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Unorganised and Organised Manufacturing in India: Potential for

Employment Generating Growth

Article in Economic and Political Weekly · January 2004

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 Unorganised and Organised
Manufacturing in India
Potential for Employment Generating Growth
This paper analyses the impact of economic reforms on the organised
and unorganised manufacturing sectors. It also seeks an explanation for the growth trends
observed by looking at specific trade and industrial policies. The analysis indicates that
economic reform policies had a differential impact on various industry groups. In
particular, the growth in the automobile industry and the infrastructure sector helped the
growth of the manufacturing industry, especially in the unorganised segment
and the generation of quality employment.
UMA RANI, JEEMOL UNNI

T
he Planning Commission’s special group on employment
generating growth has noted that “even if the organised
sector grew at 20 per cent per annum and the private
organised sector at 30 per cent per annum, their contribution to
total employment would increase hardly by 1.5 to 2.0 per cent
of the total over the Tenth Plan” [Planning Commission 2002].
Hence, in order to increase employment, the unorganised
sector has to be specially targeted. The idea is not new, as it
was earlier envisaged in the Second Plan, which “aimed at
expanding employment opportunities of which the bulk was
to be provided by the unorganised sector” [Banerjee 1988: 78].
This was expected to improve productivity, bring about
greater equality and alleviate poverty. However, this was not
realised due to the multiplicity of forms of production
organisation and the variety of enterprises in this sector, which
was beyond the analytical framework of planning in India
[Banerjee 1988]. Hence, most policies were geared towards
organised sector income and employment growth. The economic
reforms initiated in 1991 were also meant to reverse the poor
growth performance. It was expected that rapid and sustained
growth of output and employment would reduce poverty
[Chaudhuri 2002].
In an earlier paper, we had observed that the growth of value-
added, employment and capital in the organised manufacturing
sector in the country as a whole had surged in the initial years
after the introduction of reforms. Growth in the unorganised
sector, however, was observed to have peaked in the initial phase
of partial liberalisation (1984-90), and tapered off in the
reforms period (1989-95) [Unni et al 2001]. High growth in the
organised sector was expected as these units were better
equipped to deal with competitive conditions arising out of
economic reforms.
There exists a vast literature on the impact of economic
reforms on mainly the organised manufacturing sector. There
are not many studies that systematically analyse the impact of
economic reforms on the unorganised sector. This paper tries
to fill this gap by analysing the impact of economic reforms
on the organised and unorganised manufacturing sectors. We
take forward our earlier analysis to see if the rapid growth
of organised manufacturing compared with unorganised
manufacturing continued till 2001, by looking at the growth
rates of value added and employment. We also seek an
explanation for the growth trends observed by looking at
specific trade and industrial policies introduced in the sectors.
The second section analyses in detail certain specific sectors and
sub-sectors within them, which had a high growth in the late
1990s, to understand what led to this growth. We explore the
employment-generating potential of this growth throughout
the analysis.
Growth in Manufacturing Sector
In the initial years of planning, the thrust was to develop the
manufacturing base by setting up heavy industry, towards which
the organised manufacturing sector was mainly producing basic
intermediate goods and machinery. The 1980s saw a clear departure
from this strategy with partial liberalisation, as consumer goods
became the dominant industry. The introduction of economic
reforms in the 1990s led to growth of the consumer durables
industry and export-dependent growth. Both these strategies
made growth more volatile since demand for consumer durables
is income-elastic and export growth is based on international
demand [Unni 2003]. In this section, we discuss the growth in
the organised and unorganised manufacturing sector during the
partial liberalisation and liberalisation periods. To see the impact
of liberalisation, we divide the entire period from 1984 to 2001
into three sub-periods: the partial liberalisation period from
1984-85 to 1989-90; liberalisation of the early 1990s, 1989-90
to 1994-95; and liberalisation of the late 1990s from 1994-95
to 2000-01. The cut-off points are largely based on the availability
of data on unorganised manufacturing sector (See Appendix for
details on data). The first period captures partial liberalisation
quite precisely. The second period begins a year before reforms
were introduced in 1991. The initial two years after the reforms
were introduced were years of adjustment before the economy
actually started picking up. The year 1994-95 was actually one
of the peak years, and we expect to capture the impact of reforms.
The third period covers both the period of rapid growth and
recession (which began around 1996-97), with the continuation
of reforms.

4568 Economic and Political Weekly October 9, 2004

 Late 1980s, 1984-85 to 1989-90 the two fastest growing industries were chemicals and chemical
products, and rubber and plastic products, other than machinery
Partial liberalisation of the economy actually started in the mid- and equipment, and medical, precision and optical instruments,
1980s, after the Rajiv Gandhi government came to power and watches and clocks (Table 3). The reason for high growth in value
“delicensed several industries; increased the ceiling of invest- added in chemicals and chemical products in both sectors was
ment for big business houses; relaxed rules for importation of argued to be due to the exceptionally high effective rates of
foreign technology; replaced quantitative trade restrictions with protection that the industry enjoyed, especially for synthetic
tariffs, and lowered tariff barriers overall, reduced marginal tax fibres, soaps, cosmetics and glycerine, pesticides, and inorganic
rates on personal and corporate income and simplified tax rules; heavy chemicals [Kelkar and Kumar 1990; Nouroz 2001]. The
and, finally, announced that public sector reforms was necessary” preference given for the chemicals sector showed very clearly
[Varshney 2001: 241]. Import of capital goods against replen- that there was a bias in the policy in the 1980s.
ishment licences was granted to small-scale industries and non- As the protection afforded to the domestic industry declined
small-scale industries [Das 2003]. There was also easing of with the reduction in tariffs for most capital goods, it adversely
licensing restrictions, particularly with respect to expansion and affected the unorganised sector. In the organised sector, while
diversification within the same product group, broad banding we observed a slowdown4 in growth, the unorganised sector had
[Kathuria 1995]. The 1980s saw changes in the external and a negative value added for electrical machinery, fabricated metal
industrial sector in matters pertaining to licensing for scale and products, office, accounting and computing machinery, motor
technology as well as quantitative restrictions on imports and vehicles, and transport equipment (Table 3). The short-term effect
tariff rates [Das 2003]. of the worsening of effective protection rates for this sector could
However, due to political pressure, the government did not have been the pressure on capacity utilisation and profitability
allow “across-the-board cuts in excise duties, and it was forced of these enterprises.
to make tariffs on capital goods higher” [Varshney 2001: 244]. Despite the high growth in industrial output, employment grew
Though the system began to be administered more liberally in very slowly in the organised sector (0.65 per cent) and was
the 1980s, with import licences being much more freely given, negative in the unorganised sector (-0.95 per cent) (Table 1). The
it remained restrictive and also highly discretionary [Ahluwalia
2001]. During this period, the pace of reforms was slow and it Table 1: Growth Rates and Shares in Value Added,
focused on dismantling internal controls and increased the flex- Employment and Fixed Capital in Manufacturing Sector
ibility of operation of domestic capital. The attempts to foster Growth Rates
domestic competition through delicensing of domestic industries, Organised Unorganised
1984-85 1989-90 1994-95 1984-85 1989-90 1994-95
while continuing with non-tariff measures to protect them from to to to to to to
foreign competition, probably helped a recovery and acceleration 1989-90 1994-95 1999-2000 1989-90 1994-95 2000-01
in manufacturing activity during the 1980s.
Value Added 7.20 8.25 6.94 0.99 -0.99 6.92
During the partial liberalisation period of 1984-90, value added (8.42)
in the organised sector grew at 7.2 per cent, with growth of capital Organic 7.82 7.19 3.46 0.47 -3.00 5.86
at 6 per cent and employment at 0.65 per cent (Table 1). The (8.41)
Inorganic 6.90 8.74 8.33 2.09 2.54 8.43
organic1 industries that registered high growth in value added Employment 0.65 2.13 0.70 -0.95 -1.73 2.16
during this period were food and beverages, tobacco products, (3.80)
wearing apparel, and paper and paper products. Among the Organic 0.90 1.97 0.55 -2.59 -2.35 2.47
inorganic2 industries, intermediate goods like chemicals and (4.72)
Inorganic 0.40 2.29 0.85 4.04 -0.26 1.44
chemical products, coke and refined petroleum, rubber and plastic Fixed Capital 5.99 13.56 12.09 -20.41 5.25 6.39
products, and other non-metallic mineral products, and consumer (7.60)
goods like office accounting machinery, radio, television and Organic 4.28 15.37 11.38 -23.39 3.72 5.84
communications, medical, precision and optical instruments, (7.81)
Inorganic 6.56 12.96 12.34 -12.62 7.96 7.24
watches and clocks had a high growth in value added (Table 2).
The import policy of the 1980s included a number of capital Shares
Organised Unorganised
goods3 in the open general licence (OGL) category. Some of 1984- 1989- 1994- 1999- 1984- 1989- 1994- 2000-
the intermediate goods, like metal products and organic heavy 85 90 95 2000 85 90 95 01
chemicals were also included in the OGL. This effectively brought
Value Added
down the protection afforded to domestic producers [Kelkar and Organic 31.69 32.70 31.02 26.06 68.52 66.75 60.34 56.6
Kumar 1990 Nouroz 2001]. As a result, there was a slowdown Inorganic 68.31 67.30 68.98 73.94 31.48 33.25 39.66 43.4
in value added growth in most of these industries, and transport Employment
Organic 49.93 50.54 50.14 49.77 78.17 72.02 69.83 71.12
equipment registered a negative growth (Table 2). With import
Inorganic 50.07 49.46 49.86 50.22 21.83 28.03 30.17 28.88
liberalisation, intermediate and consumer goods became the Fixed Capital
prime movers of growth during the 1980s, and metal-based and Organic 25.96 23.83 26.09 25.17 77.35 66.90 61.73 59.72
machinery industries, which had provided the momentum for Inorganic 74.04 76.17 73.91 74.83 22.65 33.40 38.27 40.28
industrial growth in the economy, grew at a much slower rate Note: Figures in parentheses include tailoring establishments. To make the
[Kelkar and Kumar 1990]. overall growth rate comparable with the earlier periods, we have
In the unorganised sector, the manufactured output grew very excluded tailoring establishments from wearing apparel.
Source: NSSO (1989), NSSO (1994a), NSSO (1994b), NSSO (1998a), NSSO
slowly at nearly 1 per cent, compared with the organised sector (1998b), NSSO (1998c), NSSO (2002a), NSSO (2002b), NSSO (2002c).
during 1984-90, with a negative growth of capital and employ- CSO (1985a), CSO (1985b), CSO (1985c), CSO (1990a), CSO (1990b),
ment (Table 1). As in the organised sector, even in this sector, CSO (1990c), CSO (1995a), CSO (1995b), CSO (2002).

