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Sectoral Divergence in Indian Manufacturing: Organised Sector Growth and Unorganised Decline

Author

Listed:
  • Mehrotra, Santosh

    (Higher School of Economics)

  • Chauhan, Dr Renu

    (Centre for INformal Sector & Labour Studies, Jawaharlal Nehru University, New Delhi, India)

Abstract

Manufacturing-led growth remains central to India’s structural transformation, given its potential to generate large-scale employment for unskilled and semi-skilled workers transitioning out of agriculture, as well as its strong interlinkages with services employment. However, the share of manufacturing in both employment and gross value added has remained stagnant. Against this backdrop, this paper analyses the performance of India’s organised (or formal) and unorganised (or informal) manufacturing during last decade using unit-level data from the National Sample Survey's Annual Survey of Industries, Periodic Labour Force Surveys, and Annual Survey of Unorganized Sector Enterprises. The findings reveal a slowdown in employment and gross value added within the unorganised manufacturing sector between 2015–16 and 2022-23, while the organised manufacturing sector recorded gains. Overall, the manufacturing sector is increasingly becoming organised with share of unorganised sector in total employment and value added reducing over the years which can pose an opportunity or a challenge, depending on the absorption of workers in the organised sector.

Suggested Citation

  • Mehrotra, Santosh & Chauhan, Dr Renu, 2026. "Sectoral Divergence in Indian Manufacturing: Organised Sector Growth and Unorganised Decline," IZA Discussion Papers 18688, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18688
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    Keywords

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    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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