Chapter - 2

Performance of Unorganized Manufacturing Sector –

The National Scenario

A high rate of growth is an important objective for any country, as it reduces

poverty, increases employment and enables the economy to reach higher levels
of per capita income within a shorter time period. The growth rate of Indian
economy has been pushed up from 5.5-6.5 per cent to 8-9 per cent in the last
decade. The high growth rate has brought the Indian economy in the list of
emerging economies with large potential in terms of investment, savings, income
generation and market. But growth of employment is not complementary with
the GDP growth of the economy. One reason is that the saturation point has
reached in case of agriculture. Other reason is that organized manufacturing
sector is not able to provide adequate employment to the burgeoning young
population of the country. Though, India has recently enjoyed high economic
growth, but this has been jobless growth which is unsustainable. The plethora of
labor and market regulations has become a hindrance in the path of growth of
employment in this sector. With the large young population and huge chunk of
unskilled labour force in the country, productive employment remains an area of
concern for the social scientists and policy makers. The pattern of development
in case of Indian economy has been different than the other developing
countries. Share of service sector in GDP has grown at a much faster rate since
independence that of the industrial share. The structural change shows that the
process of development has skipped the process where industries contributed
larger share in GDP. Manufacturing sector with far less share in GDP has a
distinctive feature of dualism i.e. the existence of a relatively small set of formal
sector firms which have a largely protected workforce along with a large number
of firms in the informal sector, where workers have little access to social
security, employment protection and other benefits (Mazumdar and Sarkar,
2008).

40
 There are large number of studies discussing the unorganized sector, its
structure, growth in terms of income and employment and patterns and
determinants of productivity in this sector. A number of theoretical, empirical,
micro and macro level studies have contributed by discussing the role of
unorganized sector in employment generation and reduction of poverty. Some of
these studies stress upon the transitory and stress driven nature of the
manufacturing employment. According to Papola (2008), due to discouraging
labour laws in the organized sector, employment in the unorganized
manufacturing has grown over the years. Share of organized sector in
employment was only 16 percent in 1983-84 which declined to 13 percent in
1999-2000 and further to 11 percent in 2004-05. Again a plethora of studies also
find that unorganized sector is a consistent and integral part of Indian economy.
Kundu (1993) presented an overview of macro dimensions of the unorganized
sector in urban India at national and state level. He observed that, unorganized
sector in urban areas has grown at a faster rate than the rural unorganized sector
and organized sector during the period of 1961 to 1985. He found that on one
hand, the growth of unorganized sector in developed states like Maharashtra,
Gujarat and West Bengal is due to complimentary relationship between
organized and unorganized activities through subcontracting of jobs and in the
less developed areas, it is due to the survival strategy adopted by unskilled and
poor residents. House (1984) also opined that though the presence of a distress
segment in the unorganized sector cannot be ruled out, but also there is an
existence of a vibrant growth oriented segment of unorganized manufacturing
sector. Whether the organized sector is complementary to unorganized sector or
organized sector leads to marginalization of unorganized sector and it has been
an issue of debate for years. In estimation on the employment in unorganized
sector using several alternative data sources Mitra (1998) finds negative
association between informal employment and urbanization (industrialization)
and positive association between informal employment and poverty. A positive
association between informal employment and industrialization shows the
presence of linkages between the two sectors. While and the low use of capital

41
and large absorption of labour are the important features of the unorganized
sector that gained recognition in the developing countries, low productivity of
this sector has always remained a cause of concern for the policy makers. The
growth of employment in this sector gained more momentum especially after the
reforms in India. Two different opinions originated regarding the effect of
reforms on the manufacturing sector of India. First opinion was that it would
push the process of employment generation in organized sector and the other
was that the employment will be restructured in organized sector due to large
scale foreign competition and retrenchment in this sector, pushing the surplus
labour to unorganized sector. Nagaraj (2000) and Goldar (2000) found that
investment boom in the decade of reforms was the main reason of faster
employment generation in organized sector mainly in the first half of 1990’s,
whereas there was a steep fall in employment in the second half of 90’s. About
15 percent workers in the organized manufacturing sector or about 1.1 million
workers lost their jobs between 1995-96 and 2000-01. It has been widely
recognized that unorganized manufacturing sector is the largest employment
provider of the nation. But the nature of employment determines the contribution
of this sector in the national mainstream. The types of job and job conditions
indicate the viability and persistence of this sector. According to NCEUS (2007),
92.4 percent of all workers are employed in the unorganized sector. But the
quality of employment is poor as compared to the organized sector. The
employment in this sector is either part time or unpaid in nature. The conditions
of work of these workers are unsatisfactory where they have no economic and
social security. Observing its relation with poverty ratios, it was analyzed that
the poverty ratios among the unorganized manufacturing sector workers are
significantly higher in urban areas as compared to rural areas. Wages in this
sector increased to some extent due to reforms due to which the population
suffering from extreme poverty came down significantly after 1993-94. As per
the results of the, NSSO (2008), for the Sample Survey conducted in 2004-05,
about 7.62 per cent of the total work force was formal in nature, while remaining
92.38 per cent or about 422.61 million workers were informally employed. The

42
compound annual growth rate of labour absorption in informal sector in the post
-liberalization period (from 1999-00 to 2004-05) is 2.76 per cent, while in the
pre-liberalization period (from 1983 to 1988) it was 1.38 per cent. The size of
the informal sector has increased not only in terms of employment, but also in
terms of its contribution to total industrial output and total manufacturing
exports by the country. Like other developing countries, the size of the informal
sector in India is also increasing at a rapid rate. An analysis regarding their
structure, growth, relevance, contribution to employment and productivity needs
to be anlysed especially after the process of liberalization. Rani and Unni (2004)
analyzed the impact of economic reforms on the organized and unorganized
manufacturing sector from 1984-85 to 1999-00, and found that economic
reforms had a differential impact by industry groups, and the main contribution
in the growth of the unorganized manufacturing industry. Mitra (2007) examined
the nature of relationship between industry and informal sector and argued that
share of the informal sector is equally high in the states which are highly
industrialized in comparison to the states which are industrially backward. In
these industrial states, other than direct employment, sub-contracting and other
indirect processes also generate employment in this sector.
Bairagya (2010) found that during the initial years of his study period
(1980-81 to 2005-06), labour income was more than 70 per cent in unorganized
sector. Still the share of labour income remains same in the unorganized sector
as it was earlier. This may be due to the fact that the informal sector uses labour
intensive technology and this high labour intensity of production is the main
reason for huge employment generation and, thereby increasing the labour
income. It can be seen that the share of labour income started decreasing
significantly immediately just after liberalization. The main reason could be free
market competitions faced by the industry. It increases the use of modern capital
intensive technology in the organized sector thereby enhancing the share of
capital income overtime which ultimately reduces the share of labour income.
Since unorganized manufacturing sector plays a pivotal role in employment
generation and poverty reduction, it is necessary to measure the productivity of