Economic and Political Weekly October 9, 2004 4569

slow growth in employment in the organised manufacturing
sector was termed as the period of ‘jobless’ growth [Nagaraj
2000]. In the organised sector, employment growth was com-
paratively higher in organic than in inorganic industries. Except
for wearing apparel, tobacco products, and leather there was
hardly any growth of employment in the organic industries.
Chemical industries, which had a high growth of value added
did not generate similar employment growth. Employment growth
was observed only in radio, television and communication, medical,
precision and optical instruments, watches and clocks, and rubber
products, among inorganic industries (Table 2).
In the unorganised sector, employment in the organic industries
had a negative growth (-2.6 per cent), while inorganic industries
saw a positive growth of 4 per cent. Wearing apparel, textiles,
food products and leather had a high negative growth in em-
ployment among the organic industries. Among inorganic indus-
tries, employment grew in all industries except basic metals,
fabricated metal products and office accounting and computing
machinery (Table 3).
The employment output elasticity for the organised sector was
0.09 during this period and it was negative for the unorganised
sector (-0.96) (Table 4). The low absorption of labour in the
organised sector was argued to be due to inappropriate technology
choice or product composition [Mohan 1996]. It was argued that
chemicals, petrochemicals and related activity are process indus-
tries with vast potential for automation and application of elec-
tronic process control equipment [Kelkar and Kumar 1990] and
that labour productivity was the highest in these industries in
the organised sector, but not so in the unorganised sector. However,
the high labour productivity seems to be due to substitution of
capital for labour in this industry, as the increase in capital
intensity was not accompanied by an increase in capital produc-
tivity (Table 5). This industry, while being skill intensive, was
not labour absorbing, as the employment output elasticity for this
industry group was 0.20 (Table 4).
The growth in the consumer goods industries, which was
facilitated by the macroeconomic policies during this period
(effective rate of protection for consumer goods remained high),
also reflected the modernisation of consumption, as a large
number of consumer products embodied modern technological
characteristics. There was a reliance on imported kits for most
of these goods, which probably led to low generation of employ-
ment [Kelkar and Kumar 1990]. The other reason could have
been the change in labour laws in the early 1980s, making labour
adjustment in the organised sector more difficult, which might
have led to inappropriate technology choice and slowdown in
machinery industries in this period as the effective rates of
protection declined. These industries, it was argued, were rela-
tively more employment generating and also offered greater
technological flexibility in terms of factor proportions, which
could be changed to some extent in response to relative factor
prices [Kelkar and Kumar 1990]. Despite the slowdown, fab-
ricated metal and electrical machinery industry had an employ-
ment elasticity of 0.54 and 0.65 in the organised sector (Table 4).
The negative employment growth in the unorganised sector
was largely due to the textile policy of 1984, which led to the
closure of textile mills, affecting employment in both large and
small industries. Secondly, the massive growth of capital-inten-
sive chemical and related industries had less scope for
ancillarisation and subcontracting, unlike the machinery indus-
tries, which had both forward and backward linkages. Thirdly,
the consumer goods industry, which grew in the organised sector

Table 2: Growth Rates in Value Added, Employment and Fixed Capital

in Organised Manufacturing by Two-Digit Industry Group
Industry Groups Value Added Employment Fixed Capital
1984-85 to 1989-90 to 1994-95 to 1984-85 to 1989-90 to 1994-95 to 1984-85 to 1989-90 to 1994-95 to
1989-90 1994-95 1999-2000 1989-90 1994-95 1999-2000 1989-90 1994-95 1999-2000

1405 Cotton ginning 6.65 -6.36 11.84 3.06 -0.93 2.66 -2.47 7.76 17.23
15 Food products 10.52 5.82 4.31 1.79 2.30 1.65 9.46 12.58 12.16
16 Tobacco products 7.66 7.18 7.72 8.25 2.10 -1.86 13.40 12.39 13.89
17 Textiles 5.91 6.41 2.86 -2.41 -0.34 0.21 3.70 14.75 13.29
18 Wearing apparel 20.19 26.97 2.20 11.15 17.30 3.73 16.92 32.78 10.80
19 Leather products 5.18 11.05 6.26 6.49 3.79 1.68 7.14 17.66 9.19
20 Wood products 2.10 -3.84 -5.11 -0.73 -0.17 -4.81 7.80 6.25 4.93
21 Paper products 9.32 3.56 -0.88 0.36 3.57 1.75 -4.05 21.87 3.74
22 Publishing, printing 1.32 10.85 3.19 -2.75 2.66 -6.43 -1.23 12.57 16.61
Organic 7.82 7.19 3.46 0.90 1.97 0.55 4.28 15.37 11.38
23 Coke, petroleum 25.07 9.19 -1.41 4.06 5.46 -0.01 4.02 10.57 20.25
24 Chemical products 9.10 9.35 10.72 1.80 3.37 3.11 10.28 12.36 12.81
25 Rubber products 8.64 7.54 12.00 4.87 5.14 3.11 13.90 14.39 13.91
26 Other non-metallic minerals 8.27 4.38 11.92 1.14 0.41 0.32 13.51 9.21 18.15
27 Basic metals 5.20 10.02 7.22 -2.51 1.34 -0.03 1.56 16.98 6.00
28 Fabricated metals 4.67 6.93 10.83 2.52 2.07 3.74 8.20 17.43 9.07
29 Machinery and equipments 1.75 5.13 6.37 -0.69 0.86 -0.09 4.75 7.62 10.82
30 Office, accounting and
computing machinery 7.98 10.67 -12.29 -4.23 -1.57 -6.12 10.44 7.70 -3.67
31 Electrical machinery 3.51 9.71 5.31 2.28 2.53 -0.81 6.33 22.25 42.31
32 Radio, television and
communication equipment 17.93 13.18 3.56 6.73 2.91 -3.05 20.21 -22.4 42.31
33 Medical, precision and optical
instruments, watches and clocks 11.25 9.04 13.18 4.14 3.02 3.32 12.86 11.89 2.07
34 Motor vehicles 5.25 9.11 11.30 1.89 3.50 4.31 7.79 10.91 27.70
35 Other transport equipments -1.38 7.31 6.66 -4.27 2.01 -10.08 -0.75 2.96 7.97
36 Other manufacturing -1.68 22.16 19.57 1.33 8.44 9.83 1.89 21.17 16.17
Inorganic 6.90 8.74 8.33 0.40 2.29 0.85 6.56 12.96 12.34
All 7.20 8.25 6.94 0.65 2.13 0.70 5.99 13.56 12.09

Source: CSO (1985a), CSO (1985b), CSO(1985c), CSO (1990a), CSO (1990b), CSO (1990c), CSO (1995a), CSO (1995b), CSO (2002).

