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UNIVERSITY OF MUMBAI DEPARTMENT OF ECONOMICS

INDUSTRIAL GROWTH AND STRUCTURE: AN ANALYSIS OF THE MANUFACTURING SECTOR IN MAHARASHTRA

BY L. G. BURANGE

WORKING PAPER 98 /1 FEBRUARY 1998

DEPARTMENT OF ECONOMICS UNIVERSITY OF
Vidyasiagari, Mumbai 400 098

MUMBAI

Documentation Sheet
Title: Industrial Growth and Structure - An Analysis of the Manufacturing Sector in Maharashtra Author(s): Dr. L. Q. Burange Unit : General Economics Unit

WP.

No.:

98/1

Date of Issue: February 1998 Contents: 45P,15T,10R

No. of Copies: 100 Sponsor's Project No.: -

External Participation: Sponsor:

Approval: Editorial Committee, Working Paper Series.

JELCode(s): L60
Keywords: Fixed Capital, Value-added, Employment Elasticity, Factor Intensity Structural Ratios, Competitiveness. , Abstract: Maharashtra occupies a very significant position as far as the manufacturing sector in India is concerned. Howe ever since the seventies the share of the secondary sector in the state domestic product has been stagnating around 33 to 34 percent Further the state is experiencing significant changes in the industrial composition wherein capital and intermediate goods industries are becoming dominant The manufacturing sector is itself undergoing major structure changes over the period 1979-80 to 1993-94, the state realised high growth rate iv fixed capital as a result employment has been declining in the manufacturing sector the rising capital intensity and thereby substitution of capital for labour,low growth rates of output and value-added, all do not ensure satisfactory performance of the state on the industrial front

INDUSTRIAL GROWTH AND STRUCTURE AN ANALYSIS OF MANUFACTURING SECTOR IN NAHARASHTRA

L.G.Burange * 1. Introduction: The industrial scenario of India has changed since the mid-8Os with the first round of liberalization. The new economic policy introduced in 1991 is expected to provide a boost to the industrial sector. After 1991 many state governments have come out with policies for promoting industries, especially through foreign direct investments. Without discerning the trends over the years at industry level, any growth strategy, propelled by private investment,may be unduly optimistic. Thus industrial growth and structure at the state level has to be analyzed at disaggregate level in order to evaluate industrial policies and potential for growth. Here efforts are made to analyze industrial structure and growth of the manufacturing sector in Maharashtra with as much disaggregation as possible. This study is divided into ten sections. In section two data have been discussed. Section three describes the industrial situation in the state. Section four analyzes industrial composition while section five deals with manufacturing sector. Employment and output elasticities as well as factor intensity are discussed in sections six and seven

The author wishes to thank Professor M.J.M'< Rao for helpful discussions and incisive comments on an earlier draft. He also wishes to thank Dr. Neeraj Hatekar, Dr. Ritu Dewan, Ms. Mala Lalvani and Dr. A. Balachandran for suggestions and advice. However, the author remains solely responsible for any remaining errors

respectively. The changes in structural ratios are analyzed in section eight. Section nine takes the cursory note of the responsible factors. The last section presents the conclusions. 2. Data: The main data source is the Annual Survey of IndustriesSummary Results for Factory Sector (ASI). There are few

limitations of the data which must be noted. Firstly, the period begins with 1979-80, because in that year ASI started publishing state level data for two-digit industries; 1993-94 is the latest year for which industry wise data is available through ASI summary results. Secondly, since the analysis depends on ASI data, the limitations of the data due to collection and compilation procedures of ASI will automatically affect our analysis. To recount a few important limitations: (a) The analysis relies mainly on the data presented through ASI (Census and non-census) returns received in the Directorate of Economics and Statistics, Maharashtra. Data collected by the NSSO usually undergo revision as a result of scrutiny references issued to the field staff by Central Statistical Organization (CSO),

Government of India. To this extent the corrections were not applied on this set of data, (b) As data in respect of less than three units in an industry cannot be shown separately, the details in respect of such units have been combined with other industries. (c) In respect of non-responding factories, no

estimates have been made and incorporated in this report. Further it is not possible to capture the growth of modern hi-tech industries like computer and information 2

43 per cent of productive capital. Total emoluments to employees are deflated to base year 1981-82. The values at constant prices are computed using the all-India WPI series.10 per cent employment. manufacture of machinery. To deflate value of output of different industries in manufacturing sector. 17. the industry-wise wholesale price index has been used. as this is not available for the state. For deflation of current values price index with the base as 1981-82 is used. manufacture of electrical machinery and manufacture of transport equipments and parts are used. using consumer price index for industrial workers. 32. 3. while for value-added the wholesale price index (general) is used. machine tools and parts. The performance of 'other industries' in this analysis may be taken as a proxy for the above observation.36 per cent value of output and 26. 3 . Industrial Situation: Maharashtra is the leading industrialized state in our country.91 per cent of registered factories. and Monthly Bulletins of Index Number of Wholesale Prices in India. For deflation of fixed capital the composite price index for building material. 19. The other required data are obtained from the various Economic Surveys of Maharashtra.68 per cent of value-added.technology industry as the ASI data ' clubs these industries together With other industries (category 38). Unless one gets disaggregated data one may not be able to analyze growth of this sector which has shown phenomenal growth from the mid-80s in the state. This can be seen from the fact in 1969-70 the state contributed 17.

or Employees 19.73 21.68 The sectoral composition of 'state domestic product 1 also shows some what unsatisfactory performance in the industrial sector.63 14.43 Capital 3.30 92-93 13.25 16.Value of Output I. except for net value-added and the number of factories..54 25. the situation has further deteriorated (Table 1).in 1993-94.18 22.11 21. Table 1: Maharashtra's share in Indian Industry.Productive 17.75 93-94 15. while over the period of time Maharashtra remains on top of industrial map of India.13 per cent. the worrisome factor is that state's share in Indian industry is declining which indicates that the state is loosing its grip on industrial front. in terms of productive capital it was 17.36 15.26 24. Maharashtra is an agriculturally deficit state.36 26.18 per cent.However.57 16. After three years of 1990-91fi.of Registered 17.05 24.60 79-80 IS.No.88 90-91 14..70 23.Net Value-added 32.64 18.10 4.66 24.e. In 1990-91 the state contribution in terms of registered factories declined to 14.70 24. in terms of value of output it cane down to only 22.15 17.30 per cent.82 19. ( Per cent ) Item 1969-70 75-76 17.48 17.43 l.86 17.91 Factories 2.No.87 85-86 14. This indicates that the rest of India is doing better than Maharashtra.15 per cent.45 23.70 per cent and in terms of value-added it declined to 23. also 4 .39 17.06 22.06 16. This scenario seeks to examine the industrial performance of the state for the recent period.18 22.13 15. in terms of employment it declined to 15.