43
this sector. The impact of reforms on growth and productivity has been a subject
of research interest. But different economists have come up with controversial
results. Goldar and Kumari, (2003); Balakrishnan et al. (2000) observed that
economic reforms have adversely affected productivity, whereas Krishna and
Mitra (1998), Unel (2003) and others argued that total factor productivity growth
has been positive in the post-reform period. Chadha (1999) examined the labour
productivity of unorganized manufacturing sector in India between 1984-85 and
1994-95 separately for rural and urban enterprises. He observed that labour
productivity is higher in urban areas as compared to their rural counterparts.
In view of the above studies, in this chapter, an analysis of unorganized
manufacturing sector has been done focusing on the growth of enterprises in
terms of employment and productivity since liberalization in India. Using the
data for the period 1994-95 to 2005-06, a comparative profile is drawn
examining the growth of employment and productivity for different types of
enterprises i.e. OAMEs, NDMEs and DMEs, different industry groups at 2-digit
NIC level with a thrust on rural- urban classification of units.
Table 2.1: Number of Enterprises and Employment in Unorganized
Manufacturing Sector in India by Type of Enterprise (figures in ‘000)
Year Type of Number of Enterprises Employment
Enterprise Rural Urban Combined Rural Urban Combined
1994-95 OAMEs 9535 2715 12250 17845 4817 22662
NDMEs 668 932 1600 1829 3057 4886
DMEs 294 360 654 2452 3203 5655
All 10497 4007 14504 22126 11077 33203
Enterprises
2000-01 OAMEs 11058 3607 14665 19147 5914 25061
NDMEs 630 1082 1712 1933 3629 5562
DMEs 247 400 647 2906 3552 6458
All 11935 5089 17024 23986 13095 37081
Enterprises
2005-06 OAMEs 11109 3504 14613 18021 5666 23687
NDMEs 745 1025 1770 2384 3395 5779
DMEs 274 414 688 3053 3924 6977
All 12128 4943 17071 23458 12985 36443
Enterprises
Source: Calculated from NSSO, 1998 (Report No 433), NSSO, 2002 (Report No. 478, 479) &
NSSO, 2008 (Report No. 525).

Table 2.1 shows the number of enterprises and employment in different types of
enterprises for the period of 1994-95 to 2005-06. During 1994-95, there were

44
14.5 million enterprises in the unorganized manufacturing sector providing
employment to 33.2 million persons. OAMEs have maximum number of units
(12.25 million) employing maximum (22.66 million) number of persons. In
OAMEs, the number of both enterprises and employment is more in rural areas
as compared to their urban counterparts, whereas this trend is reverse in case of
NDMEs and DMEs i.e. in these types of enterprises; both employment and
enterprises are more in urban areas as compared to their rural counterparts.
During 2000-01, the unorganized manufacturing sector has accounted for 17.02
million of enterprises providing employment to 37.08 million persons.
Maximum contribution in number of enterprises as well as employment is by
OAMEs (14.66 million units and 25.06 million persons employed). NDMEs
accounted for 1.71 million units followed by DMEs with 0.68 million units.
While in case of employment in the contribution of DMEs (0.64 million) is
greater than that of the NDMEs (0.55 million). During this period the number of
enterprises rural areas is almost double to that of the urban areas. Going by the
type of enterprises, it can be observed that during this period also, the OAMEs
have more units in rural areas providing more employment as compared to
number of units and persons employed in urban areas while this trend is reverse
in case of NDMEs and DMEs. By the year 2005-06, there were 17.07 million
units which have provided employment to 36.44 million people. Like the earlier
periods, OAMEs have the maximum number of units (14.61 million) followed
by NDMEs (1.77 million) and DMEs (0.68 million) providing employment to
23.68 million people followed by DMEs (6.97 million) and NDMEs (5.77
million). The rural – urban comparison of different types of enterprises shows
that there is no change in earlier structure of employment in unorganized
manufacturing sector of India in which we have observed a rural bias of the and
an urban bias in case of NDMEs and DMEs. Further, in Table 2.2 we can also
have a look at the growth rate of both number of enterprises and employment in
each type of enterprise during the whole period.

45
 Table 2.2: Growth Rate of Number of Enterprises and Employment in
Unorganized Manufacturing Sector in India by Type of Enterprise
Year Type of Number of Enterprises Employment
Enterprise Rural Urban Combine Rural Urban Combine
d d
1994-95 OAMEs 2.5 4.84 3.04 1.18 3.48 1.69
To NDMEs -0.97 2.51 1.13 0.93 2.9 2.18
2000-01 DMEs -2.86 1.77 -0.17 2.87 1.74 2.24
All 2.16 4.06 2.71 1.35 2.82 1.86
Enterprises
2000-01 OAMEs 0.09 -0.58 -0.07 -1.20 -0.85 -1.12
To NDMEs 3.41 -1.08 0.67 4.28 -1.32 0.77
2005-06 DMEs 2.10 0.64 1.24 0.99 2.01 1.55
All 0.32 -0.58 0.06 -0.44 -0.16 -0.35
Enterprises
Source: Calculated from NSSO, 1998 (Report No 433), NSSO, 2002 (Report No. 478, 479) & NSSO,
2008 (Report No. 525).

Table 2.2 highlights the growth rate of number of enterprises and employment
in different types of enterprises for the period 1994-95 to 2000-01 and 2000-01
to 2005-06. During the period 1994-95 to 2000-01, these enterprises registered a
growth of 2.71 percent per annum with only 1.86 per cent growth in
employment for the same period. This implies that the growth in employment in
this sector is not in compliance with the growth in number of enterprises. The
growth in enterprises is highest in OAMEs (3.04 per cent per annum) followed
by NDMEs (1.13 per cent per annum) and a negative growth of –0 .17 percent
in DMEs. But the growth in employment is maximum in DMEs (2.24 per cent
per annum) followed by NDMEs (2.18 per cent per annum) and OAMEs (1.69
per cent per annum). The growth in employment is high in urban areas (2.82
per cent per annum) as compared to growth in rural areas (1.35 per cent per
annum). The rural-urban break-up shows that the urban areas have registered a
growth of 4.06 percent per annum and 2.82 percent per annum for enterprises
and employment respectively in comparison to the growth of 2.16 per cent per
annum and 1.35 percent per annum for rural areas. Growth in number of
enterprises is more in all types of enterprises in urban areas. For 2000-01 to
2005-06, there is a positive growth in number of enterprises but this growth is
very meager (0.06 percent per annum) as compared to preceding period (2.71
percent per annum). Employment has also witnessed a fall of 0.35 percent per
annum. The rural-urban breakup shows that rural areas have netted a growth of