4570 Economic and Political Weekly October 9, 2004

with the easing of import liberalisation, probably did not spill
over to the unorganised sector, as most of these goods were
imported and assembled in large factories.
During this period, capital-intensity grew at 5 per cent with a
growth in capital productivity of 1.2 per cent and labour pro-
ductivity at 6.5 per cent in the organised sector (Table 5). The
rise in capital-intensity with capital productivity remaining un-
changed or rising meant that the production efficiency had
improved and it might have led to technological upgradation
[Ghose 1994]. However, at the two-digit industry group, it was
observed that in most of the modern industries there was a rise in
capital intensity, with a substantial decline in capital productivity,
which meant that there was merely substitution of capital for
labour (Table 5), and no technological upgradation. The slowdown
in employment growth could be attributed to this strategy of
capital deepening by firms in the organised sector. In the
unorganised sector, the growth of capital intensity was negative,
and capital productivity grew at 21.4 per cent and labour producti-
vity grew at 2 per cent (Table 6). The negative capital intensity
could be due to the closure of textile mills or closure of inefficient
units, bringing down both capital investment and employment,
and allowing the remaining units to operate productively. It is also
possible that with the decline in protection to domestic producers,
many of the units might have found it difficult to operate.
Early 1990s, 1989-90 to 1994-95
The current account imbalance of the early 1990s, which led
to the liberalisation of the economy, was argued to be due to
the import liberalisation policies of the mid-1980s, as it stimu-
lated faster import growth [Chandrasekhar and Ghosh 2002]. The
reforms of the new policy regime abolished investment licensing
and simplified rules to facilitate private investment. Exclusive
monopoly of the public sector over a number of industries was
abandoned. This policy allowed domestic private investors to
invest in capacity and production in a wide range of industries,
including heavy industries and automobiles, which were earlier
reserved for public sector [Chandrasekhar and Ghosh 2002]. The
new industrial policy abolished the system of licensing for all
but 18 industries, which were reduced to 15 by 1993 [Kathuria
1993]. For small-scale industries, investment limit in plant and
machinery was increased from Rs 2 to Rs 5 lakh.
This period brought about a more comprehensive trade
liberalisation, which encompassed abolition of non-tariff barri-
ers, reduction of peak tariff rates and dispersion along with
devaluation of the rupee [Das 2003]. Imports were further
liberalised, whereby the domestic industry could access capital
goods, intermediates and raw materials. Tariff barriers and
quantitative restrictions on foreign trade were sharply reduced.
Average tariff was brought down from 123 per cent in 1987-88
to 58 per cent in 1994-95 [Nouroz 2001], and quantitative
restrictions on trade were lifted, except for consumer goods and
agricultural commodities [Varshney 2001: 234]. The dismantling
of quantitative restrictions occurred in the first two years, when
import licensing was virtually abolished for imports of industrial
raw materials, intermediates, components and capital goods.
However, restrictions on imports of consumer goods continued,
which provided “substantial and open-ended protection for all
industrial consumer goods” [Ahluwalia 2001].
Foreign portfolio institutions were given entry and rules for
foreign direct investment were liberalised. The policy allowed
Economic and Political Weekly October 9, 2004
automatic approval of foreign collaboration agreements in 34
priority industries subject to certain guidelines, and foreign firms
could hold up to 51 per cent equity in these industries, if their
requirement for capital imports was financed through foreign
equity [Kathuria 1995]. This change in policy allowed firms to
enter into joint ventures with multinational enterprises (MNEs)
more freely, import technology from MNEs, import capital goods
and expand capacities and introduce new products without
obtaining an industrial licence. The liberalisation measure also
made technology transfer easier as firms could import technology
against royalty and lumpsum payments. Liberalisation of foreign
direct investment was expected to facilitate the formation of
alliances for technology transfer and international marketing. The
reforms reduced dependence on sub-optimal domestic inputs and
technology by allowing freer imports of raw materials, interme-
diate goods and capital goods [Siddharthan and Lal 2003]. To
encourage private initiative, tax policies were also rationalised.
During this period, no reforms were undertaken in areas related
to privatisation of public sector enterprises and labour laws.
All these policies together led to growth in value added of 8.3
per cent with an employment growth of 2.1 per cent and fixed
capital growth of 13.6 per cent in the organised sector during
1989-95 (Table 1). There was also a remarkable turnaround, with
exports growing by 20 per cent in 1993-94. According to
Chandrasekhar and Ghosh (2002) the growth in manufacturing
output in this period was a result of “pent-up demand for a host
of import-intensive goods, which because of liberalisation could
be serviced through domestic assembly or production using
imported inputs and components” (p 60). Across the industry
groups, wearing apparel and leather products had a high value
added among organic industries. Among inorganic industries,
growth was observed in consumer durable industries like radio,
television and communications; medical, precision and optical
instruments, watches and clocks, furniture and other manufac-
turing, office accounting and computing machinery, chemical
industries, motor vehicles and metal based industries (Table 2).
Undoubtedly, during this period, the consumer goods industry
dominated the manufacturing sector and the continued growth
was also due to domestic protection and high levels of tariff
[Nouroz 2001]. It was argued that the industrial base of the
economy had become shallower as more than half the growth
was accounted for by consumer goods [Chaudhuri, 2002].
Despite the steep reduction in tariffs in the metal-based and
machinery industry by 1994-95, these industries had a compara-
tively better growth than in the earlier period. This growth in
value added was largely due to growth in fixed capital, as capacity
expansion and import of technology became easier. However,
the consumer goods industry continued to grow as the tariff levels
were high. The protection for consumer goods while liberalising
other imports was widely criticised as illogical because it dis-
torted resource allocation in favour of highly protected consumer
goods industries and away from basic and capital goods which
were strategically important [Ahluwalia 2001: 47].
In the unorganised sector, growth in value added was negative
(-0.99 per cent) accompanied by a negative growth of employ-
ment (-1.7 per cent) and positive growth of fixed capital (5.3
per cent) (Table 1). Among the organic industries, only wearing
apparel and leather products had a positive growth, while in the
inorganic industries positive growth was observed in rubber and
plastic products, non-metallic mineral products, fabricated metal
products, office, accounting and computing machinery and other
4571
manufacturing industries (Table 3). While, the metal-based and
machinery industry in the organised sector recovered despite the
decline in protection, the unorganised sector was affected quite
badly. Except for fabricated metals, all the other metal-based and
machinery industry had negative growth. Though the fixed capital
in these industries increased as a result of incentives given to
the small-scale industry, it did not help in improving value added
growth, which continued to be negative. One consequence for
the manufacturing industry with the policy change was argued
to be “displacement of existing domestic production either directly
by imports or indirectly by new products assembled domestically
from imported inputs” [Chandrasekhar and Ghosh 2002: 56].
This could be one of the reasons for the growth of the organised
sector and the lack of it in the unorganised sector.
Contrary to expectations, with the opening up of the economy,
employment grew at 2.1 per cent in the organised sector, and
growth was much higher in the inorganic industries (2.3 per cent)
(Table 1). The absence of massive labour dislocations following
the liberalisation of the economy, as expected, was because the
government postponed reforms that might have strong negative
effects on employment [Zagha 2001]. In the initial three years,
1992-93 to 1994-95, after the reforms were introduced, employ-
ment grew at 4 per cent per annum in the organised sector.5 The
acceleration in employment growth, especially in the capital
goods industry in the organised sector, was due to the expansion
in output and investment boom in response to industrial deregu-
lation and trade policy reforms [Forbes 2002; Goldar 2000].
The organised manufacturing sector also saw reorganisation
in terms of size, with the very large units (above 1,000 workers)
Table 3: Growth Rates in Employment, Value Added and Fixed Capital in Unorganised
Manufacturing by Two-Digit Industry Group
Industry Groups Value Added
1984-85 to 1989-90 to 1994-95 to 1984-85 to 1989-90 to
1989-90 94-95 2000- 01
declining and growth of the middle and small-sized units
[Uchikawa 2003]. Goldar (2000) also observed an increase in
employment, but he argued that this was not in large establish-
ments, but in small and medium-sized factories. The growth in
employment in organised industries was observed in wearing
apparel, rubber and plastic and other manufacturing industries
(Table 2). However, employment growth in the unorganised
sector was negative (-1.7 per cent) (Table 1), and across industry
groups positive employment growth was observed only in food
products, wearing apparel, rubber and plastic products, basic
metals; fabricated metal products, office, accounting and com-
puting machinery, motor vehicles and other manufacturing
(Table 3). All other industries had negative employment growth.
In the organised sector, though employment growth was much
higher compared with the earlier period, it was not commensurate
with the growth in value added. The employment output elasticity
improved from 0.09 in the earlier period to 0.26 (Table 4). At
the two-digit industry group, the industries that, generated
employment were wearing apparel, paper products, coke, petro-
leum and rubber products. The unorganised sector had a negative
employment output elasticity of 1.76. The industries that gen-
erated employment in the unorganised sector were wearing apparel,
rubber products, fabricated metals, office accounting and com-
puting machinery, motor vehicles and other manufacturing
(Table 4). A sharp growth in capital intensity in both the organised
and unorganised sector was observed. The positive growth in
capital intensity was not accompanied by a rise in capital pro-
ductivity in both sectors, which again implied a substitution of
capital for labour, without any technological upgradation
Employment Fixed Capital
1994-95 to 1984-85 to 1989-90 to 1994-95 to
1989-90 1994-95 2000-01 1989-90 1994-95 2000-01

1405 Cotton ginning 3.85 -20.83 -1.53 -16.08 -4.33 -11.93 -31.48 -2.42 -1.34
15 Food products 0.33 -1.52 6.52 -3.65 0.79 1.69 -12.98 -0.80 6.39
16 Tobacco products 7.24 -4.30 5.03 12.89 -8.80 7.73 ** ** 5.68
17 Textiles 3.50 -2.88 6.26 -5.63 -2.43 -0.16 -19.92 5.62 4.28
18 Wearing apparel* -29.52 6.24 14.40 -41.34 1.52 14.44 -76.13 23.61 7.90
19 Leather products -16.50 8.24 1.71 -6.94 -1.65 -2.65 -38.60 2.23 6.83
20 Wood products 6.12 -7.31 1.20 7.53 -3.08 2.36 -24.41 2.53 5.27
21 Paper products 7.64 -3.95 10.91 10.21 -1.13 5.73 11.45 9.85 4.58
22 Publishing, printing 12.25 -6.04 5.97 12.60 -2.16 3.99 4.58 1.39 9.16
Organic* 0.47 -3.00 5.86 -2.59 -2.35 2.47 -23.39 3.72 5.84
23 Coke, petroleum -4.33 -6.73 0.16 3.11 -10.76 0.45 -27.81 3.56 8.41
24 Chemical product 10.83 -12.94 8.29 9.62 -9.39 7.63 -4.37 3.20 7.49
25 Rubber products 15.69 4.79 0.83 12.18 4.77 1.45 11.35 19.64 -4.52
26 Other non-metallic minerals 6.15 1.34 13.43 2.03 -1.81 2.69 -17.30 0.55 13.93
27 Basic metals 2.10 -3.82 7.02 -1.58 1.84 1.16 2.62 4.40 10.80
28 Fabricated metals -6.25 4.83 8.37 -0.31 2.38 4.27 -20.15 9.29 6.19
29 Machinery and equipments 11.21 -10.67 12.31 6.69 -2.55 7.56 -2.28 6.26 8.95
30 Office, accounting and
Computing machinery -1.60 19.91 -53.12 -12.41 5.91 -30.76 -33.82 -17.18 -40.98
31 Electrical machinery – – 21.72 9.10 -6.30 18.63 -2.13 2.62 14.37
32 Radio, television and
communication equipment 2.23 -0.44 10.76 9.25 -1.52 4.77 -4.41 0.63 5.92
33 Medical, precision and optical
Instruments, watches and clocks 26.31 -7.01 -1.31 7.76 -0.39 -4.36 -3.91 17.97 -6.91
34 Motor vehicles -26.93 -1.84 16.54 8.38 3.00 9.40 -0.80 13.74 19.81
35 Other transport equipments -22.86 -3.10 3.43 5.25 -6.87 -0.45 -3.51 8.26 10.46
36 Other manufacturing 10.66 5.38 4.99 5.80 1.35 -3.44 -14.92 8.72 5.49
Inorganic 2.09 2.54 8.43 4.04 -0.26 1.44 -12.62 7.96 7.24
All* 0.99 -0.99 6.92 -0.95 -1.73 2.16 -20.41 5.25 6.39

Note: ‘-’ Implies that the growth rates could not be computed as the gross value added for electrical machinery and related goods were negative.
‘*’ Implies that tailoring establishments are excluded from wearing apparel, to make the data comparable with the earlier periods.
‘**’ Implies that the growth rates could not be computed as the fixed capital for tobacco products was negative.
Source: NSSO (1989), NSSO (1994a), NSSO (1994b), NSSO (1998a), NSSO (1998b), NSSO (1998c), NSSO (2002a), NSSO (2002b), NSSO (2002c).