If the annual compound growth rates of these shares are computed from 1960-61 to 1993-94. In 1993-94 the shares of primary and secondary sectors further declined to 21. 33.e. The percentage share of primary.6. the tertiary sector also increasing by 0. In 1970-71 these shares were 28. This means that only the share of tertiary sector is increasing.40 per cent per annum.8 per cent of secondary sector and 43.1 and 36. if annual compound growth rates of shares of these sectors are computed for the period of this study i.2.8 per cent respectively. secondary arid tertiary sectors in 1960-61 were 41.72 per cent per annum whereas the share of the secondary sector increases by 0. The percentage share of this sector in state domestic. In 1990-91 these shares were 22.2 and 37. product continuously went on increasing up to 1972-73.In 1980-81 the share of primary.1.9 per cent and 32.beyond a point the state does not have enough scope for the growth in the agricultural sector. The share of the 5 . showing marginal increase in secondary and tertiary sectors and a large decline in the share of the primary sector. this is not the case of the secondary sector.9 per cent of primary sector.7 respectively.from 1979-80 to 1993-94.4 per cent.6.7 per cent respectively and that of the tertiary sector increased to 45.7 and 31. it shows a decline in the share of the primary sector by 0. secondary and tertiary sectors were 28. the share of the primary sector goes on declining by 0. 26. 34.3 per cent of tertiary sector.. However.95 per cent per annum. However. 35.13 per cent per annum. but since then it has remained more or less stagnant.

67 Note: ACGR = Annual Compound Growth Rate.7 31.72 ( .1 22.2 22.2 28.95 (-) 0.7 39.) 0. Only the share of the tertiary sector shows increase by 0.4 32.2 36.12 0.9 20.2 32.1 41. (Per cent) Sector Secondary Year Primary Tertiary 1960-61 1965-66 1970-71 1975-76 1979-80 1980-81 1981-82 1982-83 19H3-84 1984-05 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 ACGR(%) 960-61to] 993-94 L979-80tol993~94 41. income equality.8 38.1 33. a growing tertiary sector and declining real sectors is not good for the state in the context of employment.9 26.1 43.8 28.7 28.7 37. and regional balance in development.12 per cent per annum.7 31.8 33.6 31.3 40.0 21.5 32.5 (-) 0.4 24.67 per cent per annum.5 35.9 21.4 39.3 46.3 36.18 0.5 41.8 41.8 36. .40 0. This shows the relative performance of the sectors in the state (Table 2).7 40.7 28.6 33.7 35.3 37.4 45.1 33.5 33.5 32.7 33.6 32.7 24.0 34. Table 2: Sectoral Composition of State Domestic Product. However.8 42.6 27.8 23.4 25.1 25.7 33.5 34.secondary sector also declines by 0.5 35.5 33.1 27.

This structure has changed completely over the period of time. This has further declined to 21 per cent for consumer goods and 79 per cent for capital and intermediate goods in 1989-90. the composition of industries in Maharashtra in 1960 was about 52 per cent consumer goods industry while 48 per cent was accounted for by capital and intermediate goods industries. This shows that the industries in Maharashtra experienced major compositional changes. Govt. In 1993-94 the consumer goods industry accounted for merely 18 per cent . Per cent ) Year Goods 1960 1980-81 1989-90 1991-92 1992-93 1993-94 Consumer Goods Capital and Intermediate 52 35 21 20 16 18 48 65 79 80 84 82 Source: Economic Survey of Maharashtra . Table 3: Composition of Industries According to Value-added. of Maharashtra (Various Issues). and capital and intermediate goods industries together 82 per cent (Table 3). In terms of value-added in 1980-81 the consumer goods industry accounted for 35 per cent whereas capital and intermediate goods industries accounted for 65 per cent. .4. Industrial Composition: In the 1960s industrial activity in Maharashtra was concentrated in production of consumer goods. According to valueadded. (.

12 23.09 66.00 100.91 33.rel.42 -Ind. 31. Employment.00 100.00 100.58 -Ind.88 76. Table 4: Relative Shares of Agriculture-related Industries and Non-agriculture related Industries in Fixed Capital.To strengthen the above argument. ( Per cent) Industry Fixed Capital Type Employment Value-added Value of Output 1979-8G 1993-94 1979-80 1993-94 1979-80 1993-94 1979-80 1993-94 Agr. Mfg(2-3)100. 8 . This means that the major changes in the production structure of the manufacturing sector took place during the period from 1979-80 to 1993-94 in the state. Correspondingly the share of nonagriculture related industries went up in 1993-94 (Table 4).67 50. value-added and value of output declined substantially in 1993-94.00 100.37 41. industries in the manufacturing 3ector are grouped into agriculture-related industries and non-agriculture-related industries .00 100.51 21. for value of output and for value-added. their relative shares are then computed for 1979-80 and 1993-94. The share of agriculture-related industries in fixed capital.60 75.40 24. 68.49 78.00 To study the concentration of industries in the state. employment. The HH index has been constructed for fixed capital. Non-Agr.33 49.00 100.88 30. Value-added and Value of Output. the Hirschman Herfindahl index (HHI) is used for the manufacturing sector for the period 1979-80 to 1993-94.for number of employees.12 69.63 58.00 100.

share of ith industry in the manufacturing Using this index one can study with this data set the industrial concentration in manufacturing sector. it went on increasing.26) value of HHI will be obtained when the fixed capital is equally distributed in all two-digit industries. HH1 can be used for two-digit industrial disaggregation in the manufacturing sector. The trend remains more or less the same from 1982-83 onwards. increasing especially after the 1990s. That is fixed capital is Ies3 concentrated in few industries in the state.where Pi «= Percentage sector.26 it means fixed capital in concentrated in some industries. That is minimum (5. In terms of value-added the degree of concentration is higher than that of employment and it is increasing over the 15-year period. after 198990. However. The maximum value of HH index is 100 when the entire fixed capital is concentrated in on< industry only in the manufacturing sector. As long as in this case HHI > 5. According to the number of employees the degree of concentration is less in the state. 9 . The HHI constructed for fixed capital at constant prices shows decline which implies that the concentration is decreasing in Maharashtra. Employment is less concentrated in the industries than is fixed capital. Similarly in terms pf value of output (real output) the degree of concentration in the manufacturing sector in the state is higher than that of employment. implying that fixed capital is getting concentrated in a few industries in the state (Table 5).

for 68. of Employees Value-added and Value of Output Year Fixed Capital 13.73 10.38 8.07 per cent of fixed capital of manufacturing sector in Maharashtra.11 Value of Output 1 11. petroleum and coal products.65 10.72 10.08 13.69 8.67 13.06 11. In case of net value-added in 1993-94 only four industries account for 62.79 10.34 10.28 8.79 10. manufacture of electrical and non-electrical machinery and manufacture of transport equipments account for 69.08 11.31 12.ofEmployees 10.39 11.17 8. plastic.88 14.Table 5: HH Index with respect to Fixed Capital.37 9.19 11.28 12.79 10. manufacture of chemical and chemical products.40 per cent of net value-added in the manufacturing sector in 10 .08 11.34 per cent of the total output of manufacturing sector in the state in 1993-94.14 10.22 10.49 10.05 8. manufacture of rubber.01 7.74 10.45 9. For Value of output manufacture of food products.90 10.63 9.16 9. basic metal and alloys industries and the manufacture of electrical and non-electrical machinery account .46 8.76 10.59 1C.77 9.75 8.93 8.03 11.68 9. rubber plastic.64 10.79 14.81 Value-Added 12.93 8.98 10. manufacture of chemical and chemical products.69 11.49 1979-80 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 In case of fixed capital manufacture of food products. petroleum and coal products.61 10.58 10.44 10.62 No.86 12.03 8.09 10. No.85 9.52 12.08 10.81 11.45 9.