46
0.32 percent per annum as compared to the negative growth of-0.58 percent per
annum in urban areas. During the same period, growth of employment is
negative both in rural and urban areas (-0.44 and -0.16 percent per annum). For
a deeper analysis, it would be necessary to analyze growth of various sub–
sectors in unorganized manufacturing sector of India.
Table 2.3: Number of Enterprises and Employment in Unorganized
Manufacturing Sector in India by Industry Group 1994-95 (Fig. in ‘000)
Industry Number of Enterprises Employment
Rural Urban Combined Rural Urban Combined
Agro Foods 3096 725 3281 6608 1727 8335
Textiles 1782 565 2347 4521 2177 6698
Wood &Wood 2441 431 2872 4360 1033 5393
products
Paper & Paper 52 123 175 131 423 554
Products
Leather & Leather 121 90 211 190 314 504
Products
Chemicals & 62 75 137 157 194 351
Chemical products
Rubber & Plastic 24 61 85 54 273 327
products
Non-Metallic 745 108 853 2240 355 2595
Mineral Products
Basic Metal 7 27 34 20 104 124
Metal Products 249 200 449 503 783 1286
Machineries 58 65 123 120 312 432
Transport 8 20 28 23 104 127
Equipment
N.E.C. 1845 1515 3360 3194 3299 6493
All 10497 4007 14504 22126 11077 33203
Source: Calculated from NSSO 1998 (Report No. 433).
Note: N.E.C. Not elsewhere classified

Table 2.3 exhibits the number of enterprises and employment during 1994-95 by
different industry groups. During this period maximum number of enterprises is
registered by the Manufacturing of Agro foods (3.82 million), followed by the
Manufacturing of Wood & Wood Products (2.87 million) and Manufacturing of
Textiles (2.34 million). Manufacturing of Agro-foods (8.33 million), followed
by Textiles (6.69 million) and Wood and Wood Products (5.39 million) are also
the forerunners in providing employment. The rural-urban profile of industries
shows more number of enterprises as well as workers employed in rural areas as
compared to urban areas. Enterprises in rural areas are 2.6 times more than the
enterprises in urban areas and employment in rural areas is almost twice than

47
 employment in urban areas. The industries of Agro-foods, Textiles and Wood
and Wood Products have large number of enterprises (both in rural and urban
areas). These industries are also forerunners in providing employment in both
rural and urban areas. The industry of Non-Metallic mineral products also
provides employment to a substantial number of workers in rural areas (2.24
million). Workers employed in rural enterprises are more as compared to that in
the urban areas. A similar analysis of enterprises and employment has been done
in the Table 2.4.
Table 2.4: Number of Enterprises and Employment in Unorganized
Manufacturing Sector in India by Industry Group 2000-01 (Fig. in ‘000)
Industry Number of Enterprises Employment
Rural Urban Combined Rural Urban Combined
Agro Foods 4009 1106 5115 7913 2338 10251
Textiles 3363 1866 5229 6183 4585 10768
Wood &Wood 2466 345 2811 4479 743 5222
products
Paper & Paper 49 184 233 118 614 732
Products
Leather & Leather 91 84 175 134 265 399
Products
Chemicals 107 113 220 304 264 568
&Chemical products
Rubber & Plastic 39 63 102 107 248 355
products
Non-Metallic 687 133 820 2564 486 3050
Mineral Products
Basic Metal 14 25 39 40 92 132
Metal Products 371 272 643 676 910 1586
Machineries 105 134 239 209 580 789
Transport Equipment 9 30 39 24 147 171
N.E.C. 625 733 1358 1235 1824 3059
All 11935 5089 17024 23986 13095 37081
Source: Calculated from NSSO 2002 (Report No. 478, 479).

For the year 2000-01, maximum number of enterprises have been accounted by
the Manufacturing of Textiles (5.22 million) followed by Manufacturing of
Agro-foods (5.11 million) and Manufacturing of Wood & Wood Products (2.81
million). In case of employment, the sequence of the industries is same with the
Manufacturing of Textiles providing maximum employment (10.76 million)
followed by the Manufacturing of Agro foods (10.25 million) and the
Manufacturing of Wood & Wood Products (5.22 million). The rural-urban
analysis shows that both the number of enterprises and persons employed are

48
almost double in case of rural areas as compared to urban areas. The order of
various industry groups in terms of enterprises is same in both rural and urban
areas with Manufacturing of Agro foods having the first place followed by the
Manufacturing of Textiles and Manufacturing of Wood & Wood Products. In
terms of employment in rural areas, maximum persons are employed in the
manufacturing of Agro foods (7.91 million), followed by the Manufacturing of
Textiles (6.18 million) and the Manufacturing of Wood and Wood Products
(4.47 million). On the other hand, the Manufacturing of Textiles have registered
maximum number of persons employed in urban areas (4.58 million), followed
by the Manufacturing of Agro foods (2.33 million) and Manufacturing of Wood
& Wood Products (0.74 million). In the rural areas, the Manufacturing of Agro
foods has recorded maximum number of enterprises (4 million) and employment
(7.91 million), followed by Manufacturing of Textiles.
Table 2.5: Number of Enterprises and Employment in Unorganized
Manufacturing Sector in India by Industry Group 2005-06 (Fig. in ‘000)
Industry Name Number of Enterprises Employment
Rural Urban Combined Rural Urban Combined
Agro Foods 4418 1003 5421 7385 2159 9544
Textiles 3716 2075 5791 6377 4915 11292
Wood &Wood products 1915 224 2139 3526 533 4059
Paper & Paper Products 124 162 286 240 525 765
Leather & Leather Products 38 106 144 93 381 474
Chemicals & Chemical 297 121 418 599 265 864
Products
Rubber & Plastic products 30 48 78 105 194 299
Non-Metallic Mineral 536 106 642 1964 373 2337
Products
Basic Metal 14 22 36 34 79 113
Metal Products 370 250 620 710 947 1657
Machineries 123 169 292 225 658 883
Transport Equipment 12 28 40 62 141 203
N.E.C. 536 629 1165 1139 1814 2953
All 12128 4943 17071 23458 12985 36443
Source: Calculated from NSSO 2008 (Report No. 525)

Table 2.5 highlights that for the year 2005-06, Manufacturing of Textiles
have accounted for maximum enterprises and employment. It has accounted for
5.79 million enterprises followed by Manufacturing of Agro foods (5.42 million)
and Manufacturing of Wood & Wood Products (2.13 million) taking second and