4572 Economic and Political Weekly October 9, 2004

(Tables 5 and 6). This was true across all the industry groups
at the two-digit level in both the sectors.
Late 1990s, 1994-95 to 2000-01
In this period, the reforms were gradually extended to other
sectors. Tariffs were further reduced for most goods, and con-
sumer goods were also included in 1997, and tariffs were to be
reduced in a phased manner over a period of six years [Ahluwalia
2001]. By 1997-98, the average tariff rate came down to 41 per
cent from 58 per cent [Nouroz 2001]. Public sector reforms
started in 1996 with “‘disinvestments’ involving sale of a portion
of the government equity in public sector enterprises while
retaining majority control with the government” [Ahluwalia
2001: 62]. In 1998, seven years after reforms were introduced,
the government finally announced its intention to push through
privatisation of public firms [Varshney 2001]. Labour law was
amended, allowing firms with more than 100 workers to restruc-
ture their companies and lay off labour in the process.
The other important policy that was introduced was the de-
reservation of 15 small-scale industries in 1997-98, allowing larger
firms to enter and compete. Investment ceiling in plant and
machinery was enhanced from Rs 60 lakh to Rs 3 crore and for the
tiny sector it was raised from Rs 5 lakh to Rs 25 lakh in 1996-97.
Composite loan limit for SSI units increased to Rs 2 lakh from
Rs 50,000. The export promotion capital goods (EPCG) scheme
at zero duty was extended to the small-scale engineering industry.
Further, the ceiling for working capital was doubled for small-
scale units from Rs 2 to Rs 4 crore. Small-scale industry units
were exempted from excise duty (Economic Survey, various years).
The earlier period, which had a high growth rate in value added
in the organised sector was led by an import-led boom, and it
Table 4: Employment Elasticity With Respect to Output in the Organised
and Unorganised Manufacturing by Two-Digit Industry Groups
Industry Groups
1984-85
to 1989-90
slowed down in this period to 6.9 per cent, along with employ-
ment (0.7 per cent) and capital (12.1 per cent) (Table 1).
Chandrasekhar and Ghosh (2002), commenting on the recession
in the organised manufacturing industry since mid-1996, observed
that “liberalisation per se is not enough to ensure high rates of
growth of investment and productive activity, and that other
strategies may be necessary to encourage” (p 23). Vaidyanathan
(1995) also pointed out that though the policy regime changed
under reforms, which deregulated and got rid of bureaucratic
controls, the responsibility for the necessary reform was left to
the states. The requirements for licences, permits and inspections
at the state and local level continued to be onerous, as the
enterprises faced difficulties in procuring land, electricity and
water connections. Secondly, there was a credit squeeze in 1996,
based on the quality of credit, which also seemed to have dis-
suaded industrial producers from plans to expand their pro-
duction and import technology [Desai 2002]. A credit policy
based more on changes in interest rates would have been more
responsive to market conditions. Instead, the credit squeeze
choked funds to industry and perhaps resulted in the prolonged
recession.
In the organised sector, among organic industries positive
growth was registered in all areas except wood, and paper and
paper products. Positive growth in value added was observed
in all inorganic industries except coke, refined petroleum, and
office accounting and computing machinery. The value added
continued to grow in chemical and rubber products, other non-
metallic mineral products, fabricated metals, machinery and
equipments, medical, precision and optical instruments,
watches and clocks, and motor vehicles in 1994-2000 (Table 2).
In most of these industry groups fixed capital also increased
during this period.
Organised Unorganised
1989-90 to 1994-95 to 1984-85 to 1989-90 to 1994-95
1994-95 1999-2000 1989-90 1994-95 to 2000-01

1405 Cotton ginning 0.46 -0.15 0.23 -4.17 -0.21 -7.78

15 Food products 0.17 0.40 0.38 -11.12 0.52 0.26
16 Tobacco products 1.08 0.29 -0.24 1.78 -2.04 1.54
17 Textiles -0.41 -0.05 0.07 -1.61 -0.84 -0.03
18 Wearing apparel* 0.55 0.64 1.70 -1.40 0.24 1.00
19 Leather products 1.25 0.34 0.27 -0.42 -0.20 -1.55
20 Wood products -0.35 -0.05 -0.94 1.23 -0.42 1.98
21 Paper products 0.04 1.00 1.98 1.34 -0.29 0.53
22 Publishing, printing -2.09 0.25 -2.01 1.03 -0.36 0.67
Organic 0.12 0.27 0.16 -5.53 -0.78 0.56
23 Coke, petroleum 0.16 0.60 -0.01 0.72 -1.60 2.83
24 Chemical product 0.20 0.36 0.29 0.89 -0.73 0.92
25 Rubber products 0.56 0.68 0.26 0.78 1.00 1.76
26 Other non-metallic minerals 0.14 0.09 0.03 0.33 -1.35 0.20
27 Basic metals -0.48 0.13 -0.00 -0.75 0.48 0.17
28 Fabricated metals 0.54 0.30 0.35 -0.05 0.49 0.51
29 Machinery and equipments -0.40 0.17 -0.01 0.60 -0.24 0.61
30 Office, accounting and computing machinery -0.53 -0.15 -0.50 -7.78 0.30 -0.58
31 Electrical machinery 0.65 0.26 -0.15 - - 0.86
32 Radio, television and communication equipment 0.38 0.22 -0.86 4.15 -3.45 0.44
33 Medical, precision and optical Instruments, watches and clocks 0.37 0.34 0.25 0.30 -0.06 -3.34
34 Motor vehicles 0.36 0.38 0.38 0.31 1.63 0.57
35 Other transport equipments 3.11 0.28 -1.51 0.23 -2.22 -0.13
36 Other manufacturing -0.79 0.38 0.50 0.54 0.25 -0.69
Inorganic 0.06 0.26 0.10 1.94 -0.10 0.17
All* 0.09 0.26 0.10 -0.96 -1.76 0.31

Note: ‘-’ implies that the growth rates could not be computed as the gross value added for electrical machinery and related goods were negative.
‘*’ implies that tailoring establishments are excluded from wearing apparel, to make the data comparable with the earlier periods
Source: Same as Table 1.

Economic and Political Weekly October 9, 2004 4573

 The value added grew rapidly in the unorganised manufactur-
ing sector (6.9 per cent) compared with a negative growth in the
earlier periods, employment growth of 2.1 per cent and fixed
capital growth of 6.4 per cent (Table 1). This could mean that
with the reforms, some of the growth-oriented industry in the
organised sector has spilled over to the unorganised sector.
Secondly, with the enhancement of investment ceiling for plant
and machinery for small-scale industries from Rs 60 lakh to Rs 3
crore, and other concessions accorded to this sector, the firms
might have gone in for better technology or technological
upgradation,which helped to improve output. Thirdly, with
liberalisation and dereservation of small-scale industries the
forces of competition are unleashed and there is reorganisation
or restructuring of the unorganised sector, which might have also
led to improved output.
In the unorganised sector, positive growth in value added was
observed in all the industries except for office accounting and
computing machinery, medical precision and optical instruments
and watches and clocks. A high growth in value added was
observed in wearing apparel, chemical products, other non-
metallic mineral products, basic metals, fabricated metals,
machinery and equipment, electrical machinery, and motor vehicles
(Table 3). There was an increase in fixed capital growth in all
these industries except fabricated metals. The high growth in the
unorganised sector could also be due to the subcontracting
arrangements with firms within and outside the country.
Organised sector employment grew by only 0.7 per cent during
this period (Table 1). This could be due to the public sector
reforms, which were introduced during this period, and also due
to the general slowdown of the economy. Positive employment
growth was observed in food products and beverages, wearing
apparel, fur products, leather, and paper and paper products,
among the organic industries. In inorganic industries, employ-
ment grew only in fabricated metal products, medical, precision
and optical instruments, watches and clocks, and motor vehicles
(Table 2). Employment elasticity in the organised sector declined
to 0.10 during this period. Wearing apparel and paper products
in the organic industry were the only groups that had a high
employment elasticity and also elasticity greater than in the
unorganised sector (Table 4).
In the unorganised sector, employment grew at 2.1 per cent
after registering a negative growth in the earlier two periods
(Table 1). The unorganised sector, which has a larger presence
in the organic industries, registered a higher growth of employ-
ment in all the groups except leather and textiles. In the inorganic
industries, employment grew in chemicals and chemical prod-
ucts, other non-metallic mineral products, fabricated metal prod-
ucts, machinery and equipment, electrical machinery, and motor
vehicles (Table 3). In all these industries, though employment
generation was not commensurate to the growth in value added,
the quality of employment measured in terms of labour produc-
tivity was quite high. Employment elasticity in the unorganised
sector was 0.45 during this period. Employment elasticity close
to or greater than one was observed in tobacco products, wearing
apparel, wood products, coke petroleum, chemical products,
rubber products and electrical machinery industries (Table 4).
Capital intensity grew at a similar rate as in the earlier period
in the organised sector along with increasing labour productivity
and declining capital productivity. This was true for most of the
industry groups in this sector. In the unorganised sector, the
capital intensity continued to grow at a slower pace and this was
accompanied by an increase in capital productivity, and labour
productivity also increased during this period (Tables 5 and 6).
This could mean that in the unorganised sector there was

