005) Trade and employment: stylized facts and research findings. The World Bank

    Google Scholar 

  • IHD (2014) India labour and employment report 2014. Academic Foundation and Institute of Human Development

    Google Scholar 

  • Jadhav K, Husain T (2016) Trade orientation of industries and employment performance in indian manufacturing: recent trends, patterns and implications. J Int Bus 3(1)

    Google Scholar 

  • Janiak A (2006) Does trade liberalization lead to unemployment? Theory and some evidence. mimeo, Universite Libre de Bruxelles

    Google Scholar 

  • Kakarlapudi KK (2010) The impact of trade liberalisation on employment: evidence from India’s manufacturing sector. MPRA paper no. 35872

    Google Scholar 

  • Kathuria V, Rajesh Raj SN, Sen K (2010) Organised versus unorganised manufacturing performance in the post-reform period. Econ Political Wkly XLV(24) (Special Article)

    Google Scholar 

  • Kathuria V, Rajesh Raj SN, Sen K (2013) The effects of economic reforms on manufacturing dualism: evidence from India. J Comp Econ 41(2013):1240–1262

    Article  Google Scholar 

  • Krishna KL, Aggarwal S, Erumban AA, Das DK (2016) Structural changes in employment in India, 1980–2011 (no 262)

    Google Scholar 

  • Kumar N (2007) Regional economic integration, foreign direct investment and efficiency-seeking industrial restructuring in Asia: the case of India. RIS discussion paper no. 123

    Google Scholar 

  • Kumar N (2017) Reversing pre-mature deindustrialization for jobs creation: lessons for ‘Make-in-India’ from experiences of industrialized and East Asian countries. RIS discussion paper no. 208

    Google Scholar 

  • Lall S (2000) The Technological structure and performance of developing country manufactured exports, 1985‐98. Oxford Dev Stud 28(3):337–369

    Article  Google Scholar 

  • Lang K (1998) The effect of trade liberalization on wages and employment: the case of New Zealand. J Labor Econ 16(4):792–814

    Article  Google Scholar 

  • Mazumdar D, Sarkar S (2009) The employment problem in India and the phenomenon of the missing middle. Indian J Labour Econ 52(1)

    Google Scholar 

  • Mehrotra et al (2012) Creating employment in the Twelfth Five-Year Plan. Econ Political Wkly XLVII(19)

    Google Scholar 

  • McMillan M, Verduzco I (2011) New evidence on trade and employment: an overview. In Trade and Employment: From Myths to Facts, ed. Marion Jansen, Ralf Peters, José Manuel Salazar-Xirinachs, Geneva: ILO, pp 23–60

    Google Scholar 

  • Milner C, Wright P (1998) Modelling labour market adjustment to trade liberalisation in an industrialising economy. Econ J 108(447):509–528

    Article  Google Scholar 

  • Mishra P, Kumar U (2005) Trade liberalization and wage inequality: evidence from India (No. 5–20). International Monetary Fund

    Google Scholar 

  • Mohanty SK (2003a) Trade liberalisation in South Asia: an empirical assessment, paper presented at the ESCAP Expert Group Meeting on Regional Trading Agreements in Asia and Pacific, Bangkok, 30–31 Jan 2003

    Google Scholar 

  • Mohanty SK (2003b) Regional trade liberalization under SAPTA and India’s trade linkages with South Asia. Research and Information System for the Non-Aligned and Other Developing Countries, New Delhi-India

    Google Scholar 

  • Mohanty SK (2012) Economic growth, exports and domestic demand in India: in search of a new paradigm of development. In: Zhang Y, Kimura F, Oum S (eds) Moving towards a new development model for East Asia—The Role of Domestic policy and Regional Cooperation, ERIA Research project 2011–10. Jakarta, ERIA, pp 191–222. http://www.eria.org/RPR_FY2011_No.10_Chapter_6.pdf

  • Moreira MM, Najberg S (2000) Trade liberalisation in Brazil: creating or exporting jobs? J Dev Stud 36(3):78–99

    Article  Google Scholar 

  • Nagraj R (2017) Economic reforms and manufacturing sector growth need for reconfiguring the industrialisation model. Econ Political Wkly LII(2)

    Google Scholar 

  • Nambiar RG, Mungekar BL, Tadas GA (1999) Is import liberalisation hurting domestic industry and employment? Econ Political Wkly 417–424

    Google Scholar 

  • NCEUS (2009) The challenge of employment in India—an informal economy perspective. Report of the National Commission for Enterprises in the Unorganised Sector

    Google Scholar 

  • Ohara M, Lin H (2011) Competition and management in the manufacturing sector in China and India: a statistical overview. In: Ohara M, Vijaybhaskar M, Hong L (eds) Industrial dynamics in China and India—firms, clusters, and different growth paths. Palgrave MacMillan and IDE-JETRO