49
third place. In terms of employment, it has accounted for 11.2 million
employment followed by the Manufacturing of Agro- foods employing 9.54
million persons and Manufacturing of Wood & Wood Products employing 4.05
million persons.
The rural-urban analysis shows that in the rural areas, the Manufacturing
of Agro foods has maximum number of enterprises (4.41 million) as well as
employment (7.38 million), followed by the Manufacturing of Textiles and
Manufacturing of Wood & Wood Products, respectively. The Manufacturing of
Textiles & Textile Products has remained at the top in terms of the number of
enterprises (2.07 million) and employment (4.91 million), followed by
Manufacturing of Agro Foods & Manufacturing of Metal & Metal Products.
From the industry–wise analysis done for all the three periods, it can be
concluded that during the entire period, Manufacturing of Agro foods in rural
areas and the Manufacturing of Textiles in the urban areas had the most
important role to play among all the sub-sectors in the unorganized
manufacturing sector of India.
Table 2.6: Growth Rate in Number of Enterprises and Employment in
Unorganized Manufacturing Sector in India by Industry Group (1994-95 to
2000-01)
Industry Name Number of Enterprises Employment
Rural Urban Combined Rural Urban Combined
Agro Foods 4.40 7.29 4.98 3.04 5.17 3.51
Textiles 11.16 22.02 14.28 5.35 13.21 8.23
Wood &Wood Products 0.16 -3.63 -0.36 0.45 -5.34 -0.54
Paper & Paper Products -0.98 6.94 4.89 -1.73 6.41 4.75
Leather & Leather Products -4.64 -1.14 -3.07 -5.65 -2.79 -3.82
Chemicals &Chemical 9.52 7.07 8.21 11.64 5.27 8.35
Products
Rubber & Plastic Products 8.43 0.53 3.09 12.07 -1.58 1.38
Non-Metallic Mineral -1.34 3.52 -0.66 2.28 5.37 2.73
Products
Basic Metal 12.25 -1.27 2.31 12.25 -2.02 1.05
Metal Products 6.87 5.26 6.17 5.03 2.53 3.56
Machineries 10.39 12.81 11.71 9.68 10.88 10.60
Transport Equipment 1.98 6.99 5.68 0.71 5.95 5.08
N.E.C. -16.51 -11.39 -14.01 -14.64 -9.40 -11.79
All 2.16 4.06 2.71 1.35 2.82 1.86
Source: Calculated from NSSO 1998 (Report No. 433), NSSO 2002 (Report No. 478, 479).

50
Table 2.6 examines the growth of enterprises and employment among the major
industry group for the unorganized manufacturing sector in India during 1994-95
to 2000-01. During this period all the industry groups except for the
Manufacturing of Wood & Wood Products (-0.36 per cent per annum), Leather
& Leather Products (-3.07 per cent per annum) and Non-metallic mineral
products (-0.66 per cent per annum) have registered a positive growth in terms of
number of enterprises. In case of employment, all the industry groups except for
the Manufacturing of Wood & Wood Products (-0.54 per cent per annum) and
the Manufacturing of Leather and Leather Products (-3.82 per cent per annum),
have registered a positive growth. The industries showing higher growth of
enterprises are the Manufacturing of Textiles, Machinery and Chemical &
Chemical Products with the growth rate of 14.28 per cent, 11.71 per cent and
8.21 per cent, per annum respectively. Similarly the industries showing higher
growth of employment are the Manufacturing of Machinery, Chemical &
Chemical Products and Textile products registering growth rates of 10.60 per
cent, 8.35 per cent and 8.23 per cent per annum, respectively. Going through the
rural–urban analysis, it is found that the growth of enterprises as well as
employment is almost double in urban areas as compared to their rural
counterparts both for enterprises and employment. Surprisingly, these sub-
sectors are Agro–based industries like Agro-foods, Textiles and Paper & Paper
Products.

Table 2.7 depicts the growth of enterprises and employment during 2000-01 to
2005-06. Though there is positive growth in the number of enterprises, the rate
of growth is very low (0.06 per cent per annum). Growth of employment is
negative of the order of -0.35 per cent per annum which has shown a decline in
both rural and urban areas by -0.44 per cent and -0.16 per cent per annum,
respectively. It is observed that during this period, the growth rate of number of
enterprises is maximum in the manufacturing of Chemical & Chemical Products
(13.70 per cent per annum) followed by the Manufacturing of Paper & Paper

51
Products (4.18 per cent per annum) and the Manufacturing of Machineries (4.09
per cent per annum).

Table 2.7: Growth of Number of Enterprises and Employment in

Unorganized Manufacturing Sector in India by Industry Group (2000-01 to
2005-06)
Industry Number of Enterprises Employment
Rural Urban Combined Rural Urban Combined
Agro Foods 1.96 -1.94 1.17 -1.37 -1.58 -1.42
Textiles 2.02 2.15 2.06 0.62 1.40 0.95
Wood &Wood products -4.93 -8.28 -5.32 -4.67 -6.43 -4.91
Paper & Paper Products 20.41 -2.51 4.18 15.26 -3.08 0.89
Leather & Leather -16.03 4.76 -3.82 -7.05 7.53 3.50
Products
Chemicals & Chemical 22.65 1.38 13.70 14.54 0.08 8.75
products
Rubber & Plastic Products -5.11 -5.29 -5.22 -0.38 -4.79 -3.38
Non-Metallic Mineral -4.84 -4.44 -4.78 -5.19 -5.15 -5.19
Products
Basic Metal 0 -2.52 -1.59 -3.20 -3.00 -3.06
Metal Products -0.05 -1.67 -0.73 0.99 0.80 0.88
Machineries 3.22 4.75 4.09 1.49 2.56 2.28
Transport Equipment 5.92 -1.37 0.51 20.90 -0.83 3.49
N.E.C. -3.03 -3.01 -3.02 -1.61 -0.11 -0.70
All 0.32 -0.58 0.06 -0.44 -0.16 -0.35
Source: Calculated from NSSO 2002 (Report No. 478, 479), NSSO 2008(Report No. 525).

On the other hand the Manufacturing of Rubber and Plastic Products (-5.22 per
cent per annum), Manufacturing of Wood & Wood Products (-5.32 per cent per
annum), Manufacturing of Non–metallic Mineral Products (-4.78 per cent per
annum) have registered a negative growth for the same period. Maximum
growth in employment has been registered by the Manufacturing of Chemical &
Chemical Products (8.75 per cent per annum)followed by Manufacturing of
Leather & Leather Products (3.50 per cent per annum) and Manufacturing of
Transport Equipments (3.49 per cent per annum) whereas the Manufacturing of
Non–metallic Mineral Products, Manufacturing of Wood & Wood Products and
Manufacturing of Rubber and Plastic Products have been ahead in negative
growth of 5.19 percent, 4.91 percent and 3.38 percent respectively Growth in
employment not accompanied by the growth in productivity questions the long
term viability of the enterprise. Therefore the analysis and comparison of gross