Table 5: Growth Rates in Partial Productivity in Organised Manufacturing Sector by Two-Digit Industry Group
Industry Groups Labour Productivity Capital Productivity Capital Intensity
1984-85 to 1989-90 to 1994-95 to 1984-85 to 1989-90 to 1994-95 to 1984-85 to 1989-90 to 1994-95 to
1989-90 1994-95 1999-2000 1989-90 1994-95 1999-2000 1989-90 1994-95 1999-2000

1405 Cotton ginning 3.59 -5.43 9.18 9.12 -14.12 -5.39 -5.53 8.68 14.57
15 Food products 8.74 3.52 2.66 1.06 -6.77 -7.85 7.68 10.29 10.51
16 Tobacco products -0.58 5.08 9.58 -5.73 -5.21 -6.17 5.15 10.29 15.74
17 Textiles 8.33 6.75 2.65 2.22 -8.34 -10.43 6.11 15.10 13.08
18 Wearing apparel 9.04 9.67 -1.53 3.26 -5.80 -8.60 5.78 15.47 7.07
19 Leather products -1.32 7.25 4.57 -1.96 -6.61 -2.93 0.64 13.86 7.51
20 Wood products 2.83 -3.67 -0.30 -5.69 -10.09 -10.04 8.52 6.42 9.74
21 Paper products 8.96 -0.01 -2.63 13.37 -18.31 -4.62 -4.41 18.30 1.99
22 Publishing, printing 4.07 8.19 9.63 2.55 -1.72 -13.42 1.52 9.91 23.04
Organic 6.93 5.22 2.90 3.54 -8.18 -7.92 3.38 13.40 10.82
23 Coke, petroleum 21.01 3.73 -1.40 21.05 -1.38 -21.66 -0.04 5.11 20.26
24 Chemical products 7.31 5.98 7.61 -1.18 -3.01 -2.09 8.49 8.99 9.70
25 Rubber products 3.77 2.40 8.89 -5.26 -6.84 -1.91 9.03 9.25 10.80
26 Other non-metallic minerals 7.13 3.97 11.60 -5.24 -4.83 -6.23 12.38 8.80 17.83
27 Basic metals 7.71 8.67 7.25 3.64 -6.96 1.22 4.07 15.64 6.03
28 Fabricated metals 2.15 4.86 7.09 -3.53 -10.49 1.76 5.68 15.36 5.33
29 Machinery and equipments 2.44 4.28 6.47 -2.99 -2.48 -4.45 5.44 6.76 10.91
30 Office, accounting
and computing machinery 12.21 12.24 -6.17 -2.46 2.97 -8.62 14.67 9.27 2.45
31 Electrical machinery 1.23 7.17 6.12 -2.82 -12.55 -0.17 4.05 19.72 6.29
32 Radio, television and
communication equipment 11.20 10.27 6.62 -2.28 35.60 -38.75 13.48 -25.3 45.37
33 Medical, precision and optical
Instruments, watches and clocks 7.10 6.01 9.87 -1.62 -2.85 11.12 8.72 8.86 -1.25
34 Motor vehicles 3.36 5.61 6.99 -2.55 -1.79 -16.39 5.90 7.40 23.38
35 Other transport equipments 2.90 5.30 16.75 -0.63 4.35 -1.30 3.52 0.95 18.05
36 Other manufacturing -3.02 13.72 9.74 -3.57 0.99 3.40 0.56 12.73 6.34
Inorganic 6.50 6.45 7.48 0.34 -4.22 -4.01 6.15 10.66 11.49
All 6.55 6.11 6.24 1.21 -5.31 -5.16 5.34 11.43 11.39

Source: Same as Table 2.

4574 Economic and Political Weekly October 9, 2004

technological upgradation taking place during this period. This
technological upgradation was taking place in paper products
with increase in labour productivity among the organic industries.
Among the inorganic industries, the growth of labour produc-
tivity was accompanied by some sort of technological upgradation
in radio, television and communications, machinery and equip-
ments and fabricated metals industries.
By the end of the 1990s, the growth in value added and
employment in the organised sector slowed down, while the
growth in value added and employment in the unorganised sector
showed a recovery. In the initial phase of liberalisation, consumer
goods grew under protection. Growth slowed down later when
protection for this industry was phased out. The opposite was
true of metal-based and machinery industries, which slowed
down during the partial liberalisation phase with reduction in
tariffs but began to grow with the opening up of the economy.
The early 1990s had a higher growth in employment but it was
not commensurate with the growth in value added in the organised
sector. The unorganised sector had a negative employment
growth. The reforms of the late 1990s did not generate any employ-
ment in the organised sector, but the unorganised sector saw an
increase in value added and employment, with better quality of
employment. In certain specific industries in the unorganised sector,
employment elasticity was equal to or more than one, but the
employment generating potential was quite low in other industries.
Sector-Based Impact of Reforms
The earlier analysis indicated that the economic reform policies
had a differential impact on various industry groups. In this
section we analyse in detail some of these industries at the sub-
sector level.
Motor Vehicles
This sector was heavily regulated and dominated by a few
players before reforms were introduced. The liberalisation policy
of 1992-93 allowed import of motor vehicle parts through special
import licence. The motorcar was delicenced in 1993-94. Excise
duty on automobiles was reduced from 55 to 40 per cent and
there was also reduction in excise and customs duties on various
components and spare parts in 1993-94. These policies allowed
a number of global firms like Ford, General Motors, Daewoo,
Hyundai, Mercedes Benz, Peugeot and Honda to enter the Indian
market [Zagha 2001]. The automobile industry seems to have
emerged as a fiercely competitive industry with the opening up
of the economy.
The motor vehicles industry had a high growth in the 1990s
in both the organised and unorganised sector. In the organised
sector, employment and value added grew at 4.3 and 11.3 per
cent during 1994-2000 (Table 2), while in the unorganised sector
both employment (9.4 per cent) and value added (16.5 per cent)
registered a very high growth during 1994-2001 (Table 3). In
this industry, the sub-sector, manufacture of motor vehicles (341)
had a high growth in the organised sector, while manufacture
of parts and accessories for motor vehicles and their engines (343)
had a comparatively high value added growth in both the organised
and unorganised sector. Manufacture of bodies (coach work) for
motor vehicles and manufacture of trailers and semi-trailers (342)
had a negative growth in both value added and employment in
the organised sector during the late 1990s. This industry group
Economic and Political Weekly October 9, 2004
however, had a high growth in the unorganised sector in both
value added and employment (Table 7).
The industry group manufacture of motor vehicles (341)
maintained a high value added growth throughout the 1990s, but
the growth in employment declined (-4.8 per cent) during the
late 1990s in the organised sector. In the unorganised sector,
both value added and employment registered negative growth
throughout the 1990s (Table 7). The removal of licences for
motor vehicles brought about 17 new ventures, 16 of which
were for the manufacture of cars, according to a Ficci estimate
[Shourie 2003].
The liberalisation policy allowed import of capital goods and
automotive components under open general licence, but re-
stricted import of cars and automotive vehicles in semi-knocked
down (SKD) condition. Car manufacturing units were issued
licences to import components in complete knocked down (CKD)
or SKD form only on executing a memorandum of understand-
ing6 (MoU), which was signed by 11 companies [GoI 2002].
This policy might have helped the manufacture in the motor
vehicles industry to grow in the 1990s in the organised sector.
The removal of restrictions also allowed a number of multi-
nationals and large companies to manufacture cars and supply
it to other countries. For example, in the small car business, Maruti
became the preferred supplier under the Suzuki brand for Europe.
Suzuki has also decided to make India its manufacturing, export
and research hub outside Japan. Hyundai Motors India got its
first outsourcing contract in 1999 and started exporting cars to
Indonesia, Algeria, Morocco, Columbia, Nepal, Sri Lanka and
Bangladesh [Pande 2003]. Ford India is the sole manufacturing
and supply base for Ikon cars and components exported to
Mexico, China and Africa [Shourie 2003]. Liberalisation policies
seem to have helped India become the preferred destination for
many countries to take advantage of low costs and high-quality
services, in engineering and software.
As companies started to establish their automobile industry in
India, this had a positive impact on the manufacture of parts and
accessories for motor vehicles and their engines (343), which
had a high growth in value added in both the organised and
unorganised sector. High growth in both sectors was due to the
structure of the automobile industry, which was hierarchical and
‘system supply’ of integrated components and sub-systems is in
practice, where individual small components were supplied to
the system integrators instead of the vehicle manufacturers directly.
In this process, the unorganised sector manufacturing smaller
individual components became tier-2 and tier-3 suppliers, to the
tier-1 company, which was the system integrator. The larger
companies, including most multinational companies, were being
transformed into tier-1 companies, which purchase from tiers 2
and 3, and sell to the auto manufacturers or original equipment
manufacturers. This kind of system allowed both small and
large firms to grow.
India is gaining global recognition for auto component manu-
facturing and is the preferred base as it offers the best mix of
low cost and high quality engineering skills. According to a Ficci
estimate, 15 of the world’s major automobile manufacturers are
now obtaining components from Indian firms [Shourie 2003].
There is an increasing pressure on global tier-1 suppliers and
original equipment manufacturers in US and Europe to reduce
costs by 3-5 per cent.7 This is not possible unless they outsource
components from low-cost countries like India. An increasing
number of foreign manufacturers are making their Indian firms
4575
the sourcing base.8 Hyundai has decided to make its Indian plant
the exclusive sourcing base for the Santro. Most of the large and
medium-sized companies in the automotive segment have made
exports a focus area and are concentrating on systems and processes
in their companies accordingly (Auto parts exports to grow by
35 per cent ACMA, The Economic Times, April 2003).
The growth of the automobile industry has had a positive impact
on the unorganised sector’s auto components and parts industries,
where both value added and employment grew, with improved
quality of employment, measured by growth of labour produc-
tivity. The employment elasticity in both organised and unorganised
sectors was quite high and similar. The growth of the automobile
industry has also helped the consumer durables industry to be
more prominent in the 1990s than in the earlier decade. The
expansion of this industry has also spilled over to other manu-
facturing industries like electric equipments in electrical machi-
nery; forging in fabricated metal products and metal casting in
basic metals, where we observed tremendous growth.
Electrical machinery: The value added growth in this industry
group declined in the organised sector at the two-digit level, with
negative employment growth during 1994-2000 (Table 2). In the
unorganised sector employment and value added had a very high
growth of 19 and 22 per cent during 1994-2001 (Table 3).
However, at the three-digit level, we found that accumulators,
cells and batteries (314) and other electric equipments (319) had
a very high growth in value added in both the organised and
unorganised sectors (Table 7). It is possible that both these
industry groups manufacture and supply intermediate goods for
the automotive industry, which is growing. In the unorganised
sector, employment elasticity was closer to one. The industry
group insulated wire and cable (313) had a high growth in both
value added and employment in the unorganised sector, while
it had a declining growth in the organised sector (Table 7). Though
this industry group had a high employment elasticity of 1.75 in
the unorganised sector, labour productivity was declining. The
growth in this industry group could be due to the increased
demand for optical fibre cables for telecom infrastructure.
Machinery and Equipment: Value added growth in this industry
group grew during the late 1990s, 1994-2000-01, in both the
organised and unorganised sectors. Employment, however, had
a negative growth in the organised and positive growth in the
unorganised sector (Tables 2 and 3). At the three-digit level,
general purpose machinery (291) and domestic appliances (293)
had a very high growth in value added and employment in both
the organised and unorganised sectors. The growth in general
purpose machinery could be due to increased demand for lifting
and handling equipments (2,915) or earth moving equipments
needed in the construction sector. Some of the general purpose
machinery, like compressors are also exported, which has helped
this industry group to grow. The employment potential in both
these industry groups in the unorganised sector was quite high,
as their employment elasticity to output was closer to one, while
only general purpose machinery had employment elasticity closer
to one in the organised sector. The growth of domestic appliances
(293) could be largely due to increased demand for home
appliances in the country and also due to increased exports to
Sri Lanka, Bangladesh, Mexico, Ivory Coast and Dubai
[Chandramouli 2003].

