Understanding the Performance of India’s Manufacturing Sector: Evidence from Firm Level Data

Radhicka Kapoor, Senior Fellow, International Council for Research on International Economic Relations (ICRIER)

Abstract

India’s overall economic performance over the last fifteen years has been outstanding, with
the economy growing at an average of over 7% p.a. Growth has been service-led with the
services sector accounting for over 60% of GDP growth over the period. Importantly, India’s
structural transformation has been marked by a shift straight from agriculture to services led
growth, leapfrogging manufacturing. The problem with this pattern of growth has been that it
has generated relatively fewer opportunities of employment generation. The role of the
manufacturing sector, ordinarily considered to be an important engine of growth and job
creation for low and middle income countries, has been rather limited. Its share in total GDP
and employment has continued to hover around 15% and 12% respectively for the last three
decades.

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Radhicka Kapoor, Understanding the Performance of India’s Manufacturing Sector: Evidence from Firm Level Data,CSE Working Paper #2, Azim Premji University,March 2018