manufacture of electrical and non-electrical machinery.24 per cent of fixed capital. coal products rubber. Manufacturing Sector: To understand the pattern of growth in the manufacturing sector of Maharashtra.39 per cent in value of output. and manufacture of transport equipments together accounted for 59.88 per cent per annum over the period. 11 . However.47 per cent in value-added and 33. These are the major structural changes that have occurred in the manufacturing sector in Maharashtra.In case of employment 50.26 per cent of value-added and 53. plastic. The share of the same four industries in 1993-94 decreased to 28. and chemical chemical products. cotton textiles.32 per cent per annum. 52. Fixed capital of the manufacturing sector has grown by 3. in 1979-80 the manufacture of food products. non-agriculture related industries increasing by 4. petroleum and coal products.67 per cent of employment.79 per cent of value of output of manufacturing sector in the state. These industries are manufacture of rubber. and agriculture-related industries increasing by only 2. petroleum and and electrical and non-electrical machinery. annual compound growth rates have been estimated for the period 1979-80 to 1993-94. 53.46 per cent employees of manufacturing sector in the state are in manufacture of food products.67 per cent (Table 6). chemical and chemical products. 5. manufacture of plastic.the states. cotton textiles.

64 1.88 2.27 ValueAdded 3.58 (-)0.35 (-) 0.38 2.67 0.66 (-) 1.82 -5.32 1 05 3.86 (-) 0.83 1. petroleum and local products (30) shows the highest growth of 9.72 0.39 4.57 (-) 4.59 1.70 0.09 2.00 3.of Employees Total Emoluments Value of Output 2. Manufacture of rubber. 1981-82^100 ) (Per cent) Industry Fixed Code Capital 20-21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 2.85 4.31 per cent per annum growth in the fixed ]2 . Ind.24 3.13 (-) 0.57 4.(2-3) Agri.70 2. ( ia Constant Prices .68 1.56 (-) 0.45 2.95 0.29 4.22 3.30 (-) 0.67 4.00 1.46 9.23 (-)3.37 4.18 1.32 No.12 4.76 6.53 (-) 0.82 2.58 1.75 (-)0.59 0.01 (-) 1.90 0.60 (-) 0.46 5.21 2. Manufacture of non-metallic mineral products(32) realized 7.39 2. plastic.93 1.08 (-) 0.54 1.77 __ 4.87 4.31 0.31 5.17 4.52 4.81 0.32 1.93 2.05 3. Annual compound growth rates for two-digit industries in manufacturing sector are also estimated.21 -.68 3.Table 6: Annual Compound Growth Rate For 1979-00 to 1993-94.61 (-) 3.46 4.89 2.87 6.54 Mfg.64 1.36 7.28 2.21 (-) 0.82 1. 1.39 8.27 (-) 1.71 1.87 2.rel.83 -0..73 2.82 (-) 0.-Ind.06 2.66 2.44 1. Non-agri.98 3.06 1.63 6.09 5.62 0.90 per cent per annum in the fixed capital in the manufacturing sector. rel.27 1.53 1.68 2.22 7.17 (-) 0.76 1.24 0.63 2.83 (-)l.64 1.39 2.00 2.20 2.

tobacco and tobacco products(22).tobacco and tobacco products(22) 4.08 per cent growth rate per annum. The manufacture of beverages.00 per cent per annum. This may be because this sector includes fast growing modern hi-technology industries like computer and information technology.38 and 1. The output of the manufacturing sector increased by 2.22 per cent per annum. basic metal and alloys industries(33) 5. The manufacture of textile products(26) shows the growth rate in output of 4.27 per cent compared to the agriculture related industries which recorded 2.66 per cent per annum.46 per cent. Manufacture of cotton textile(23) and manufacture of wood and wood products(27) also show some what lower growth rates of 1. paper 13 .09 per cent per annum.(38) show the highest growth rate in output 6. Manufacture of leather and leather products(29) shown growth rate of 6.93 per cent per annum.83 per cent per annum. The manufacture of chemical and chemical products(31) shows the lowest growth rate in fixed capital of 0. Among the two-digit industries. The output of manufacture of rubber. manufacture of beverages. The manufacture of leather and leather products(29) shows the growth rate in output of 4. other manufacturing industries. petroleum and coal products (30) increased by 5.capital.53 per cent and manufacture of textile products(26> 4.12 per cent.05 per cent per annum respectively. The non-agriculture related industries show higher growth rate in output at 3. The manufacture of wood and wood products(27) is the only industry which experienced decrease in output at the rate of 1. plastic.32 per cent per annum.46 per cent per annum.

64 per cent in value-added in the state. silk and synthetic fibre(24).82 per cent in net value-added compared to that of 1. and metal products and parts(34) recorded the growth rate in net value-added less than 2.54 per cent per annum in the net value-added during the period in the state. plastic. However.The manufacture of cotton textiles(23) recorded the highest decrease of 3. . The manufacture of wool. chemical and chemical products(31) and manufacture of metal products and parts (34) are" the industries in which growth rate was less than 2 per cent per annum.and paper products(28).00 per cent in net value-added. paper and paper products(28). the manufacture of rubber.58 per cent growth rates in value-added respectively. The manufacture of food products (2021). The manufacturing sector experienced growth rate 6f 2.00 per cent per annum in the state during the period of 15 years. chemical and chemical products(31) and of basic metal and alloys industries recorded negative growth rates for the period under study.70 per cent of agriculture related industries.83 per cent per annum. electrical machinery(36) and other manufacturing industries(38) recorded growth rates higher than 3. the manufacture of cotton textiles(23) . 14 . petroleum and coal products(30) recorded the highest growth rate of 8. wood and wood products(27). The manufacture of leather and leather products(29) and textile products(26) recorded 6.39 and 5. In case of net valueadded within two-digit industries. Non-agriculture related industries show higher growth rate of 2.

such as food products(20-21).basic metal and alloys industries( 33) .. wood paper and paper products(28).cotton and wood wool.petroland coal products(30) Employment also realized 3 .85 of leather and leather products(29) shows increase in employment per cent tobacco *(32). 0 0 in repair of capital goods(39) However the industry is percent per annum growth. textiles(23).70percent per annum how in non agriculture related industries employment increased by 0. electrical machinery(36) other manufacturing industries(38) However.plastic .20 percent per anum among the two digit industries manufacture of rubber .The performance of the state in terms of employment in the manufacturing sector is very unsatisfactorty the employment in the manufacturing sector over the period declined by 0.81 per anum over all the state realized fall in employment in manufacturing sector during 15 . for last five new and its data is only year(1989-90 to1993-94) The manufacture by 1. The manufacture of beverages.chemical and chemical products (31).machine tool and parts(35) equipments(37)recorded decrease unemployment during the period.21 per cent per annum this is mainly because employment in agriclture related industries Declined by 0. non metallic mineral product tobacco product a (22). synthetic f i b r e ( 2 4 ) . The manufacture of chemical and chemical products(31) realised the highest fall in employment of 3.metal product and and transport parts(34). per annum and over the period. products (27). silk recorded marginal industries and growth in employment during the period.