52
value added (GVA) – an indicator of productivity; fixed assets and employment
has been done in the following tables.
Trends in Growth of Productivity in Unorganized Manufacturing Sector in
India
Table 2.8 shows the percent share of various types of enterprises in gross value
added, fixed assets and employment in the unorganized manufacturing sector of
India for the periods of 1994-95, 2000-01 and 2005-06. The share of OAMEs
which has been the largest n employment declined marginally from 68.25
percent to 64.99 percent from 1994-95 to 2005-06, but their share in fixed assets
and gross value added slipped to second rank in 2005-06. The share of DMEs
increased substantially from 33.42 per cent per annum to 43.91 per cent per
annum from 1994-95 to 2005-06 in case of GVA but marginally in case of fixed
assets during the same period (34.87 percent per annum to 36.62 percent per
annum). The share of NDMEs has remained stagnant in both fixed assets and
GVA. Though, OAMEs have witnessed a decline in their share in all three
variables taken above, this decline in case of GVA is maximum (11.11 per cent
per annum). Still OAMEs contribute substantially in productivity (32.01 per cent
per annum), employment (64.99 per cent) and fixed assets (36.24 per cent) in
unorganized manufacturing sector of India. The analysis shows dominance of
OAMEs in employment generation whereas DMEs have a dominant share in
GVA. Rural OAMEs have greater share in all three variables as compared to
their urban counterparts but for NDMEs and DMEs the urban enterprises have
greater share as compared to their rural counterparts.
For finding the share of various industry groups in all three variables, we
have done a detailed analysis in Table 2.9.
The Table 2.9 highlights that the share of Agro foods and Textiles have
been maximum in GVA, fixed Assets and employment and this share increased
from one period to another. These results indicate positive association between
all three variables. Share of Wood & Wood Products was substantial throughout
but it shows a declining trend in the successive periods. Further, we would
analyse growth of productivity at constant prices by type of enterprises and
industry group (Table 2.11).

53
 Table 2.8: Percentage Share of Gross Value Added, Fixed Assets and Employment in Unorganized Manufacturing
Sector in India by Type of Enterprise
Year Gross Value Added Fixed Assets Employment
Type of Enterprise Rural Urban Combined Rural Urban Combined Rural Urban Combined
OAMEs 64.17 28.41 43.12 59.01 24.78 37.63 80.65 43.49 68.25
NDMEs 14.49 29.75 23.46 20.17 31.90 27.50 8.27 27.60 14.72
1994-95
DMEs 21.34 41.84 33.42 20.82 43.31 34.87 11.08 28.91 17.03
All Enterprises 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
OAMEs 63.05 25.75 42.28 62.28 24.85 39.23 79.83 45.16 67.59
NDMEs 13.84 33.91 25.02 14.85 34.63 27.03 8.06 27.71 15.00
2000-01
DMEs 23.11 40.34 32.70 22.87 40.52 33.74 12.11 27.13 17.41
All Enterprises 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
OAMEs 49.60 18.44 32.01 53.35 24.72 36.24 76.82 43.64 64.99
NDMEs 16.83 29.67 24.08 19.23 32.46 27.14 10.16 26.15 15.86
2005-06
DMEs 33.57 51.88 43.91 27.42 42.82 36.62 13.02 30.21 19.15
All Enterprises 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Source: Calculated from NSSO 1998 (Report No. 433), NSSO 2002 (Report No. 479, 480), NSSO 2007 (Report No. 526)

54
 Table 2.9: Percentage Share of Gross Value Added, Fixed Assets and Employment in Unorganized Manufacturing
Sector in India by Industry Group
Industry Name Gross Value Added Fixed Assets Employment
1994-95 2000-01 2005-06 1994-95 2000-01 2005-06 1994-95 2000-01 2005-06
Agro Foods 19.61 21.62 20.98 22.61 23.95 24.45 25.11 27.64 26.19
Textiles 17.84 27.05 24.73 19.32 25.79 26.93 20.17 29.04 30.99
Wood &Wood products 12.41 9.18 6.15 8.41 6.73 5.50 16.24 14.08 11.14
Paper & Paper Products 2.82 3.57 3.16 4.41 5.19 4.52 1.67 1.97 2.10
Leather & Leather Products 2.08 1.57 1.55 1.12 1.04 0.91 1.52 1.48 1.30
Chemicals &Chemical products 1.20 1.54 1.85 1.68 1.94 2.20 1.06 1.53 2.37
Rubber & Plastic products 2.44 2.25 1.70 4.84 2.74 2.33 0.99 0.96 0.82
Non-Metallic Mineral products 5.72 8.14 7.53 4.08 6.77 5.35 7.82 8.23 6.41
Basic Metal 0.96 1.02 1.33 0.89 1.25 1.56 0.37 0.36 0.31
Metal Products 6.46 6.35 10.28 7.39 7.22 8.44 3.87 4.28 4.55
Machineries 3.44 5.05 6.38 4.69 6.05 6.14 1.30 2.13 2.42
Transport Equipment 0.97 1.27 1.21 1.21 2.29 1.98 0.38 0.46 0.56
N.E.C. 24.00 11.40 13.14 19.45 9.16 9.68 19.56 8.25 8.10
All 100 100 100 100 100 100 100 100 100
Source: calculated from NSSO 1998 (Report No. 433), NSSO 2002(Report No. 479,480), NSSO 2007 (Report No. 526) & NSSO 2008(Report No.525)
Note: N.E.C: Not elsewhere classified

55
 Table 2.10: Growth of Gross Value Added in Unorganized Manufacturing
Sector in India by Type of Enterprise at Constant Prices (1993-94 Prices)
1994-95 2000-01
to 2000-01 to 2005-06
OAMEs
Rural 4.88 -1.46
Urban -0.97 -2.04
Combined 3.04 -1.89
NDMEs
Rural 8.09 4.02
Urban 5.24 2.49
Combined 6.47 2.35
DMEs
Rural 12.52 9.16
Urban 3.09 8.79
Combined 6.35 8.82
All Enterprises
Rural 5.19 2.88
Urban 1.68 4.75
Combined 3.73 3.67
Source: Calculated from NSSO 1998 (Report No.433), NSSO 2002(Report No. 480) & NSSO 2007
(Report No. 526).

Table 2.10 shows that growth of GVA for all enterprises has remained almost
same during the two periods of analysis. Though the growth of GVA has declined
from 5.19 per cent in 1994-2001 to 2.88 per cent in 2000-2006 for rural
enterprises, in case of urban enterprises, it increased from 1.68 per cent per annum
to 4.75 per cent per annum in the same period. If we analyse the growth by type of
enterprise, productivity for OAMEs and NDMEs has declined in 2000-06 as
compared to the previous period, whereas for DME’s it has increased (from 6.35
to 8.82 percent per annum). Infact, the growth of GVA for the OAME’s has been
negative for the period of 2005-06(-1.89 percent per annum). Productivity is
higher for OAMEs and NDMEs in case of rural enterprises, but for urban areas, it
is more in case of DMEs. From 1994-95 to 2000-01, GVA in rural OAMEs
increased at the rate of 4.88 per cent per annum whereas in urban areas, it
decreased by -0.97 per cent per annum. In the period of 2000-01 to 2005-06, GVA
has gone down both in rural as well as urban areas at the rate of -1.46 percent per

