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Dualism and Structural Transformation: The Informal Manufacturing Sector in India

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  • Surbhi Kesar

    (South Asian University)

  • Snehashish Bhattacharya

    (South Asian University)

Abstract

We identify a basic dualism within the informal manufacturing sector (IMS) in India between a ‘traditional’/non-capitalist segment, comprising family-based household enterprises that constitute the vast majority of the IMS, and a segment of ‘modern’/capitalist enterprises employing wage labour. We focus on the high-growth decade of 2000–2001 to 2010–2011 to analyse whether there has been a marked tendency of this ‘traditional’ segment to transform into a ‘modern’ segment. We construct a variable, the net accumulation fund, which indicates the ability of an enterprise to accumulate and grow, and explore its evolution, over time and across industries, for enterprises with different production structures and firm-level characteristics. We show that while, on one hand, the average ‘traditional’ enterprise has been able to economically reproduce itself rather than withering away, the dualism between the ‘traditional’/non-capitalist and the ‘modern’/capitalist segments has been reproduced and further reinforced during this period of high economic growth, raising questions about the process of economic transformation as envisaged in much of development literature.

Suggested Citation

  • Surbhi Kesar & Snehashish Bhattacharya, 2020. "Dualism and Structural Transformation: The Informal Manufacturing Sector in India," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 32(3), pages 560-586, July.
    • Handle: RePEc:pal:eurjdr:v:32:y:2020:i:3:d:10.1057_s41287-019-00228-0
    DOI: 10.1057/s41287-019-00228-0
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    Cited by:

    1. Surbhi Kesar & Snehashish Bhattacharya & Lopamudra Banerjee, 2022. "Contradictions and Crisis in the World of Work: Informality, Precarity and the Pandemic," Development and Change, International Institute of Social Studies, vol. 53(6), pages 1254-1282, November.
    2. Bassier, Ihsaan, 2023. "Firms and inequality when unemployment is high," Journal of Development Economics, Elsevier, vol. 161(C).
    3. Golam Rabbani & S N Rajesh Raj, 2024. "The role of financial constraints in firm transition—Evidence from Indian manufacturing," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(4), pages 2193-2228, May.
    4. Ihsaan Bassier, 2022. "Firms and inequality when unemployment is high," CEP Discussion Papers dp1872, Centre for Economic Performance, LSE.
    5. Bassier, Ihsaan, 2022. "Firms and inequality when unemployment is high," LSE Research Online Documents on Economics 121970, London School of Economics and Political Science, LSE Library.
    6. Surbhi Kesar, 2022. "Nature and Pattern of Subcontracting Linkages in the Informal Economy in India: Implications for Possibilities of Economic Transformation," Working Papers 254, Department of Economics, SOAS University of London, UK, revised Dec 2022.
    7. Surbhi Kesar & Snehashish Bhattacharya & Lopamudra Banerjee, 2020. "Contradictions and crisis in the world of work in the present conjuncture: Informality, precarity and the pandemic," Working Papers 253, Department of Economics, SOAS University of London, UK, revised Oct 2022.
    8. Bassier, Ihsaan, 2022. "Firms and inequality when unemployment is high," LSE Research Online Documents on Economics 117999, London School of Economics and Political Science, LSE Library.
    9. Manikantha Nataraj & Soham Bhattacharya, 2023. "Bitter Convergence: Contemporary Crisis of Labour in Rural West Bengal," BASE University Working Papers 17/2023, BASE University, Bengaluru, India.
    10. Surbhi Kesar, 2024. "Subcontracting Linkages in India's Informal Economy," Development and Change, International Institute of Social Studies, vol. 55(1), pages 38-75, January.
    11. Nataraj, Manikantha & Bhattacharya, Soham, 2020. "Bitter Convergence: Contemporary Crisis of Labour in Rural West Bengal," MPRA Paper 103363, University Library of Munich, Germany.

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    More about this item

    Keywords

    Informal sector; Dualism; Structural transformation; Manufacturing; India;
    All these keywords.

    JEL classification:

    • 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
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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