1 Employment: Elasticity: As seen in the laist section. Leather and leather products(29> also realized rise in emoluments at the rate of 4. products(27) chemical chemical products(31) •realized fall in emoluments. petroleum and coal products(30) realized the highest rise in emoluments of 7.57 per cent per annum during the period. The manufacture of rubber. The increase in emoluments is higher i.44 per cent per annum. wood industries such and as cotton and textiles(23). Overall. electrical machinery(36) and repair of capital goods(39) recorded the rise in emoluments more than two per cent per annum. The manufacture of food products*20-21). To 1 .59 per cent.36 per cent per annum. plastic.24 per cent per annum. the fixed capital is increasing while employment is declining in the state during this period. he state realized increase in fixed capital and fall in employment.. 6. They are as follow. 6 . wood and However. Elasticity: The employment and output elasticities are estimated for the manufacturing sector. 6. while in agriculture related industries the increase is merely 0. 1. Chemical and chemical products(31) recorded the highest decline of 4.54 per cent per annum in non-agriculture related industries. at the same time recording a rise in output and value-added over the period of 1979-80 to 1993-94. the sector total has at constant prices for the manufacturing increased by 1.1979-80 to 1993-94. Although emoluments employment in the state is falling.e.

beverages. (1) the employment elasticity With respect to output and fixed capital has been estimated. basic metal and alloys industries and manufacture of transport equipments(37). have Using been the estimated equation(1) In L = a0 + al In Y .study these opposite trends. wool. This implies that an increase in output decreases employment. leather and leather products(29).01 (Table 7).09.0. silk and synthetic fibre(24). etc.. negative employment elasticity with respect to output is revealed for the manufacture of food products(20-21). However. The elasticity for agriculture related industries is negative (. The employment elasticity with respect to output for the entire manufacturing sector is 0.25). The non-agriculture related industries show the employment elasticity of 0. thus explaining the phenomenon of rising capital and falling employment in the state.a2 In K . chemical and chemical products(31). This implies that fixed capital is substituted for labour. tobacco and tobacco products(22 ). paper and paper products(28 ). Fixed capital is used more as a 17 . non-metallic mineral products(32). The manufacture of textiles(23).. textile products(26). rubber.. petroleum and coal products(30).0^.. wood and wood products(27).. employment elasticities for industries in manufacturing sector. plastic. Employment elasticity with respect to fixed capital for the manufacturing sector in the state is negative at 0. show positive employment elasticity with respect to output.

7a 0.01 1.02 0.12 33 (-) 0..18 35 0.Table 7: Employment and Output Elasticities.002 (-) 0.46 0.18 (-) 0.04 (-) 0.18 (-> 0..54 0. Employment Elasticity With Output Elasticity With Industry Respect to Respect to Code Output Fixed Capital Fixed Capital Labour 20-21 (-) 0. (1) .09 rel.42 0.14 0.46 0.49 0. Non-agri.42 0.35 25 26 0.85 0.12 0.58 0. In (Y/L) = aO .26 0.21 27 0.28 (-) 0.91 0.17 (-) 0.14 (-) 0.25 0.al In (K/L) .08 0. (-) 0.25 rel. (2) 18 .01 (-) 0.02 0..47 0..74 32 0.26 Agri. In L = aO + al In Y .20 24 (-) 0.06 <-).21 0.38 28 (-) 0.48 0.09 0.79 0.-Ind.45 0.76 0.52 0.22 34 0. 0.(2-3) 0.02 36 0.10 29 1.28 30 (-) 0.71 0.27 1.30 0.83 0.66 0.05 0.05 (-) 0.a2 In K a 2 > 0 = K i s complementary. a2 < 0 = K is substitute.73 (-) 0.24 0.74 0. 0.56 38 0.03 0. .11 39 0...60 <-) 0.11 37 (-) C.15 0..27 31 (-) 1.58 0.01 (-) 0.72 0.06 22 (-) 0.-Ind.01 23 0.01 0.51 0.35 0.75 Mfg.66 0.25 0..28 0.53 0..01 (-) 0.83 1.66 1.17 0.29 0.

etc..2 Output Elasticity: Efforts are also made to measure the output elasticity with respect to fixed capital and labour using equation (2V. However. (2) for the 19 . chemical and chemica 1 products(31). The manufacture of food products(20-21). Thus. This means that in all these industries fixed capital is used as substitute for labour. leather and leather products(29).substitute for labour employment in agriculture related industries which explains the greater fall in employment in this indubtrial group. fixed capital is used as a substitute for labour employment. tobacco and tobacco products(22).. show positive employment elasticity with respect to fixed capital. rubber. plastic. This might have resulted in the displacement of labour in the state leading to fall in employment during the period.. petroleum and coal products (30). wool. Overall at the state level. silk and synthetic fibre(24). 6. In (Y/L) . paper and paper products(28). in the manufacturing sector as a whole. non-metallic mineral products(32). cotton textiles(23). Non-agriculture related industries also use fixed capita] as a substitute for labour. machine tools and parts(35) and repair of capital goods(39) all show negative employment elasticities with respect to fixed capital. in these industries the use of fixed capital is complementary to employment of labour in the state..aO'+ al In (K/L) Output elasticity with respect to fixed capital .. industries like manufacture of beverages.. textile products(26) .

cotton textiles(23).50. It means that the output responds to labour inversely in these industries.79 for agriculture-related industries and 0. 0.50. Output elasticity with respect to labour is negative for manufacture of chemical and chemical products(31).17 to 0.74 non-agriculture related industries.76 (Table 6).85.For the rest of industries in the manufacturing sector the output elasticity with respect to labour varies between 0.09 and 0.21 which is lower than that of 0. Agriculture-related industries show output elasticity with respect to labour of 0.26 for non-agriculture related industries. electrical machinery(36). textile products(26). and other manufacturing industries(?8). transport equipments(37) and other manufacturing industriesi38). 7. silk and synthetic fibre<24).manufacturing sector as a whole is 0. the output elasticity with respect to fixed capital is more than 0. machine tools and parts(35). chemical and chemical products(31).1 Fixed Capital Per Employee: To gain the insights into the trends in the factor . wool. transport equipments(37).24. 7.In case of two-digit industries the manufacture of food products<20-21). This implies that output responds more to fixed capital than to labour. which is lower than that of fixed capital. Factor Intensity: Factor intensity may be studied using fixed capital per employee and value-added per employee. For the remaining industries it is in between 0. Output elasticity with respect to labour for the manufacturing sector is 0.

37. 32. 35. 30. 23. 28. 35. 24. However.) 20-21. 21 . 23. 38. 31. capital-intensive and those with capital per employee below as labour-intensive. 28.60 thousands in 1993-94. 39. ii) Labour-intensive Industries: 1979-60: Industries (Nos. 27. 36.) 22. 33. 34. The average capital per employee for all the manufacturing sector was Rs. 24. average capital-labour is used as the criterion for this purpose. industries can be separated into capital-intensive and labour-intensive industries according to whether capital per employee (K/L) is above or below the average for all the industries. using the average capital labour ratio as the cut-off point for classifying industries into capital-intensive and labour-intensive ones may. 31. Further.22.proportions in the manufacturing sector. 26. and Rs. 32. 22. 36. The industries with capital employee above these respective averages may be regarded per as them these under.) 20-21. 29.88.) 1993-94. 34.81 thousands in 1979-80. The industries coming under each in 1979-80 and 1993-94 are listed of here categories i) Capital-intensive Industries: 1979-80: Industries (Nos. 27. 29. 26. 30. Moreover in the absence of a specific capital-labour ratio for all the industries. 38. 25. be arbitrary. 25. both at 1981-82 prices. Industries (Nos. it must be pointed cut that the concepts of capital-intensive and labour-intensive industries are used only in a restive sense and not in absolute terms. however. 33. 1993-94: Industries (Nos. 37.

