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Explaining the ‘jobless’ growth in Indian manufacturing

In Indian manufacturing, which accounts for only 12.2% of the country's workforce, a few technologically advanced sectors coexist with a vast informal sector. The growth of Indian manufacturing is characterized by ‘joblessness’, and during the post-1991 years, by large yearly and industry-wise variations. While a few capital- and skill-intensive industries recorded fast rates of growth of value added, employment generation occurred largely in the unorganized sector, mainly in export-oriented industries such as garments and textiles. The frequently cited argument that the major barrier to manufacturing-employment growth in India is the ‘rigidity’ in the country's labour regulations rests on very thin empirical evidence. With the rising share of contract workers even within the organized segments of manufacturing since the 1990s, the very argument that India's labour market is rigid is questionable. Power shortages, insufficient availability of credit and the volatility in exchange rates and raw material prices are some of the important factors that constrained the growth of Indian manufacturing, especially the small-scale sector.