These sectors deserve consistent support over time to compete internationally since India is lagging behind
Manufacturing contributed in 2017 only about 16% to India’s GDP, stagnating since economic reforms began in 1991. By contrast, in east and south-east Asia, the industry share has exceeded 30-40% while manufacturing is 20-30%. India’s manufacturing share of GDP has not moved up at all, though between 2004-05 and 2011-12 manufacturing employment growth was reasonable (grew by 6 million, using NSS). However, total manufacturing employment has fallen significantly between 2011-12 and 2015-16 by 10 million in just four years (Annual Survey Labour Bureau data, with a sample size same as NSS), especially in labour-intensive manufactures.
This is the opposite of what was achieved in Japan, Korea, Taiwan and China. All these countries restructured agriculture after the Second World War, focused their modernisation efforts on manufacturing, and made their financial systems slaves to these two objectives. The result was rapid absorption of surplus agri-labour in labour-intensive manufacturing first, which then enabled them to move up the manufacturing value chain to more capital-intensive manufacturing, making them the factory of the world.
By contrast, in India the labour intensive manufacturing sectors like food processing, tobacco, textiles, apparel, leather, wood and furniture have seen a decline since 2012. The tobacco and textiles sub-sectors within manufacturing have seen a fall in their share of total manufacturing employment in India (though total jobs grew slightly). The fall in the textiles’ share requires policy attention, while the fall in tobacco is consistent with government policy to reduce tobacco consumption.
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