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What Constrains Indian Manufacturing?

  • Poonam Gupta

    (Indian Council for Research on International Economic Relations)

  • Rana Hasan
  • Utsav Kumar

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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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
Date of revision:
Handle: RePEc:eab:macroe:22162
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  1. Mitra, Devashish & Ural, Beyza P., 2007. "Indian manufacturing : a slow sector in a rapidly growing economy," Policy Research Working Paper Series 4233, The World Bank.
  2. Rana Hasan & Devashish Mitra & K.V. Ramaswamy, 2003. "Trade Reforms, Labor Regulations and Labor-Demand Elasticities: Empirical Evidence from India," NBER Working Papers 9879, National Bureau of Economic Research, Inc.
  3. DellAriccia, Giovanni & Detragiache, Enrica & Rajan, Raghuram G, 2005. "The Real Effect of Banking Crises," CEPR Discussion Papers 5088, C.E.P.R. Discussion Papers.
  4. Aghion, Philippe & Burgess, Robin & Redding, Stephen J. & Zilibotti, Fabrizio, 2006. "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India," CEPR Discussion Papers 5492, C.E.P.R. Discussion Papers.
  5. Poonam Gupta & James P. F. Gordon, 2004. "Understanding India’s Services Revolution," IMF Working Papers 04/171, International Monetary Fund.
  6. Abhijit V. Banerjee & Shawn Cole & Esther Duflo, 2004. "Banking Reform in India," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 1(1), pages 277-332.
  7. Aditya Bhattacharjea, 2006. "Labour Market Regulation and Industrial Performance in India--A Critical Review of the Empirical Evidence," Working papers 141, Centre for Development Economics, Delhi School of Economics.
  8. Arvind Subramanian & Raghuram Rajan & Ioannis Tokatlidis & Kalpana Kochhar & Utsav Kumar, 2006. "India's Pattern of Development: What Happened, What Follows?," IMF Working Papers 06/22, International Monetary Fund.
  9. Prachi Mishra & Utsav Kumar, 2005. "Trade Liberalization and Wage Inequality: Evidence From India," IMF Working Papers 05/20, International Monetary Fund.
  10. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  11. Étienne Gilbert, 1987. "J. J. Ahluvalia, Industrial Growth in India : Stagnation since the Mid-Sixties," Revue Tiers Monde, Programme National Persée, vol. 28(112), pages 968-968.
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