Table 6: Growth Rates in Partial Productivity in Unorganised Manufacturing Sector by Two-Digit Industry Group
Industry groups Labour Productivity Capital Productivity Capital-Intensity
1984-85 to 1989-90 to 1994-95to 1984-85 to 1989-90 to 1994-95 to 1984-85 to 1989-90 to 1994-95 to
1989-90 1994-95 2000-01 1989-90 1994-95 2000-01 1989-90 1994-95 2000-01

1405 Cotton ginning 19.93 -16.49 10.40 35.33 -18.41 -0.19 -15.40 1.92 10.58
15 Food products 3.98 -2.30 4.83 13.31 -0.72 0.13 -9.33 -1.58 4.70
16 Tobacco products -5.65 4.49 -2.70 ** ** -0.65 ** ** -2.05
17 Textiles 9.13 -0.45 6.42 23.42 -8.50 1.98 -14.29 8.05 4.43
18 Wearing apparel* 11.82 4.72 -0.05 46.61 -17.37 -6.55 -34.79 22.09 6.50
19 Leather products -9.56 9.89 4.36 22.10 6.01 -5.12 -31.67 3.88 9.49
20 Wood products -1.40 -4.23 -1.17 30.54 -9.84 -4.07 -31.94 5.61 2.90
21 Paper products -2.57 -2.83 5.18 -3.80 -13.81 6.33 1.23 10.98 -1.15
22 Publishing, printing -0.36 -3.89 1.98 7.67 -7.44 -3.19 -8.02 3.55 5.17
Organic 3.06 -0.65 3.69 23.86 -6.72 0.60 -20.80 6.07 3.09
23 Coke, petroleum -7.44 4.03 -0.29 23.48 -10.29 -8.25 -30.92 14.32 7.96
24 Chemical product 1.21 -3.55 0.66 15.20 -16.14 0.80 -13.99 12.59 -0.14
25 Rubber products 3.52 0.03 -0.63 4.34 -14.85 5.35 -0.83 14.87 -5.98
26 Other non-metallic minerals 4.12 3.15 10.74 23.45 0.79 -0.50 -19.33 2.36 11.24
27 Basic metals 3.69 -5.66 5.86 -0.52 -8.22 -3.79 4.21 2.55 9.64
28 Fabricated metals -5.94 2.45 4.10 13.90 -4.46 2.18 -19.84 6.91 1.92
29 Machinery and equipments 4.53 -8.12 4.75 13.50 -16.93 3.35 -8.97 8.81 1.40
30 Office, accounting and computing
machinery 10.82 14.00 -22.36 32.22 37.10 -44.22 -21.40 -23.1 21.86
31 Electrical machinery - - 3.09 - - 7.35 -11.23 8.92 -4.27
32 Radio, television and communication
equipment -7.02 1.08 5.99 6.64 -1.07 4.84 -13.66 2.15 1.15
33 Medical, precision and optical
instruments, watches and clocks 18.54 -6.62 3.06 30.22 -24.98 5.60 -11.67 18.36 -2.54
34 Motor vehicles -35.31 -4.84 7.14 -26.1 -15.5 -3.27 -9.18 10.74 10.41
35 Other transport equipments -28.11 3.77 3.87 -19.35 -11.36 -7.03 -8.76 15.13 10.91
36 Other manufacturing 4.86 4.03 8.43 25.58 -3.34 -0.49 -20.72 7.37 8.92
Inorganic -1.95 2.80 6.99 14.71 -5.42 1.19 -16.67 8.22 5.81
All* 1.94 0.75 4.76 21.39 -6.24 4.23 -19.44 6.98 0.53

Note: ‘-’ implies that the growth rates could not be computed as the gross value added for electrical machinery and related goods were negative.
‘*’ implies that tailoring establishments are excluded from wearing apparel, to make the data comparable with earlier periods.
‘**’ implies that the growth rates could not be computed as the fixed capital for tobacco products was negative.
Source: Same as Table 3.

4576 Economic and Political Weekly October 9, 2004

 Table 7: Growth Rates in Employment and Value Added in Organised and Unorganised Manufacturing Sector
by Three Digit Industry Groups
Industry Groups Organised Unorganised Employment Elasticity
Value Added Employment Value Added Employment Organised Unorganised
1989-90 1994-95 1989-90 1994-95 1989-90 1994-95 1989-90 1994-95 1989-90 1994-95 1989-90 1994-95
to to to to to to to to to to to to
1994-95 1999-2000 1994-95 1999-2000 1994-95 2000-01 1994-95 2000-01 1994-95 1999-2000 1994-95 2000-01