56
annum and -2.14 per cent per annum, but it decreased more sharply in urban areas.
Though in case of OAMEs, growth of GVA has shown negative trends in 2005-06
as compared to growth in the previous period, NDMEs registered a positive
growth (2.35 per cent per annum) in the period 2000-2006 and a growth of 6.47
percent per annum for 1994-95 to 2000-01. It can be noticed that the growth of
GVA among NDMEs declined over time. The analysis of DMEs is showing
different results. Growth of gross value added in both the periods is significantly
high i.e. 6.35 per cent per annum and 8.82 per cent per annum from 1994-95 to
2000-01 and 2000-01 to 2005-06, respectively. In fact, growth rate of GVA during
the second period increased. The rural–urban break up of GVA growth among
DMEs is showing different results than that of the growth rates of OAMEs and
NDMEs. There is fall in the growth of GVA from 1994-95 to 2000-01 period to
the period of 2000-01 to 2005-06 in rural DMEs (12.56 per cent per annum to
9.16 per cent per annum), but increase in growth in urban DMEs in the same
period ( 3.09 per cent per annum to 8.79 per cent per annum). In both the periods,
the growth of GVA in DMEs has been positive both in rural as well as urban
areas. This growth was much higher in rural areas from 1994-95 to 2000-01(12.52
per cent per annum) as compared to urban areas (3.09 per cent per annum) during
the same period. From 2000-01 to 2005-06, both rural and urban DMEs registered
a positive growth of 9.16 per cent per annum and 8.79 per cent per annum,
respectively. Hence, it is seen that growth of GVA in DMEs has shown a rosy
picture. It is multiple times the growth of GVA for NDMEs. For a deeper probe, it
is important to measure gross value added at constant price by various industry
groups.

57
 Table 2.11: Growth of Gross Value Added in Unorganized Manufacturing
Sector in India by Industry Group at Constant Prices (1993-94 prices)
Industry Rural Urban Combined
1994-95 to 2000-01 1994-95 2000-01 1994-95 2000-01
2000-01 to 2005- to 2000- to 2005- to 2000- to 2005-
06 01 06 01 06
Agro Foods 3.76 2.58 0.61 2.41 3.06 1.94
Textiles 4.28 3.18 -1.29 1.4 3.76 2.12
Wood &Wood 5.09 1.56 -0.99 3 1.77 1.89
Products
Paper & Paper 10.69 -8.8 3.84 2.84 5.73 -2.8
Products
Leather & Leather 5.79 10.09 3.1 1.39 4.91 7.75
Products
Chemicals & 5.39 -7.38 0.29 4.4 1.79 -4.15
Chemical Products
Rubber & Plastic 8.31 9.66 2.47 2.06 1.91 3.71
Products
Non-Metallic 14.18 8.12 10.96 4.65 13.85 7.43
Mineral Products
Basic Metal 13.81 1.04 3 9.34 4.97 6.38
Metal Products 3.26 0.66 -0.54 12.87 -0.18 9.38
Machineries 6.57 7.34 2.1 3.93 3.4 4.78
Transport 14.99 9.95 4.11 1.13 5.92 1.86
Equipments
N.E.C. 51.72 10.44 6.02 10.09 9.52 10.19
All 5.19 2.88 1.68 4.75 3.73 3.67
Source: Calculated from NSSO 1998 (Report No. 433), NSSO 2002 (Report No. 480) & NSSO 2007
(Report No. 526).

Table 2.11 highlights that from 1994-95 to 2000-01, manufacturing of non-

metallic mineral products registered maximum growth in GVA (13.85 per cent per
annum) followed by the Manufacturing of Transport Equipments 5.92 per cent per
annum), Manufacturing of Paper & Paper Products (5.73 per cent per annum),
Manufacturing of Basic Metals (4.97 per cent per annum) and Manufacturing of
Leather & Leather products (4.91 per cent per annum). The Manufacturing of
Metal Products is the only industry group with negative growth (-0.18 per cent per
annum) in GVA. The Manufacturing of Wood & Wood Products (1.77 per cent
per annum), Manufacturing of Chemical & Chemical Products (1.79 per cent per
annum), Manufacturing of Rubber & Plastic Products (1.91 per cent per annum)
etc. registered a low but positive growth of productivity during this period.
During the period 2000-01 to 2005-06, the Manufacturing of Metal Products

58
registered highest growth (9.38 per cent per annum followed by Manufacturing of
Leather and Leather Products (7.75 per cent per annum), Manufacturing of Non-
metallic Mineral Products (7.43 per cent per annum), and Manufacturing of Basic
Metals (6.38 per cent per annum).The industries showing consistency in the
growth of productivity in both the periods are Non-metallic Mineral Products,
Basic Metals and Leather & Leather Products. There is negative growth during
1994-95 to 2000-01 for the Manufacturing of Chemical & Chemical Products
(-4.15 per cent per annum) and Manufacturing of Paper & Paper Products (-2.80
per cent per annum). The industry in which significant growth in productivity is
observed is the Manufacturing of Metal Products registering an increase in growth
from -0.18 per cent per annum to a very high growth rate of 9.38 per cent per
annum from the period of 1994-2001 to the period of 2001-06 while the growth of
Manufacturing of Paper and Paper Products declined from 5.73 per cent per
annum to a negative growth of 2.80 per cent per annum during the same periods.
For further analysis, both labor productivity and capital productivity are measured,
separately.
Table 2.12: Growth of Labour Productivity in Unorganized Manufacturing
Sector in India by Type of Enterprises at Constant Prices (1993 -94 prices)
1994-95 to 2000-01 to
2000-01 2005-06
OAMEs
Rural 6.27 -0.19
Urban 0.35 -1.76
Combined 4.41 -0.68
NDMEs
Rural 6.05 3.17
Urban 4.85 2.73
Combined 5.38 2.25
DMEs
Rural 6.24 10.39
Urban 3.12 7.34
Combined 3.83 8.45
All Enterprises
Rural 6.04 3.66
Urban 2.91 4.31
Combined 4.59 4.08
Source: Calculated from NSSO 1998 (Report No.433), NSSO 2002 (Report No. 480) & NSSO 2007
(Report No.526).

