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What Constrains Indian Manufacturing?

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  • Poonam Gupta

    (Indian Council for Research on International Economic Relations)

  • Rana Hasan
  • Utsav Kumar

Abstract

India has undertaken extensive reforms in its manufacturing sector in the last two decades. However, an acceleration of growth in manufacturing, and a concomitant increase in employment, has eluded India. What might be holding the sector back? Using Annual Survey of Industries data at the three-digit level and difference in estimates this paper finds that the post-reform performance of the manufacturing sector is heterogeneous across industries. In particular, industries dependent on infrastructure or external finance, and labour-intensive industries have not been able to reap the maximum benefits of reforms. The results point to the importance of infrastructure development and financial sector development for the manufacturing sectors growth to accelerate further. They also emphasize the need to clearly identify and address the factors inhibiting the growth of labour-intensive industries.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 22162.

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Date of creation: Jan 2008
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Handle: RePEc:eab:macroe:22162

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Keywords: De-licensing; external finance dependence; infrastructure intensity; labour intensity; manufacturing; Reforms;

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References

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  1. Devashish Mitra & Beyza Ural, 2008. "Indian manufacturing: A slow sector in a rapidly growing economy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, Taylor & Francis Journals, vol. 17(4), pages 525-559.
  2. Philippe Aghion & Robin Burgess & Stephen Redding & Fabrizio Zilibotti, 2005. "The unequal effects of liberalization: evidence from dismantling the license Raj in India," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 3690, London School of Economics and Political Science, LSE Library.
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  4. Rana Hasan & Devashish Mitra & K.V. Ramaswamy, 2003. "Trade Reforms, Labor Regulations and Labor-Demand Elasticities: Empirical Evidence from India," NBER Working Papers, National Bureau of Economic Research, Inc 9879, National Bureau of Economic Research, Inc.
  5. Besley, Timothy J. & Burgess, Robin, 2002. "Can Labour Regulation Hinder Economic Performance? Evidence from India," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3260, C.E.P.R. Discussion Papers.
  6. Utsav Kumar & Prachi Mishra, 2008. "Trade Liberalization and Wage Inequality: Evidence from India," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 12(2), pages 291-311, 05.
  7. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers, National Bureau of Economic Research, Inc 8841, National Bureau of Economic Research, Inc.
  8. Poonam Gupta & James P. F. Gordon, 2004. "Understanding India’s Services Revolution," IMF Working Papers, International Monetary Fund 04/171, International Monetary Fund.
  9. Kalpana Kochhar & Utsav Kumar & Raghuram Rajan & Arvind Subramanian, 2006. "India's Patterns of Development: What Happened, What Follows," NBER Working Papers, National Bureau of Economic Research, Inc 12023, National Bureau of Economic Research, Inc.
  10. Étienne Gilbert, 1987. "J. J. Ahluvalia, Industrial Growth in India : Stagnation since the Mid-Sixties," Revue Tiers Monde, Programme National Persée, Programme National Persée, vol. 28(112), pages 968-968.
  11. Giovanni Dell'Ariccia & Raghuram Rajan & Enrica Detragiache, 2005. "The Real Effect of Banking Crises," IMF Working Papers, International Monetary Fund 05/63, International Monetary Fund.
  12. Abhijit V. Banerjee & Shawn Cole & Esther Duflo, 2004. "Banking Reform in India," India Policy Forum, Global Economy and Development Program, The Brookings Institution, Global Economy and Development Program, The Brookings Institution, vol. 1(1), pages 277-332.
  13. Arvind Subramanian & Raghuram Rajan & Ioannis Tokatlidis & Kalpana Kochhar & Utsav Kumar, 2006. "India's Pattern of Development," IMF Working Papers, International Monetary Fund 06/22, International Monetary Fund.
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Citations

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Cited by:
  1. Saraswat, Deepak, 2008. "Towards a sustainable Growth story: A critical analysis of the fundamentals," MPRA Paper, University Library of Munich, Germany 12306, University Library of Munich, Germany.
  2. Weiss, John, 2011. "Industrial Policy in the Twenty-First Century," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  3. Ejaz Ghani & Arti Grover Goswami & William R. Kerr, 2012. "Highway to Success: The Impact of the Golden Quadrilateral Project for the Location and Performance of Indian Manufacturing," NBER Working Papers, National Bureau of Economic Research, Inc 18524, National Bureau of Economic Research, Inc.
  4. Snowden, Nicholas & Muñoz, Jesús, 2012. "Building a BRIC? Stock Market Opening and Investment Finance in India since Liberalization," World Development, Elsevier, Elsevier, vol. 40(6), pages 1109-1121.
  5. Rahul Sen & Sadhana Srivastava, 2011. "Integrating into Asia’s international production networks: Challenges and prospects for India," STUDIES IN TRADE AND INVESTMENT, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), in: India: A New Player in Asian Production Networks?, Studies in Trade and Investment 75, chapter 4, pages 78-119 United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  6. Sahoo, Anshuman & Shrimali, Gireesh, 2013. "The effectiveness of domestic content criteria in India's Solar Mission," Energy Policy, Elsevier, Elsevier, vol. 62(C), pages 1470-1480.
  7. Petia Topalova, 2008. "India," IMF Working Papers, International Monetary Fund 08/54, International Monetary Fund.
  8. Ghosh, Saibal, 2009. "Industry Effects of Monetary Policy: Evidence from India," MPRA Paper, University Library of Munich, Germany 17307, University Library of Munich, Germany.
  9. Ashkok Kotwal & Bharat Ramaswami & Wilima Wadhwa, 2011. "Economic liberalization and Indian economic growth: What's the evidence?," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers, Indian Statistical Institute, New Delhi, India 11-13, Indian Statistical Institute, New Delhi, India.
  10. Alessandrini, Michele & Fattouh, Bassam & Ferrarini, Benno & Scaramozzino, Pasquale, 2011. "Tariff liberalization and trade specialization: Lessons from India," Journal of Comparative Economics, Elsevier, Elsevier, vol. 39(4), pages 499-513.
  11. Ghani, Ejaz & Goswami, Arti Grover & Kerr, William R., 2013. "The golden quadrilateral highway project and urban/rural manufacturing in India," Policy Research Working Paper Series, The World Bank 6620, The World Bank.
  12. Yilmaz Akyüz, 2012. "The Staggering Rise of the South?," Working Papers, Turkish Economic Association 2012/3, Turkish Economic Association.
  13. Ghani, Ejaz & Goswami, Arti Grover & Kerr, William R., 2013. "Highway to success in India : the impact of the golden quadrilateral project for the location and performance of manufacturing," Policy Research Working Paper Series, The World Bank 6320, The World Bank.
  14. Rahul Sen & Sadhana Srivastava, 2012. "Asia' s international production networks: Will India be the next assembly centre?," Working Papers, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada. 11812, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
  15. Bishwanath Goldar, 2010. "Informalization of Industrial Labour in India: Are labour market rigidities and growing import competition to blame?," Working Papers, eSocialSciences id:3125, eSocialSciences.
  16. Gupta, Poonam & Hasan, Rana & Kumar, Utsav, 2009. "Big Reforms but Small Payoffs: Explaining the Weak Record of Growth and Employment in Indian Manufacturing," MPRA Paper, University Library of Munich, Germany 13496, University Library of Munich, Germany.
  17. Gupta, Poonam & Kumar, Utsav, 2010. "Performance of Indian Manufacturing in the Post Reform Period," MPRA Paper, University Library of Munich, Germany 24898, University Library of Munich, Germany.

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