15 Food products
151 Meat, fish, fruits, vegetables 9.8 1.7 2.2 0.3 4.2 4.3 -3.0 8.2 0.22 0.18 -0.71 1.89
152 Dairy products -5.2 13.8 4.6 2.7 7.9 6.2 8.7 5.1 0.89 0.19 1.10 0.81
153 Grain mill 13.0 7.0 2.1 4.9 -4.0 8.3 -2.6 5.4 0.16 0.70 -0.66 0.65
154 Other food 3.8 2.4 -0.9 7.8 -1.7 12.1 0.9 0.9 -0.23 3.21 -0.53 0.07
155 Beverages 8.5 14.1 3.4 2.1 -3.3 14.3 9.3 3.0 0.40 0.14 2.81 0.21
16 Tobacco products 7.2 7.7 2.1 -1.9 -4.3 5.0 -8.8 7.7 0.29 -0.24 -2.04 1.54
17 Textiles
171 Spinning, weaving, finishing 6.0 1.5 -0.8 -0.6 -5.7 4.3 -4.9 -0.6 -0.13 -0.43 -0.86 -0.14
172 Other textiles 8.9 16.9 2.8 11.9 3.2 10.1 1.4 0.2 0.31 0.70 0.44 0.01
173 Knitted and crocheted 10.3 16.3 10.7 4.7 5.1 3.6 -17.5 6.4 1.03 0.28 -3.42 1.77
18 Wearing apparel
181 Wearing apparel 27.0 2.3 17.3 3.8 6.2 14.9 0.7 15.2 0.64 1.64 0.10 1.19
182 Fur products 22.0 -14.4 12.7 -2.6 7.9 23.6 2.2 -2.2 0.57 -0.18 0.28 -0.09
19 Leather products
191 Tanning and dressing 6.8 -1.2 0.3 -5.0 6.2 32.3 0.7 38.7 0.04 4.26 0.41 0.27
192 Footwear 15.6 10.8 7.1 6.1 7.9 23.6 2.2 -2.2 0.45 0.56 0.43 -5.51
20 Wood except furniture
201 Saw milling -12.1 4.6 -2.6 -27.0 7.3 -7.9 5.0 -3.4 -0.21 -5.91 0.68 -0.42
202 Products of wood -1.9 -4.2 0.7 -3.0 -10.6 3.5 -4.3 2.7 0.40 -0.71 -0.41 0.77
21 Wood products -5.1 7.8 -0.2 -4.8 -7.3 1.2 -3.1 2.4 -0.03 -0.62 -0.42 2.00
22 Paper products -0.9 -4.1 3.6 1.8 -3.9 10.9 -1.1 5.7 4.00 0.43 -0.28 0.52
23 Coke, petroleum
231 Coke oven prod 12.3 -1.1 4.0 -4.6 -10.0 5.4 -13.0 6.0 0.32 -4.26 -1.29 1.12
232 Refined petroleum 9.0 -1.4 7.0 3.6 -5.1 -9.2 -1.6 -21.3 0.77 2.48 -0.30 -2.31
24 Chemical and chemical products
241 Basic chemicals 12.3 10.2 3.4 1.3 -20.9 9.2 10.5 -5.7 0.27 0.12 0.50 -0.62
242 Other chemicals 7.9 13.3 3.2 5.9 -21.2 8.8 -12.9 9.5 0.40 0.44 -0.60 1.07
243 Man made fibres 2.4 -0.3 10.8 -5.3 -30.8 12.6 -31.7 4.1 4.48 -15.43 -1.03 0.32
25 Rubber and plastic products
251 Rubber products 10.5 6.9 4.0 2.6 3.9 -7.1 6.0 -1.0 0.38 0.37 1.55 -0.14
252 Plastic products 9.6 14.4 6.8 6.7 5.6 4.0 5.5 3.1 0.71 0.46 0.99 0.77
26 Other non-metallic mineral products
261 Glass products -0.3 7.8 -1.1 -1.2 -15.9 8.7 -16.1 0.7 -3.64 -0.15 -1.01 0.08
262 Other non-metals 5.0 12.3 0.7 0.5 2.6 13.6 -1.0 2.8 0.13 0.04 -0.39 0.20
27 Basic metals
271 Basic iron, steel 11.8 5.2 1.6 -1.0 -6.5 0.3 -12.8 -0.3 0.13 -0.19 -1.96 -1.18
272 Non-ferrous metal 5.5 13.9 -8.8 16.5 -2.1 9.3 13.2 1.7 -1.58 1.18 6.34 0.18
273 Casting metals 3.3 9.8 -0.5 0.4 -17.5 14.4 -6.2 0.6 -0.13 0.04 -0.35 0.04
28 Fabricated metal products
281 Structural metal 12.3 24.2 3.4 14.0 5.0 24.1 2.1 21.2 0.27 0.58 0.41 0.87
289 Other fabricated metal
products nec 5.7 5.2 1.7 -0.8 4.0 4.1 0.4 1.8 0.28 -0.15 0.09 0.43
29 Machinery and equipment, nec
291 General purpose machinery 5.0 15.5 1.5 12.6 -20.9 26.4 -11.7 25.0 0.30 0.81 -0.55 0.94
292 Special purpose machinery 5.0 -1.0 0.4 -8.7 -1.6 7.6 0.9 3.9 0.07 -8.35 0.55 0.51
293 Domestic appliances 13.4 17.9 4.7 10.0 -31.6 8.7 -15.0 6.8 0.34 0.55 -0.47 0.78
30 Office accounting and
computing machinery 10.7 -12.3 -1.6 -6.1 19.9 -53.1 5.9 -30.8 -0.15 -0.49 0.30 -0.58
31 Electrical machinery
311+312 Electric motor, generators,
transformers, etc 9.6 1.4 3.8 -3.5 - 14.4 -13.1 18.4 0.39 -2.59 - 1.27
313 Insulated wire and cables 13.1 7.5 0.9 2.9 -6.2 3.7 -15.1 6.5 0.07 0.38 -2.45 1.75
314 Accumulators, cells and
batteries 4.8 12.4 3.3 2.9 4.1 9.8 6.3 5.3 0.69 0.23 1.53 0.54
315 Electric lamps 9.0 12.5 1.8 -1.8 -24.5 11.0 -5.1 6.8 0.19 -0.14 -0.21 0.62
319 Other electrical equipments 4.6 18.8 -5.9 12.8 19.7 44.9 10.6 40.4 -1.28 0.67 0.53 0.90
32 Radio, television and communication
321 Electronic tubes 7.5 25.8 8.0 5.0 9.8 -4.9 25.8 4.9 1.06 0.19 2.63 1.00
322 Television and radio
transmitters 5.4 -0.9 4.0 -12.3 -38.3 52.3 -26.4 28.4 0.74 13.64 -0.68 0.54
323 Television and radio receivers 21.7 -1.7 -2.0 0.4 6.0 -6.1 1.8 -7.5 -0.09 0.26 0.30 -1.22
33 Medical, precision, optical instruments, watches and clocks
331 Medical and precision
instruments 14.0 15.3 5.4 4.5 -25.3 10.4 -15.0 10.6 0.38 0.29 -0.59 1.01
332 Optical instruments 24.9 15.9 51.3 7.3 27.8 -10.9 8.0 -10.0 2.06 0.45 0.29 -0.91
333 Watches and clocks 0.8 -0.2 -0.9 0.0 -26.2 -25.0 4.3 -26.2 -1.22 0.04 0.29 -1.05
34 Motor vehicles
341 Motor vehicles 11.3 11.7 1.3 -4.8 -6.2 -47.6 -9.9 -45.0 0.11 -0.40 -1.58 -0.94
342 Coach work 6.8 -47.3 5.8 -28.1 -14.1 15.0 4.0 9.5 0.84 -0.59 0.28 0.63
343 Parts and access 12.1 61.1 3.6 47.1 21.6 24.0 11.6 16.1 0.29 0.77 0.53 0.67
35 Other transport equipments
351 Ships and boats 15.5 3.8 -0.2 -0.7 -27.1 32.1 -36.1 23.1 -0.01 -0.18 -1.32 0.72
352 Railways -8.1 -13.7 2.7 -35.0 -17.7 0.9 -24.5 6.0 0.33 -2.56 -1.38 6.42
353 Spacecraft 14.1 20.5 4.7 -8.6 - 15.8 -34.4 19.7 0.33 -0.41 - 1.24
359 Transport nec 16.8 9.1 1.3 3.2 -1.0 1.1 -4.6 -2.4 0.08 0.35 -4.67 -2.19
36. Other manufacturing
361 Furniture 30.0 16.6 4.7 6.9 1.4 4.7 -7.5 -4.0 0.15 0.41 -5.30 -0.84
369 Manufacturing nec
(Jewellery, sports, music) 20.6 20.2 9.6 10.6 7.1 5.1 5.4 -3.3 0.46 0.52 0.76 -0.64

Source: Same as Table 1.