    Google Scholar 

  • Pavitt K (1981) Technology in British industry: a suitable case for improvement. Indus Policy Innov 88–115

    Google Scholar 

  • Pavitt K (1984) Sectoral patterns of technical change: towards a taxonomy and a theory. Res Policy 13(6):343–373

    Article  Google Scholar 

  • Planning Commission, Government of India (2013) Twelfth Five Year Plan (2012–2017) social sectors volume III

    Google Scholar 

  • Pradhan JP (2006) How do trade, foreign investment and technology affect employment patterns in organized Indian manufacturing? Indian J Labour Econ 49(2)

    Google Scholar 

  • Raihan S (2008, April) Trade liberalization, growth employment and poverty in Bangladesh. In 11th Annual Conference on Global Economic Analysis, Helsinki

    Google Scholar 

  • Raj SNR, Sen K (2012) Did international trade destroy or create jobs in Indian manufacturing?. Eur J Dev Res 24(3):359–381

    Google Scholar 

  • Rajakumar JD (2011) Size and growth of private corporate sector in Indian manufacturing. Econ Political Wkly XLVI(18) (Special Article)

    Google Scholar 

  • Rajakumar JD (2017) Measuring manufacturing comparing NAS and ASI. Econ Political Wkly LII(20) (Economic Notes)

    Google Scholar 

  • Rani U, Unni J (2004) Unorganised and organised manufacturing in India: potential for employment generating growth. Econ Polit Weekly 4568–4580

    Google Scholar 

  • Ramaswamy KV (2003) Liberalization, outsourcing and industrial labor markets in India: some preliminary results. Labour Market and Institution in India, 1990s and Beyond. New Delhi: Manohar

    Google Scholar 

  • Rao KSC, Dhar B (2011) India’s FDI inflows, trends and concepts. ISID working paper no. 2011/01

    Google Scholar 

  • Ray AS, Bhaduri S (2001) R&D and technological learning in Indian industry: econometric estimation of research production function. Oxford Development Studies, vol 29, no 2, June

    Google Scholar 

  • Revenga A (1997) Employment and wage effects of trade liberalization: the case of Mexican manufacturing. J Labor Econ 15(S3):S20–S43

    Article  Google Scholar 

  • RIS (2006) Towards an employment-oriented export strategy—some explorations (Report)

    Google Scholar 

  • Rodrik D (2015) Premature deindustrialisation. NBER working paper no. 20935

    Google Scholar 

  • Salvanes KG, Førre SE (2003) Effects on employment of trade and technical change: evidence from Norway. Econ 70(278):293–329

    Article  Google Scholar 

  • Sasidharan S (2015) Impact of foreign trade on employment and wages in Indian manufacturing. South Asia Econ J 16(2):209–232

    Article  Google Scholar 

  • Sen K (2008) International trade and manufacturing employment outcomes in India: a comparative study (No 2008.87). Research paper/UNU-WIDER

    Google Scholar 

  • Sen K (2009) International trade and manufacturing employment: is India following the footsteps of Asia or Africa? Rev Dev Econ 13(4):765–777

    Article  Google Scholar 

  • Trefler D (2004) The long and short of the Canada-US free trade agreement. Am Econ Rev 94(4):870–895

    Article  Google Scholar 

  • UNCTAD (2013) How are the poor affected by international trade in India: an empirical approach

    Google Scholar 

  • Veeramani C (2016) Inter-linkages between exports and employment in India, EXIM Bank of India Ocassional Paper, vol 179. https://www.eximbankindia.in/Assets/Dynamic/PDF/PublicationResources/ResearchPapers/Hindi/65file.pdf

  • Virmani A, Hashim DA (2011) J-curve of productivity and growth: Indian manufacturing post-liberalization. IMF working paper WP/11/163

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Research and Information System for Developing Countries (RIS), New Delhi, India

    S. K. Mohanty & Sabyasachi Saha

Authors
  1. S. K. Mohanty
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Sabyasachi Saha
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to S. K. Mohanty .

Editor information

Editors and Affiliations

  1. Research and Information System for Developing Countries (RIS), New Delhi, India

    Sachin Chaturvedi

  2. Research and Information System for Developing Countries (RIS), New Delhi, India

    Sabyasachi Saha

Annexure

Annexure

See Table 3.

Table 3 Sector-wise distribution of FDI inflows (USD Millions)
Full size table

Rights and permissions

Reprints and permissions

Copyright information

© 2019 Springer Nature Singapore Pte Ltd.

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Mohanty, S.K., Saha, S. (2019). Manufacturing Trade and Employment Linkages in India. In: Chaturvedi, S., Saha, S. (eds) Manufacturing and Jobs in South Asia. South Asia Economic and Policy Studies. Springer, Singapore. https://doi.org/10.1007/978-981-10-8381-5_4

Download citation

Publish with us

Policies and ethics

Search

Navigation