59
Table 2.13 highlights growth rates of labour productivity in unorganized
manufacturing sector in India from 1994-95 to 2005-06. The labour productivity
increased by 4.59 per cent per annum and 4.08 per cent per annum from 1994-95
to 2000-01 and from 2000-01 to 2005-06, respectively. Though, there is an
increase in the growth from 2.91 percent per annum to 4.31 per cent per annum
from first period i.e. 1994-95 to 2000-01 to the next period i.e. from 2000-01 to
2005-06 in urban areas, there is a fall in labour productivity in the rural areas from
6.04 per cent per annum to 3.66 per cent per annum during the same period. The
growth scenario of OAMEs has been dismal both in rural as well as in urban areas
for the period of 2000-01 to 2005-06. The overall growth of labour productivity in
OAMEs registered a decline of -0.68 per cent per annum whereas rural and urban
units registered a decline of -0.19 per cent per annum and -1.76 per cent per
annum, respectively. In the preceding period i.e from 1994-95 to 2000-01, there
was an increase in growth of labour productivity in these units both in rural areas
(6.27 per cent per annum) and urban areas (0.35 per cent per annum). The growth
of labour productivity in NDMEs increased by 5.38 per cent per annum in the
period of 1994-95 to 2000-01 and 2.25 per cent per annum in the next period
(2000-01 to 2004-05 ). The growth of NDMEs declined from 4.85 per cent per
annum to 2.73 per cent per annum from 1994-95 to 2000-01 to 2000-01 to 2005-
06. Rural NDMEs registered a growth rate of 6.05 per cent per annum in the first
period and declined to 3.17 per cent per annum in the succeeding period. In case
of DMEs, labour productivity increased by 3.83 per cent per annum between
1994-95 and 2000-01 and further increased by 8.45 per cent per annum in the
succeeding period. Both rural and urban enterprises registered significant growth
in both the time periods but this growth has been higher in the second period
(2000-01 to 2005-06). In the first period, growth of rural DMEs increased by 6.04
per cent per annum which further increased at the rate of 10.39 per cent per annum
during the period 2000-01 to 2005-06. Urban DMEs also grew at a much faster
rate (8.45 per cent per annum) during the period 2000-01 to 2005-06 than that of
the preceding period (3.12 per cent per annum only).

60
 Table 2.13: Growth of Labour Productivity in Unorganized Manufacturing
Sector in India by Industry Group at Constant Prices (1993-94 prices)
Industry Name Rural Urban Combined
1994-95 to 2000-01 to 1994-95 to 2000-01 to 1994-95 to 2000-01 to
2000-01 2005-06 2000-01 2005-06 2000-01 2005-06
Agro Foods 5.13 3.37 2.64 2.03 4.53 2.55
Textiles 10.03 4.61 6.38 2.14 9.55 3.24
Wood &Wood 4.81 1.26 0.79 0.90 1.95 0.85
Products
Paper & Paper 11.8 -4.58 4.39 3.40 5.96 0.48
Products
Leather & Leather 7.11 -0.47 4.89 -1.37 5.81 0.08
Products
Chemicals & 1.8 -0.87 2.02 5.78 0.93 0.07
Chemical Products
Rubber & Plastic 5.2 4.47 4.66 1.36 3.72 1.73
products
Non-Metallic 10.15 8.53 8.98 5.39 10.09 7.89
Mineral products
Basic Metal 13.63 3.53 3.44 9.79 6.05 7.55
Metal Products 5.02 -0.4 2.07 10.12 2.3 7.71
Machineries 7.09 9.14 3.79 6.08 4.34 6.6
Transport 15.63 -2.35 4.7 0.085 6.06 -0.59
Equipment
N.E.C. 11.04 8.87 3.59 6.90 6.7 7.63
All 6.04 3.66 2.91 4.31 4.59 4.08
Source: Calculated from NSSO 1998 (Report No. 433), NSSO 2002 (Report No. 480) & NSSO 2007
(Report No.526).

Industry-wise growth of labour productivity is presented in Table 2.14. During the

period 1994-95 to 2000-01, all the industries registered positive growth in labour
productivity. The Manufacturing of Non-metallic Mineral products (10.09 per cent
per annum) recorded maximum growth in labour productivity, followed by the
Manufacturing of Textiles (9.55 per cent per annum), Manufacturing of Transport
Equipment (6.06 per cent per annum) and the Manufacturing of Paper & Paper
Products (5.96 per cent per annum). During the succeeding period 2000-01 to
2005-06, all industries except Manufacturing of Transport Equipment registered a
positive growth. During this period, Manufacturing of Non-metallic Mineral
Products (7.89 per cent per annum) registered maximum growth followed by
Manufacturing of Metal Products (7.71 per cent per annum) and Manufacturing of
Basic Metal (7.55 per cent per annum). During the same period, a steep decline in

61
the growth of labour productivity is observed for the Manufacturing of Textiles,
Paper & Paper Products, and Transport Equipments. The rural urban profile of
industries shows growth of labour productivity is positive in all the industries
during 1994-95 to 2000-01, but in the period of 2000-01 to 2005-06, it turned
negative for the Manufacturing of Paper & Paper Products, Metal Products,
Transport Products and Leather & Leather Products the in rural areas and for the
Manufacturing of Leather & Leather Products in urban areas. In rural areas, the
Manufacturing of Machinery in urban areas, the Manufacturing of Non-metallic,
Textile and Rubber/Plastic are the forerunners among the growth of labour
productivity while in urban areas the Manufacturing of Metal Products; Basic
Metal & Machineries have recorded substantially higher growth in labour
productivity. Also, it is found that traditional industries like Manufacturing of
Paper & Paper Products, Leather & Leather Products and Wood & Wood Products
registered poor growth during 2000-01 to 2005-06.

Table 2.14: Growth Rate of Capital Productivity in Unorganized

Manufacturing Sector in India by type of Enterprise at Constant Prices
(1993-94 prices)
Type of 1994-95 to 2000- 2000-01 to 2005-
Enterprises 01 06
OAMEs
Rural 0.32 -0.39
Urban -1.13 -3.54
Combined 0 -1.71
NDMEs
Rural 6.09 -0.21
Urban 1.07 1.44
Combined 2.14 1.16
DMEs
Rural 1.32 4.8
Urban 0.62 7.18
Combined 0.98 6.58
All Enterprises
Rural 1.68 0.93
Urban 0.2 3.2
Combined 0.95 2.11
Source: Calculated from NSSO 1998 (Report No. 433), NSSO 2002 (Report No. 479, 480), NSSO 2007
(Report No. 526) & NSSO 2008 (Report No. 525).

