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The Low Wage Trap of Indian Manufacturing

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  • Mazumdar, Surajit

Abstract

The period since the turn of the century appears at first sight to have been one of great ‘dynamism’ in the Indian manufacturing sector in the sense of the sector exhibiting or experiencing significant movement, but without that really adding up to a process of full-fledged industrialization. Though output and employment in manufacturing haves grown but unevenly and investment too has fluctuated, the sector has been unable to raise its share in Indian output and employment. The unorganized segment has actually experienced a sharp relative shrinkage. India’s trade in manufactured products – both exports and imports - has also grown significantly during this period accompanied by significant changes in the composition of trade and its geographical distribution. A shift towards more capital-intensive exports and a declining labour-intensity of Indian manufacturing have been some of the paradoxical features of Indian manufacturing. Real wage stagnation and increasing informalization and contractualization of labour have accompanied these changes. This paper argues that this stagnation in wages in fact underlies both the ‘successes’ as well as the failures of India’s manufacturing performance in the last two decades. India’s low wage road to industrial development has also been fraught with contradictions that may be now coming to a head as a result of which it is caught in a trap.

Suggested Citation

  • Mazumdar, Surajit, 2015. "The Low Wage Trap of Indian Manufacturing," MPRA Paper 93163, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:93163
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    References listed on IDEAS

    as
    1. Mazumdar, Surajit, 2008. "Investment and growth in India under liberalization: Asymmetries and Instabilities," MPRA Paper 19629, University Library of Munich, Germany.
    2. Sudip Chaudhuri, 2015. "Premature Deindustrialization in India and Re thinking the Role of Government [La désindustrialisation précoce en Inde : pour un nouveau rôle du gouvernement]," Working Papers halshs-01143795, HAL.
    3. Roy, Satyaki, 2007. "Structural change in employment in India since 1980s: How Lewisian is it?," MPRA Paper 18009, University Library of Munich, Germany, revised 2008.
    4. Surajit Mazumdar, 2014. "Globalisation and Growth: The Indian Case in Perspective," India Studies in Business and Economics, in: Ratan Khasnabis & Indrani Chakraborty (ed.), Market, Regulations and Finance, edition 127, chapter 12, pages 213-230, Springer.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Industrialization; Labour; Wages;
    All these keywords.

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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