India’s development has not been uniform and has leapfrogged from agriculture to services, skipping over a manufacturing phase. However, the agriculture and services sectors typically do not create enough productive jobs for those at the bottom of the education and skills ladder. Thus, there is a need for labor-intensive manufacturing to absorb those with low levels of education and skills, but only around 11–12 percent of the total employment is in manufacturing, and this share has been essentially flat for two decades. There is also too much labor employed in the low-productivity unorganized sector, and there are too few jobs in the high-productivity formal sector. As recently as 2015–16, the unorganized sector continued to employ over 70 percent of total manufacturing employment. Inclusive growth would require us to find ways to enable formal manufacturing to prosper.

In this episode of Interpreting India, Radhicka Kapoor joins Sayoudh Roy to discuss the state of labor-intensive manufacturing in India.

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Episode Contributors

Radhicka Kapoor is a visiting professor at the Indian Council for Research on International Economic Relations, in addition to having previously worked at the Planning Commission and at the International Labour Organization, Geneva. Her research interests include poverty and inequality, labor economics and industrial performance, and she has published extensively on labor-intensive manufacturing in India. Most recently, she has edited A New Reform Paradigm, a collection of essays written in honor of Isher Judge Ahluwalia.

Sayoudh Roy is a senior research analyst with the Political Economy Program at Carnegie India.  His work focuses on the macroeconomic implications of frictions in labor and financial markets and how interactions between them can affect macroeconomic aggregates.

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Additional Reading

A New Reform Paradigm: Festschrift in Honour of Isher Judge Ahluwalia, edited by Radhicka Kapoor

Creating jobs in India’s organised manufacturing sector by Radhicka Kapoor

Explaining the contractualisation of India’s workforce by Radhicka Kapoor and P. P. Krishnapriya

Stylized Facts on the Evolution of the Enterprise Size: Distribution in India's Manufacturing Sector by Radhicka Kapoor

Employment in India by Ajit Kumar Ghose

India Employment Report by Ajit Kumar Ghose

Structural Change and Employment in India by Nomaan Majid

Small-Scale Industry Policy in India: A Critical Evaluation by Rakesh Mohan

Industrialisation for Employment and Growth in India: Lessons from Small Firm Clusters and Beyond, edited by Rayaprolu Nagaraj

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