62
 Table 2.14 highlights that rate of growth of capital productivity has more
than doubled from 0.95 per cent per annum in 1994-95 to 2000-01 to 2.11 per cent
per annum from 2000-01 to 2005-06.Though growth in labour productivity in rural
areas has declined from 1.68 per cent per annum from first period to the second, it
increased from 0.2 per cent per annum to 3.2 per cent per annum in urban areas
during the same period. Among the three types of enterprises, the growth of
capital productivity increased from almost nil in 1994-95 to 2000-01 to a negative
trajectory (-1.71 per cent per annum) during 2000-01 to 2005-06, whereas DMEs
have registered a meager growth rate of 0.98 per cent per annum during 1994-95
to 2000-01 to 6.58 per cent per annum between 2000-01 and 2005-06. In NDMEs,
capital productivity decreased from 2.14 per cent per annum during the period
1994-95 to 2000-01 to 1.16 per cent per annum during 2000-01 to 2005-06. In the
second time period the performance of both rural and urban OAMEs worsened but
urban OAMEs showed poorer results. Growth of capital productivity among
NDMEs also declined in the second period i.e. from 2000-01 to 2005-06 but this
decline is sharper in rural enterprises. The picture is totally different in case of
DMEs where there is a steep increase in growth in both rural and urban enterprises
in the succeeding period of 2000-01 to 2005-06 and this growth is more in urban
enterprises. To measure the contribution of capital productivity of each sub-sector
of the unorganized manufacturing sector, we further examine the capital
productivity of each industry group at the constant prices.
Table 2.15 has highlights the growth of capital productivity at constant
prices in all the industry groups from 1994-95 to 2000-01 and from 2000-01 to
2005-06. The average growth (2.11 per cent per annum) for 2000-01 to 2005-06
was more than twice the growth in the preceding period (0.95 per cent per annum).
The Manufacturing of Rubber & Plastic Products (9.47 per cent per annum),
Manufacturing of Textiles (7.07 per cent per annum) and Manufacturing of
Machineries (4.65 per cent per annum) are the industries which show higher

63
growth in capital productivity. The industries of Manufacturing of Basic Metals,
Non-metallic Mineral Products, Leather & Leather Products and Wood & Wood
Products registered a negative growth of capital productivity.
Table 2.15: Growth of Capital Productivity in Unorganized Manufacturing
Sector in India by Industry Group at Constant Prices (1993-94 prices)
Industry Name Rural Urban Combined
1994-95 2000-01 1994-95 2000-01 1994-95 2000-01
to 2000- to 2005- to 2000- to 2005- to 2000- to 2005-
01 06 01 06 01 06
Agro Foods 3.42 2.55 -2.01 -1.89 1.54 0.98
Textiles 5.36 0.5 8.35 2.26 7.07 1.54
Wood &Wood 4.6 3.29 -7.24 -1.03 -0.39 -1.84
Products
Paper & Paper -3.85 8.89 3.14 1.49 2.29 2.42
Products
Leather & Leather 4.84 3.87 -4.95 5.06 -2.55 4.53
Products
Chemicals -1.39 1.37 2.47 8.22 1.09 4.09
&Chemical Products
Rubber & Plastic 5.08 -0.58 9.96 0 9.47 0
Products
Non-Metallic Mineral -1.83 10.2 -0.23 -2.99 -1.73 5.43
Products
Basic Metal 20.81 -20.3 -10.04 4.48 -3.86 -1.94
Metal Products -1.16 -5.71 0.23 6.41 0.42 3.67
Machineries -2.18 0.43 5.25 8.02 4.65 6.75
Transport Equipment 17.61 -0.64 -7.08 2.81 -4.91 3.98
N.E.C. 0.94 3.55 1.16 3.87 1.07 3.93
All 1.68 0.93 0.2 3.2 0.95 2.11
Source: Calculated from NSSO 1998 (Report No. 433), NSSO 2002 (Report No. 479, 480), NSSO 2007
(Report No.526) & NSSO 2008 (Report No.525).

During the period 2000-01 to 2005-06 capital productivity is the highest in the
Manufacturing of Machineries followed by Manufacturing of Non-metallic
Mineral Products (5.43 per cent per annum), Manufacturing of Leather & Leather
Products (4.53 per cent per annum), however the growth of capital productivity is
negative in two industry groups i.e. Manufacturing of Wood & Wood Products
and the Manufacturing of Basic Metals. The rural-urban break up shows that, the
overall growth of capital productivity has declined, still the sub-sector of Paper &
Paper Products showed increase in growth from -3.85 per cent per annum during
1994-95 to 2000-01 to 8.89 per cent per annum during 2000-01 to 2005-06 and the

64
Manufacturing of Non-metallic Mineral products registered an increase from -1.83
per cent per annum to 10.20 percent per annum during the same periods. The
worst performer in rural areas is the Manufacturing of Basic Metals. In urban
areas, the Manufacturing of Leather & Leather Products, Chemical and Chemical
Products, Basic Metals, Metal Products, Machinery and Equipments improved in
terms of capital productivity whereas the Manufacturing of Textiles and Rubber
& Plastic Products have experienced a decline in the growth of capital productivity
during 2000-01 as compared to the previous period.
From the above analysis, it has been observed that the unorganized sector
in India has been dominated by own account enterprises (OAMEs) which are the
main contributors in total employment in this sector. But these OAMEs are mainly
located in rural areas. Among the establishments, number of enterprises is more in
NDMEs but number of persons employed is more in DMEs. Also during the
period of 2000-01 to 2005-06, DMEs have registered highest growth rate of both
number of enterprises and employment. The sector-wise distribution shows that
three sub-sectors of unorganized manufacturing sector, namely, Manufacturing of
Agro-foods, Textiles, Wood & Wood Products account for 75 per cent of the total
enterprises and about 70 per cent of the total employment in this sector. Both
manufacturing of Agro-foods & Textiles have shown an increase in the share of
employment and enterprises while the Manufacturing of Wood & Wood Products
has experienced a decline its respective share. From productivity point of view, it
has been observed that for main sectors of activity in unorganized manufacturing
sector, the share of gross value added is much less than their share in employment
in any time period. This is a clear indication of low productivity of these units. Out
of the three types of enterprises, the share of OAMEs in gross value added has
been much lower (32 percent) as compared to their share in total employment.
Moreover, it has declined very sharply in the rural areas which absorb about 77
percent of the total rural employment in unorganized manufacturing sector. So,
this is a cause of concern. On the other hand, in case of DMEs, their share in

65
productivity has increased to a much greater extent as compared to their increase
in fixed assets as well as employment. The sector-wise analysis shows that more
than 50 per cent of the gross value added in the unorganized manufacturing sector
has been contributed by the traditional sectors of manufacturing of Agro-foods,
Textiles and Wood & Wood Products. Though, the growth dynamics of this
sector have shown positive growth in productivity (at constant prices) throughout
the period of study, yet it has slightly declined. This positive growth has been due
to NDMEs and DMEs and the decline is mainly due to the poor performance of
rural units. In case of partial productivities, the growth of labour productivity has
always remained higher than capital productivity and growth of labour
productivity is higher in rural units than that of urban units. Among the
enterprises, it has been highest in DMEs followed by NDMEs, whereas the
workers in OAMEs are the least productive. Contrary to the general view about
low productivity of the unorganized sector, it has been found that the modern
industries like Manufacturing of Non-metallic Mineral Products, Machineries,
Basic Metals and Metal Products, have registered higher growth of labour
productivity as compared to the capital productivity. On the whole, the traditional
industries such as Manufacturing of Agro-foods, Textiles, Paper & Paper
Products, Wood and Wood Products etc. have registered lower growth in capital as
well as labour productivity as compared to the modern industries.

66
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