silk and synthetic fibre(24). electrical machinery(36) and transport equipments(37) which were in the capital-intensive category in 1979-80 shifted to the labourintensive category in 1993-94. In contrast. The dwindling share of capital-intensive industries in the manufacturing sector is clearly indicated in Table 8. viz. The share of the labour-intensive industries changed correspondingly. share in fixed capital decreased to 63 per cent while their share in value of output declined to 55 per cent. By 1993-94 their 3hare in employment decreased to 35 per cent. which were in the labour-intensive category in 1979-80 shifted to the capital-intensive category in 1993-94. a few significant exceptions. There were. three industries. But their share in value-added increased to 61 per cent. manufacture of wool. in 1993-94 there were two agriculture-related industries in this category. labour-intensive industries provided employment to as much as 65 per cent of the 22 . Capital I intensive-industries accounted £<>£ as much as 68 per cent of the total fixed capital in 1979-80 and contributed 56 percent to value-added and 66 per cent to output by employing 43 per cent of total number of employees in the manufacturing sector. Thus.It may be observed from the list that the structure of industries by factor intensity in 1993-94 remained largely the same as in 1979-80. The manufacture of food products(20-21). Another important observation is' that there was only one industry from agriculture related industries in capital-intensive category in 1979-80. however. paper and paper products(28) and metal products and parts(34)..

the capital-intensive industries usurped a large chunk of fixed capital.1 can be used as a proxy for human capital and the non-wage component.08 36. ( Per cent) Industry Fixed Capital Employment Value-added Value of Output type 1979-80 1993-94 1979-80 1993-94 1979-80 1993-94 1979-80 1993-94 Kintlnd Lintlnd 67. This method involves using the value-added per employee comprising wage and non-wage components as a composite index for the amount of human and physical capital embodied in the production of a good.00 35.90 57.91 34. Value-added and Value of Output. out absorbed just 35 per cent of the total employees of the manufacturing sector in the 3tate in 1993-94.00 65.2 Value-added Per Employee: The factor intensity in the manufacturing sector can be estimated by using Lary's index.45 100.10 100. a proxy for Physical capital.63 per cent.00 7.63 39.02 63. i. 23 . Thus.37 100.98 32.00 42.96 100. The wage and non-wage components of the value-added per employee may be taken to reflect the flows of the services of labour (human capital) and capital (physical capital) into the manufacturing process.00 Mfg(2-3)100.82 100.09 100.92 100.00 56. it may be observed that.55 45.18 64. Employment.e. 3y the same token..04 43.00 60.00 54. Table 8: Relative Shares of Capital-intensive and Labour-intensive Industries in Fixed Capital. the wage component of the value-added per employe'.total manufacturing sector's employment by employing only 37 per cent of its capital assets in 1993-94.

this assumption is not restrictive. value-added per employee can be used as a reasonably good guide to the factor intensity of different industries.Lary'a method is based on two assumptions. itbypasses the difficulty of measuring the stock of physical capital . according co Lary. inter-industry differences in the non-wage value-added per employee are assumed to reflect differences in respect of physical capital invested* Accordingly. there are two advantages of non-wage value-added per employee as a criterion of capital intensity. One is that. First.differences t h e i r requirements of s k i l l e d labour. the interindustry differences in wages are assumed to reflect. This phenomenon was examined by Mitra (1974) in the light of the Indian data for the period 1960-65 and his results supported it. being a flow rather than a stock figure. Thus. U. the non-wage value-added per employee can be used as the indicator of the physical capital as against the stock figures. it fits better with the notion of factor inputs into production and therefore it is more relevant to the theory of production functions. Though affected by various market imperfections. Since wage rates are positively related to the skill levels. data reveal a positive and significant correlation between the wage valueadded per employee and the ratio of skilled labour to the total employment. As La ry has demonstrated. Secondly.S . Second. Industries can be classified into labour-intensive or capitalintensive ones according to whether the value-added per employee in lower than or higher than the average value-added for all 24 the .

There were. 25. Capital intensive industries accounted for as much as 67. The average value-added per employee for all the industries was Rs. 31. 26. 30. 22.16 thousands in 1993-94 both at 1981-82 prices. It may be observed that the structure of industries by factor intensity in 1993-94 remained largely the same as in 1979-80. 36. 37.industries therefore it can be postulated that the higher the value added per employee the more capital intensive the industry lower the value-added per employee.06 per cent of output by 25 employing 44.63. 38. however. The industries corning under each of these categories in 1979-80 and 1993-94 are listed here under. the more labour intensive the industry. 34. 29.48 per cent of the total fixed capital in 1979-80 and contributed 66.98 . 28. 38. 34. 37. 1993-94: Industries (Nos. ii) Labour-intensive Industries: 1979-80: Industries (Nos. 33.): 24. 36. The industries with value-added per employee below these respective averages are regarded as labour-intensive and those with value-added per employee above them as capital-intensive. 33. 27. 24.31 per cent of value-added and 64. i) Capital-intensive Industries: 1979-80: Industries (Nos. 22. 1993-94: Industries (Nos. 27. 23.): 20-21. 25. 39.): 20-21. 26. 35. 28. 29. 23. 32.25. 32.60 thousands in 1979-89 and Rs. 31. The dwindling share of labour-intensive industries in the manufacturing sector is clearly indicated in Table 9.): 30. a few significant exceptions.

94 50.50 per cent. This has been done by formulating some specific questions to which these ratios would provide the answers.48 32.56 100.46 19.OO 100.06 100. it is worthwhile to examine some key ratios.50 25.In short.00 64.1fg(2-3)lOO. They are as follow.00 44.00 49.00 8. ( Per cent) Industry Fixed Capital Employment Value-added Value of Output Type -------------------------------------------------------------------------------------------------------------------------------------1979-80 1993-94 1979-80 1993-94 1979-80 1993-94 1979-80 1993-94 Kintlnd Lintlnd 67.the capital -intensive industries are becoming more dominant Table 9: in the state. Value-added and Value of Output.94 per cent and in fixed capital increased to 71. The share of labourintensive industries declined correspondingly. Structural Ratios: In order to analyze industrial production in Maharashtra.00 80.94 74.76 100.52 73. while their share in value of out put increased to 74.00 66. Instead of just analyzing the ratios we thought it is more appropriate to analyze the changes in these ratios which will reflect the structural changes in the industry in the state.50 .24 26.98 55.31 33.69 100.00 35.per cent of the total number of employees in the manufacturing sector in the state.24 per cent.46 per cent in 1993-94. Employment. Relative Shares of Capital-intensive and Labour-intensive Industries in Fixed Capital. (i) What is the 26 . By 1993-94 their share in employment increased to 49.00 100. The share of these industries in value-added jumped to 80.02 100.

e. (v) What is the increase in fixed capital per unit of output ? i..... in productivity of an employee is The non-agriculture ?. The annual compound growth rate has been computed for these ratios for the period from 1979-80 to 1993-94. growth of (EMO/NE). (iv) What is the change in the share of wages in value-added ? i.e.e. growth of (FC/VO).09 per cent per annum in the manufacturing sector. The non-agriculture related industries show higher increase than the agriculturerelated industries. (vi) What is the increase in average output of an employee ? i.e..growth of (VO/NE). (vii) What is the increase in labour cost per unit of output ? i. related industries 27 .e.increase in the coat of creating one job ? i.75 for the sector. However. growth of (EMO/VA).01 per cent per annum for the period. growth of (FC/NE).e.growth of (EMO/VO). The cost of creating one job increased by 4. The cost of creating one job means the fixed capital per employee.growth of (VA/VO).e. and (viii) What is the change in valueadded generated by one unit of output ? i..e. This is the indicator of capital intensity of the industry. (iii) What is the increase in the average wage of an employee ? i. growth of (VA/NE) and (VA/FC). manufacture of non-metallic mineral products(32) shows the highest increase of 7. (ii) What is the level of growth in the productivity of an employee and in per unit of fixed capital ? i. The repair of capital goods(39) shows the most decrease Increase manufacturing in this cost (Table 10)... Tne answers to all these questions vary according to the industry in the manufacturing sector of the state.

