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Manufacturing sector in the Indian economy: Output-value added symbiosis

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  • Datta, Madhusudan

Abstract

We contradict the widespread impression that the service sector of the Indian economy is a super performer while manufacturing is a laggard. Service-I, the part of services that is closely associated with manufacturing, has grown quite fast since the turn of the 1970s; and this has been the more dynamic part of the overall service sector. Output (not value added) and expenditure estimates show manufacturing’s growth almost paralleled that of service-I (in real terms) but manufacturing’s relative GDP share remained stagnant. This apparent stagnancy of manufacturing conceals the story of labour saving technical progress under heightened competition causing slippage of value added away from the sector. While this dynamic explains the stagnation of manufacturing’s GDP share, the fact that it is low in India by international comparison has a lot to do with government policies too, that encouraged skill formation but effectively discouraged low-skill labour intensive manufacturing.

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  • Datta, Madhusudan, 2019. "Manufacturing sector in the Indian economy: Output-value added symbiosis," Journal of Asian Economics, Elsevier, vol. 63(C), pages 75-87.
    • Handle: RePEc:eee:asieco:v:63:y:2019:i:c:p:75-87
    DOI: 10.1016/j.asieco.2019.04.004
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