34 0.62 1.49 (.31 ( -) 0. 72 Note: Fc Fixed Capital .(2-3) 4 .50 <~)1.45 (-)0.10 2.45 (-)1. 1981-82 = 100) (Per cent) flustry FC/NE VA/NE VA/FC EMO/NE EMO/VA FC/VO VO/NE EMO/VO Structura] VA/VO Ratio 1.78 3.11 2 . . 7 5 (-U.Value-added .29 1.70 2.05 (-)1.demonstrate higher ricuiture-related labour productivity than that of the industries.06 (-)0. 28 of Employees Employees . el.30 1.14 0. 3. fall in highest in the manufacture of textilo products(26). on-agr.28 < -) 1 . id.97 (-)1.) 0 . Table 10: Annual Compound Rate of Growth For 1979-80 to 1993-94.Ind.60 1. VO = Value of Output.ll 3. i manufacture of cotton textiles(23) demonstrates labour productivity in the state during the period. NE = Number EMO = Total Emoluments to VA . . 0 9 krel. The rise in labour productivity However.40 (-)1.94 (-)l. Constant Prices.38 4.34 2.

all experienced some growth in the average wage of the employees. except manufacture of chemical and chemical products(31) and repair of capital goods(39). This implies that the 29 . The non-agriculturerelated industries experienced higher rise in average wage than the agriculture-related industries in the state. The industries in the manufacturing sector except manufacture of food products(20-21). However. Though the average wage of an employee in the manufacturing sector showed increase but the share of emoluments to employees in value-added (EMO/VA* is declined for the manufacturing sector during the period in the state. The industries in the manufacturing sector. demonstrate fall in capital productivity. The fall in capital productivity may be because of rising capital intensity in the manufacturing sector of the state. the increase in labour productivity is much more than the rise in average wage of the employee. The average wage of an employee (EMO/NE) in the manufacturing sector increased by 1-45 per cent per annum during the period. That is. This fall is more pronounced in the case of manufacture of cotton textiles(23) and basic metal and alloys industries(33).30 per cent per annum.34 per cent per annum during the period. the wage share in valueadded declined by 1.In case of capital productivity (VA/FC). textile products(26) and repair of capital goods(39>. The fall in capital productivity is more pronounced in non-agriculture related industries. the state experienced a fall of 1. The manufacture of chemical and chemical products(31) and repair of capital goods(39) experienced decline in the average wage.

tobacco and tobacco products(22). The increase in capital-output ratio (FC/VO) is 0.94 per rent per annum.05 and 3. The rise in fixed capital-output ratio is highest at 4.14 per cent per annum in the manufacturing sector in the state. This rise is much faster for * non-agriculture related industries than the agriculture related industries. 30 . t This fall is substantial in other manufacturing industries(38). some of the industries experienced fall in capital output ratio during the period. The share of emoluments in value-added declined faster in nonagriculture related industries than in the agriculture-related industries. This increase is higher in non-agriculture related industries in output than in agriculture related industries. However. metal products and parts(34) and beverages. The manufacture of cotton textilesi23) experienced rise in the share of emoluments in value-added by 3. The increase in capital-output ratio is substantial in the manufacture of non-metallic mineral products(32). The increase in average output of an employee (VO/NE) is 3.08 per cent per annum for manufacture of rubber. The decline is more pronounced in manufacture of textile products(26) and chemical and chemical products(31). The increase per employee is more than 5. plastic.00 per cent in manufacture of rubber.non-wage share has increased in the manufacturing sector. This means that every unit of output is produced with more and more fixed capital. at 4.02 per cent per annum during the period. petroleum and coal products(30>. This share declined in ail the industries except manufacture of cotters textiles (23). and basic metal and alloys industries ( 33).38 per cent per annum respectively.

o r unit of output is falling faster in non-agriculture related industries than this agriculture-related industries. The emoluments per unit of output is falling by 1. The rising output per employee resulted in the fall in labour cost per unit of output (EMO/VO). plastic.70 per cent per annum during the period. petroleum and coal products(30) 31 . leather and leather products ( 29 ) and rubber. petroleum and coal products (30). manufacture of food products (20-21). The manufacture of textile products(26).70 per cent per annum. This f a l l is more pronounced in manufacture of chemical and chemical products(31) and other manufacturing industries(38). This general rise may be because of falling employment and rising labour productivity in the manufacturing sector in the state. falling faster in nonagriculture related industries than in the agriculture-related industries. The Volume-added 1 . transport equipments(37) non-metallic mineral products ( 32 ). whereas except manufacture of rubber. Labour cost per unit of output declined in the state by 1. The value-added generated by every unit of output (VA/VO) in manufacturing sector in the state is declining.plastic. s i l k and synthetic fibre(?4). petroleum and coal products(30) and in other manufacturing industries(38). wood and wood product s ( 27 ). The valueadded per u n i t of output is increasing in agriculture related industries except manufacture of cotton tcxtiles(23) arid manufacture of wool. and electrical machinery (36) also experienced substantial increase in output per employee during the period in the state. plastic. Emoluments per unit of output is declining in a l l industries except.

Responsible Factor: Maharashtra was at one time the dominant state in respect of industrial development. Mo r e o v e r t h e w a ge s ha r e i n va l u e. productivity fal ling e mploymen t.it is decling in all the industries of non-agriculture related may industries group. All these structural ratios explain the increasing intensit y. Rising wages with falling employment explains the increasing skill composition of the employees which results in i ncrease in labour productivity. Though the main purpose of this study is not of discerning the reasons for this state of affairs. to make the stud y comple te one. 9.a d de d is d ec l i ni n g w i t h f a ll i n g employment and only wage share is increasing with increasing capital intensity.1 The Industrial Disputes : sta te exper ienced m ajor set back fr om the strike in Mumbai. the refore capital labou r rising . This strike adversely textile mill both workers affected 32 . The increasing capital intensity and higher skills explain the rising output per employee in the state. and falling labour cost in the manufacturing sector in Maharashtra. in emoluments per unit of output. The f a l l in value-added per unit of output he associated with the fall. it is ne cessary to menti on a few major factor 9. The above analysis clearly shows that the state is experiencing a slow-down in industrial growth and that the structural changes are in favor of increasing capital intensity in production.

This intensity in union 'he from the rising capital manufacturing also sector in the state.2 In the sixties and seventies Maharashtra had a better position in relation to infrastructure. The militancy in trade the industrial peace in explains the major disturbed of industrial centres the state. Infrastructure: Government of 3. Table 11: Industrial Disputes in the state. However. Maharashtra. Table 11 the number of workers lockouts. 33 . in eighties 1. Increasing trade in the state made industries has been reflected unionization substitute c a p i t a l for labour.o state lost its position. Year Number of strikes and lockouts 274 781 690 337 636 300 193 217 194 156 Number of workers involved 83400 514400 450700 151900 200700 83100 60100 59400 83600 89200 Number of mandays lost 5750000 3541900 2052500 421000 9505000 5297800 4008900 4649300 3956300 3686400 1961 19G6 1971 1976 1981 1986 1990 1991 1993 1994 Source : Economic Survey of Maharashtra 1994-95.industrial workers and industries.1. LOOKS involved and number of mandays lost due to strikes and In terms of ! ^ages and productivity Maharashtra's labour costlier than the labour in other states. Infrastructure-wise other states are doing much better than Maharashtra. Infrastructural development did not occur sufficiently in the places other than Mumbai.

7 110.1 104.4 128.80 All India 103.9 116.3 126.2 106.9 133.9 1. Table 12: Index of Growth in Infrastructure .6 105.17 Tamil Nadu 100.19 1980-81 1981-82 1982-83* 1983-84 1884-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 ACGR(%) * estimated Source : CMIE. (1980-81 = 100) Year Maharashtra 100.9 140.1 106.6 139.3 106.2 129. and for dispersal of industries to backward regions the state stopped giving licenses to new industrial units in this region. Overview of states.0 1.1 134.82 Gujarat 102.0 124.2 103.0 106.2 113.10 West Bengal 101.9 108. 9.0 127.0 0.5 134.2 120.1 144.5 129.1980-81 to 1993-94.0 122.8 129.Thane.5 132.8 109.5 0.5 123.2 137.6 1.9 118.2 119.nasik belt The growth of infrastructure in the state is 0 .9 117.1 105. For industrial dispersal the state provided some 34 .1 136.9 128.3 State's Industrial Location Policy: In Maharashtra the industrial concentration was and is in the Mumbai Thane Pune belt.6 106.4 145. In order to have a balanced industrial development.0 112. Similarly.9 107. 8 2 per cent per annum during 1980-81 to 1993-94.7 120.6 115.9 104.8 105.8 129.9 106.8 120. capacity expansion was al3o curbed.4 124.3 119.1 126.0 110.pune.0 115.0 109.3 136.5 116.9 142. In t h i s respect Gujarat and Tamil Nadu did much better than Maharashtra (Table 1 2 ) .9 111.9 120.0 113.4 112.7 126.4 110.9 105.2 116. March 1997.4 115.

better infrastructural facilities. 9. less bureaucratic administration etc. These states are giving more and more fiscal incentives. These states started giving more and more fiscal incentives. industries preferred to go to the neighboring states which were providing some more incentives and better infrastructural facilities. States like Gujarat. Tamil Nadu. However* considering the availability of infrastructure in the backward regions of the state. 9. are competing with Maharashtra. Karnataka and Tamil Nadu also. Karnataka. On this front Maharashtra is the main loser in case of manufacture of chemical and chemical products. better infrastructure facilities and are also trying to provide more and more i ndust rial peace. Andhra Pradesh etc.. have less bureaucratic administration.. West Bengal.4 Competition Among States: During the 1980s many states realized their industrial backwardness and others understood their mistakes in earlier state industrial policies. A large number of small scale units shifted to Gujarat. The state lost many industries due to this reason.5 State Competitveneas: Competitiveness of a state can be broadly considered as the overall health of the economy in terms of various observable economic and social indicators which adequately demonstrate 35 the .incentives for Betting up industries in backward regions. while Maharashtra went on following exactly the opposite policy.

That is Punjab. ninth. (1) Transport infrastructure (Road. case of (1) performance relatively poor in . Political stability. to conclusion during other states Haryana. and (11) Taxes levied by state government. (2) Telephone availabilty. Among these eleven variables seventh. contributing remaining to the overall competitiveness other seven variables a»-e while positively of the contributing. tenth and eleventh of are the negatively state. it is necessary to analyze the relative competitiveness of Maharashtra on various performance indicators.level of development attained by the states. In a market economy. (4) Distribution of Life expectancy. Hid Water Electricity banks. (8) Size of the market (7) poverty (9) (Consmption (10) Savings). Labour climate ( Mandays lost ). line. National Productivity Index Council for (1994) major constructed states of State India.. The competitiveness ranking of select 15 states India arrival at by National Productivity Council leads that Maharashtra lagged behind of many (Table 13). includes Rail Competitiveness Competitiveness (SCI) of the state is composite index which eleven variables. Gujarat. 1991-92 Kerala. Therefore. the relative competitiveness of the states becomes the guiding [actor for the private corporate sector while evolving their future investment strategies. attracting maharashtra's These states are in better than position in private corporate is 36 sector Maharashtra. (6) Literacy rate. below (5) ways). Karnataka and Tamil Nadu are competitively better states than Maharashtra. viz. (3) Installed commercial Population + generation capacity.

6. 8. 7. contributed a lot industrial development in the state. very same administration became more and more bureaucratic.6 State Administration: State administration in earlier was one of of the major factors A in Maharashtra development industries.61 46.77 46. 15. and Wat^r ways ).Transport infrastructure ( Road. (4) Distribution of commercial banks.18 25.8 0 34.80 36. (2) Telephone availability. 12. 5. 10. (9) Labour climate (Mandays lest) and (11) Taxes levied by state government. 14.71 63.25 60. 2. Sr.10 48.27 22. Indian States Punjab Kerala Haryana Gujarat Karnataka Tamil Nadu Maharashtra Andhra Pradesh Orissa Assam Rajasthan Madhya Pradesh West Bengal Uttar Pradesh Bihar State Competitiveness 82.69 46.63 56. 9. No. (7) Population below poverty line. loss of creating delays in state clearance at various stages. Index 1. 13. 3. 4.36 Source: National Productivity Council Research Divison (1994).19 49. Table 13:Corapetitiveness Ranking of Indian States.without system and friendly towards to the the bureaucratization.41 39. Over a period of time. 11. attitude well Developed administrative industry. 37 . Rail. 9.80 67.

value-added and value of output increased in the manufacturing sector. Conclusions: Maharashtra is the major contributor to the industrial sector in India. During the nineties the concentration of fixed capital. A more systematic and detailed analysis would be required to examine the effects of these factors. The composition of industries in the state is undergoing major changes. The share of secondary sector in state domestic product is stagnating at around 33 to 34 per cent. Foregoing analysis is only an initial attempt: in identifying factors affecting industrial growth in the state. the share of the state in the country's industrial sector has declined. The deteriorating law and order situation and rising extraordionary activities to Mumbai. political indecisiveness. The state realized higher growth in fixed capital at the cost of employment. backwardness of rural Maharashtra. 10. The share of consumer goods in valueadded declined to less than 20 per cent while share of capital and intermediate goods industries increased to more than 80 per cent over the period of 34 years. Non- . increased difficulties for industry compared to other states. and rising systemic inefficiencies are some more causes directly or indirectly affecting industrial development. however. This triads many industries go away from Maharashtra. Over 1969-70 to 1993-94. while the share of tertiary sector increasing.friendly attitude towards industry.

As a result the labour cost per unit of output is falling in the state. cotton textiles(2J) and chemical and chemical products(31) are declining industries. and this increase is more pronounced in non-agriculture related industries. The increase in real wages is.agriculture related industries experienced better growth than the agriclture-related industries. In Maharashtra the cost of creating job in manufacturing sector has increased. rate. Rising capitaJ intensity and falling employment. be due to insufficient infrastructure. thereby generating more value-added. plastic. As a result capital intensity in the manufacturing sector is increasing at. a faster. The rising capital and f a l l i n g employment leads to increase in labour productivity and C a l l in capital productivity. products<26} leather and ■ and leather machinery products(29). low growth rate of value output and value-added all reflect the unsatisfactory performance of the state in the industrial activity. The manufacture of jute. The complementary role of capital declined in many industries and more industries have begun substituting capital for labour. This state may of affairs disputes. petroleum and coal products(30) . while rubber. and of Substitution of capital for labour. hemp and mesta(25). are the textile expanding electrical industries in the manufacturing sector of the state. lower than the productivity of labour. The capital-intensive industries are employing less labour and more capital. Employment is falling but average real wages are inc reasing indicating the rise in skill composition of labour. of course. industrial 39 .

And increasing situation political bureaucratization of state adminstration the declining law and order and rising extortionary activition in Mumbai.Maharashtra has comparative advantage only in industrial in activity.State policies aggressive competition from other states. nurtured and shaped by appropriate policy initiatives by the government. Indecisiveness are also some of the factors responsible for this state of affaire. However. 40 .In the state it order has can to to accelerate be industrial by development competitive supplemented advantage which be engendered.

(Various Issue. PP. (1996). Vcl. (1974) . March. Government of India. Economic and Political Weekly. 'The Paternity of an Index'. New Delhi. Directorate of Economics and Statistics. and Vijay Seth. Gupta and N. Profiles Desai. Reserve Bank of India Occasional Papers. (1985). 16 (I).V. Ltd. Economic Division.761-762. of States. Oxford and IBH Publishing Co. (CMIE).'Spatial Variation in the rate of Industrial Growth in India'. Planning Department. August 27. Central Statistical Organization. K. Summary Results for Factory Sector. Vol.'Inter-state Industrial Disparities in India -The Changing Scene'. M. (1991). Dholakia. Ravindra H.'Technological Change and Employment in India'. O. Department of Statistics. New Delhi. 6 (1). PP. Vol. 41 . Gowda. V.1237-40. PP.Srinivasa.).References Centre for Monitoring Indian Economy. (1997). (Various Issues).. Ministry Of Industry. Annual Survey of Industries 1993-94. Namboodiri. (1991). Indus Publishing Company. Goldar B. H. (1997)..2303-2309. (Issues from 1979-00 to 1993-94). New Delhi. Pvt. Economic Review. Mumbai.. Vol. Ministry of Finance. B. ' Employment in the Manufacturing Industry: An Analysis of Growth Rate and Trend: 1960-/0 '. (1994). Index Numbers of Wholesale Prices in India: Base 1981-82. 54-60. (1968). (1989). M. A. Artha Vijnana.'Spatial Dimension of Acceleration of Economic Growth in India'.New Delhi . (1995). Ministry of Planning and Programme Implementation. 'FoodProcessing Industries-Development and Financial Performance'. Economic Survey 1996-97. Udyog Bhavan.New York Mitra. New Delhi. B. Hirschrcan. PP.' A'. 'Imports of Manufactures from Less Developed Countries'. Government Of India. V. PP. 29 (35).24 (22). 54.1-49..K. American I Lary.. March. Vol.National Bureau of Economic Research. (1996) Economic Survey of Maharashtra 1995-96... Economic and Political Weekly. (Various Issues). (1964). Monthly Bulletin.. Gupta Deepak. Government of India. Government of Maharashtra.

C.National productivity Councial. PenJranadh. Analysis of Manufacturing Sector in Karnataka '. Economic and Political Weekly. PP.'Industrial Growth aM'A Sl. 29 (48). Vol. .rti'i'ture. vol. Viiayabaskar and Vinod Vyasulu (1994). M 157-164. PP." Productivity. 366-368. Research Diviaon (1994) . Competitiveness Ranking of Indian States. M. 3r> (2).

43 . The index of employment (number of employees) shows a continuous declining trend. It also shows a decline in the year 1991-92 and then increases at high rate. fixed capital or employment index is a arithmetic mean estimated by the formula I =(∑ I RiWi ) / ∑ I weighted ■ X Wi ) where I is index. The year 1980-81 is the base year. fixed capital and employment are constructed. However.ANNEXURE The output.39 and then showed marginal improvement. Ri is the relative of value of the variable of industry i in the manufacturing sector and Wi is the value-added weight of industry i.20 and then again it increases (Table Al). employment index clearly shows that employment for the manufacturing sector as a whole in the state compared to year 1980-81 is declining. In the year 1991-91. Using this formula indices for output. The output index of the manufacturing sector of the state shows continuous increase up to year 1990-91 and in 19?l-92 it suddenly declines to 167. The index of fixed capital also shows more or less a similar trend. The output and fixed capital are in constant prices (1981-82 = 100). it declined to 82.

30 161.49 278.00 98.17 Note : Weights are per centage shares of gross value-added of two-digit industries in manufacturing sector of the state in 1980-81.56 90.45 105.44 90.00 104.00 82.76 136.30 91.82 100.07.16 97.16 1.14 214.14 94. 44 .42 150.86 139.46 128.05 86.54 153.27 91.82 124.80 203.42 139.00 98.23 Fixed Capital 92.94 Of Employment 100.74 169.20 198. Capital and i Index Year 1979-80 1980-81 1981-82 1982-83 1983-04 1984-85 1985-06 1986--87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 Output 99.99 86.29 184.73 343. Fixed Employment for Manufacturing Sector.31 131.06 100.7 7 100.'Table At : Maharashtra -Indices of Output.11 95.35 114.39 89.45 140.23 227.16 234.16 96.45 203 48 167.

Plastic. Appliances and supplies and parts. Repair of Capital Goods. Manufacture of Rubber. Manufacture of Transport Equipment and Parts. Manufacture of Textile Products (Including Wearing Apparel). Manufacture of Non-metallic Mineral Products. Manufacture of Beverages. Machine Tools and parts except electrical machinery. Manufacture of Wool. Manufacture of Metal Products and parts except machinery and transport equipment Manufacture of Machinery. Basic Metal and Alloys Industries. Furniture and Fixtures. Manufacture of Leather and Leather Products. Tobacco and Tobacco products. Manufacture of Jute. Manufacture of Electrical Machinery. Manufacture of Wood and Wood Products. Manufacture of Paper and Paper Products and Printing. Publishing and Allied Industries. Manufacturing. Petroleum and Coal Products. Apparatus. Hemp and Mesta Textiles (Except Cotton).Two Digit Industrial Classification Industry Code 20-21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 2-3 Description of Industry Manufacture of Food Products. 45 . Other Manufacturing Industries. Silk and Synthetic Fibre Textiles. Fur and substitutes of Leather. Manufacture of Cotton textiles. Manufacture of Chemical and Chemical Products (Except products of Petroleum and Coal).