Economic and Political Weekly October 9, 2004 4577

Fabricated metal products: This industry group had a high
growth in value added and employment in both the organised
and unorganised sector during the 1990s (Tables 2 and 3). At
the three-digit level this industry group includes structural metal
products (281) and other fabricated metal products (289). The
manufacture of structural metal products (281) had a high value
added and employment growth in both the organised and
unorganised sectors, with employment elasticity closer to one
in the unorganised sector (Table 7). The growth of this sector
was largely due to the construction boom that the economy
experienced in the 1990s [Unni 2003]. The rapid expansion of
infrastructure had actually triggered off construction activities,
which had in turn fuelled demand for many key sectors of the
economy such as cement, steel, paints and chemicals, earthmoving
equipment and machinery, apart from structural metal products.
The other fabricated metal products (289) maintained its value
added growth in both the organised and unorganised sectors but
the growth was not employment generating. The growth could
be due to increased demand for some fabricated metal products
in the automobile industry. Forging has a huge demand in this
sector. Bharat Forge has the world’s largest single-location forging
facility and it supplies to auto manufacturers like Toyota, Honda,
Volvo, Cummins, Daimler Chrysler. This industry was chosen
as a supplier of small forging parts for Toyota’s global trans-
mission parts’ sourcing hub in Bangalore [Shourie 2003].
Basic metals: This industry group at the two-digit level had a
declining value added growth in the organised sector and increas-
ing growth in the unorganised sector in the late 1990s (Tables 2
and 3). At the three-digit level non-ferrous metals (272) and
casting metals (273) had a high value added growth in both the
organised and unorganised sectors in the late 1990s (Table 7).
The growth in metal casting was largely due to increase in demand
for iron castings, which is an essential component of the auto-
mobile industry. A number of multinational car companies were
hiring more vendors for iron castings to be outsourced to their
locations abroad [Athale 2003]. The increase in demand for non-
ferrous metals could largely be due to the growth of the infrastruc-
ture sector. The declining growth in basic iron and steel industry
(271) was somewhat surprising, given an increasing demand for
galvanised and colour coated steel from the west Asia, Iran and
China. This apart, with the growth of infrastructure and construc-
tion activities in the economy, one would expect an increase in
domestic demand for steel, which would have led to the growth
of this industry. In the unorganised sector none of these groups
were employment generating, while non-ferrous metals in the
organised sector had an employment generating potential.
Other non-metallic products: This industry group at the two-digit
level had a high value added growth in the late 1990s in both
the organised and unorganised sectors (Tables 2 and 3). Both
glass products (261) and other non-metallic mineral products
(262) had a high growth in value added in the late 1990s (Table 7).
The demand for other non-metallic mineral products, such as
ceramic products, cement, and sanitaryware, are increasing in the
housing and infrastructure sector, which might have led to the
growth of this sector. The growth in value added was not employ-
ment generating in both the organised and unorganised sectors.
Chemicals and Chemical Products: This industry was heavily
protected with high tariff rates till 1994-95 [Nouroz 2001]. The
government policies of the 1980s were biased towards chemicals
and chemical products, which allowed this industry to grow. At
the two-digit level this industry maintained a high value added
4578
growth throughout the 1990s in the organised sector and the value
added in the unorganised sector grew in the late 1990s (Tables 2
and 3). The growth of India’s pharmaceuticals industry has come
to be feared as much as the infotech industry [Shourie 2003].
At the three-digit level, other chemicals (242) had a high value
added growth in both the organised and unorganised sector in
the late 1990s (Table 7). This could be due to certain policy
changes for drugs and pharmaceuticals. Industrial licensing for
all bulk drugs and their formulations and intermediates was
abolished in 1994-95, except for five identified bulk drugs
reserved for the public sector, drugs involving the use of recom-
binant DNA technology and specific cell/tissue targeted formu-
lations. Automatic approval of foreign investment up to 51 per
cent and foreign technology agreements were permitted for all
bulk drugs and formulations, except for those produced by the
use of recombinant technology. India is among the top five
manufacturers of bulk drugs [Shourie 2003]. This apart, this
group also includes soaps, detergents and cosmetics, the demand
for which is growing, which has proved advantageous for both
the organised and unorganised sectors, which cater to different
sections of the economy. In this industry group, the unorganised
sector had an employment elasticity of 1.07 in the late 1990s,
which was much higher than in the earlier periods. Employment
generation in the organised sector was quite low.
The sub-sector analysis clearly shows that growth in the metal-
based and machinery industry is largely due to the growth in the
automobile industry and that of the infrastructure sector. The
growth of these industries would continue as long as the economy
enjoys the low-cost advantage and the infrastructure development
takes place. Once the Indian economy ceases to be a low income
destination, a number of Indian manufacturing industries and
multinational companies would move their production base to
other countries affecting the industrial output. At the moment
India can only seize this opportunity and improve its technologi-
cal base, and the quality of employment thereby even in the
unorganised sector. The analysis also showed that with the
automobile and construction industry growing, certain sub-sec-
tors within the industry groups had a potential for generating
quality employment.
Conclusion
The opening up of the economy helped the organised manu-
facturing sector to grow for more than a decade, before slowing
down. Initial reforms promoted the consumer goods industry,
along with certain basic and intermediate goods, through pro-
tection and import liberalisation. The metal-based and machinery
industry slowed down in the phase of partial liberalisation, as
they faced fierce competition due to tariff reduction. The growth
was not employment generating in this sector as capital-intensive
chemical and consumer goods industries were promoted. How-
ever, after reforms were introduced with firms allowed to expand
their capacities and import of technology, there was a turnaround
in the metal-based and machinery industries as they started to
grow by the mid-1990; some of these industries also upgraded
their technology. This apart, some policies like restriction on
import of second-hand goods of all kinds would also have helped
these industries to grow. The protection accorded to the consumer
goods industries helped them grow in the early 1990s, but with
the withdrawal of tariffs some of the industries were affected.
Growth in the early 1990s had employment generating potential
Economic and Political Weekly October 9, 2004
in some consumer goods industries but this potential tapered off
in the late 1990s. Machinery and metal-based industries did not
have labour absorption capacity during the reforms period in the
organised sector.
Initial reform policies affected the unorganised sector adversely
and employment growth was negative. The decline in employ-
ment was observed across all industries, especially in the textile
industry. The reforms of the early 1990s did not help the
unorganised sector to grow, and employment continued to be
negative during this period. However, after the promotional
policies towards small-scale industries of expanding their capaci-
ties and raising their investment limits, the unorganised segment
surged forward in the 1990s. The growth also generated employ-
ment in most of the industries. The metal-based and machinery
industry, which suffered badly after initial reforms, also picked
up in the unorganised sector in the late 1990s. Though the
employment generating potential in these industries was low, the
quality of employment improved.
The growth of the metal-based and machinery industry since
the beginning of the 1990s seemed to be intriguing. The sub-
sector analysis showed that the delicensing of the automobile
industry resulted in the entry of a number of global multinational
companies. India became a preferred destination not only for its
low costs but also for its high-quality engineering and software
services, as firms try to compete to maintain their market share.
This also helped the development of the auto component manufac-
turing base not only for the organised but also the unorganised
sector. The unorganised sector growth in the motor vehicles
industry is largely due to their being tier-2 and tier-3 auto
component suppliers to large companies. The development of
the automobile industry also triggered growth in other manufac-
turing industries, like electric equipments in the electrical
machinery sector, forging in fabricated metal products and metal
casting in basic metals. This seems to have benefited the un-
organised sector, which enjoyed high growth during the late 1990s.
The infrastructure sector also contributed to the growth of the
metal-based and machinery industry in the 1990s, as emphasis
on this sector in the globalised era gained importance. The rapid
expansion of infrastructure has triggered off construction acti-
vities, which in turn fuelled demand for many key sectors of the
economy such as cement, steel, paints and chemicals, earthmoving
equipment and machinery. The 1990s saw a number of projects
like the nationwide National Highway Development Programme,
the golden quadrilateral project, telecom infrastructure, water
supply, sanitation, and irrigation projects, which led to increased
demand for these products. There was an increased demand for
private urban housing in the 1990s, with a number of concessions
and incentives being provided under different schemes, which
also led to the construction boom. These developments also
helped the unorganised sector to grow, especially in employ-
ment. The growth in these sectors generated quality employment in
the unorganised sector. The sub-sector analysis thus showed that
in the liberalised era two sectors, automobile and the construction
industry, have actually helped the growth of the manufacturing
industry, especially the unorganised segment.
Appendix
Data on the unorganised sector for India are obtained from
the follow-up surveys of the National Sample Survey Organisation
for the years 1984-85, 1989-90, 1994-95 and 2000-01. The data
Economic and Political Weekly October 9, 2004
for each year relates to all enterprises in the unorganised sector,
that is, own account manufacturing enterprises (OAME), non-
directory manufacturing enterprises (NDME) and directory
manufacturing enterprises (DME) in rural and urban areas. For
the organised sector, data for the same four years were obtained
from the Annual Survey of Industries. The 56th round data,
2000-01 of the unorganised manufacturing sector survey and the
1999-2000 data of the organised sector was based on the National
Industrial Classification (NIC), 1998 while the earlier rounds
used the NIC-1987.
For this analysis we have made the data comparable at the
2-digit level using the NIC-1998 for all the years. The NIC 1998
excludes industry group repair of goods from the manufacturing
sector and cotton ginning has been excluded from cotton textiles
and included in the agricultural sector. We have excluded the
repair of goods from the manufacturing sector, but maintained
cotton ginning under a separate category. The NIC 1998 includes
tailoring establishments (964-NIC 1987) in wearing apparel,
which was earlier included in personal services.
Wearing apparel: The latest unorganised manufacturing sector
survey, 2000-01 included all tailoring establishments in the
manufacture of wearing apparel (NIC 1998 code 18) category.
To make the data comparable with the earlier rounds we have
excluded tailoring establishments from wearing apparel in 2000-01
for the unorganised sector.
The proportion of tailoring establishments to the total wearing
apparel and tailoring establishments was computed separately for
rural, urban and total from the employment-unemployment round,
NSS 1993-94. We assume that all tailoring establishments are in
the unorganised sector. The wearing apparel segment in 1993-94
is split into the organised and unorganised sectors using the pro-
portion of the same from the unorganised manufacturing sector
survey, 1994-95 and the Annual Survey of Industries (organised)
of the same year. The proportion of tailoring establishments to
the total unorganised segment of the wearing apparel and tailoring
establishment is then obtained. This proportion separately for
rural and urban, is applied to both the OAME and NDME to
estimate the wearing apparel segment alone in 2000-01.
To estimate the value added for wearing apparel, we have
multiplied the estimated number of workers in wearing apparel
to labour productivity of wearing apparel, which includes
tailoring establishments. To estimate the fixed capital for wearing
apparel, we have multiplied the estimated number of workers
in wearing apparel to the capital productivity of wearing apparel,
which includes tailoring establishments.
Deflators: We have used the implicit deflators of gross domestic
product at 1993-94 prices of the respective organised and
unorganised manufacturing at the two-digit industry group to
deflate the gross value added in the two sectors. The total fixed
assets was deflated by the gross fixed capital formation at 1993-94
prices for both the organised and unorganised manufacturing
sector at the two-digit level. -29
Address for correspondence:
gidrad1@sancharnet.in
jeemol@gidr.ac.in
Notes
1 Organic industries include the traditional industries, cotton ginning, food
products, tobacco products, textiles, wearing apparel, leather products,
wood products, paper products and publishing, printing.
4579
2 Inorganic industries include the modern industries, coke, petroleum,
chemical products, rubber products, other non-metals, basic metals,
fabricated metals, machinery and equipment, office, accounting, electrical
machinery, radio, television, medical, precision, motor vehicles, other
transport and other manufacturing industries.
3 These goods included tractors and other agricultural machinery; food and
textile industrial machinery; industrial machinery (except food and textile);
other non-electrical machinery; communication equipment; electronic
equipment and television; ships and boats; rail equipment; motor vehicles;
and motor cycles and scooters.
4 For growth rates in the earlier period please refer to Unni et al, (2001).
5 Computed from Annual Survey of Industries.
6 The MoU included, to establish actual production of cars and not merely
assemble vehicles; to bring in a minimum foreign equity of US $ million
if a joint venture involved majority foreign equity ownership; to indigenise
components up to a minimum of 50 per cent in the third and 70 per cent
in the fifth year or earlier from the date of clearance of the first lot of
imports. Thereafter the MoU and import licence would abate; to neutralise
foreign exchange outgo on imports (cif) by export of cars, auto components,
etc, (fob). This obligation was to commence from the third year of start
of production and to be fulfilled during the duration of the MoU. From
the fourth year imports were to be regulated in relation to the exports
made in the previous year.
7 Global tier-I suppliers like Visteon, Mico Bosch, Cummins and Delphi
are emerging as the largest exporters of auto components from the country.
Large domestic companies like Bharat Forge, Ricoh Industries, Motherson
Sumi Systems, Sundaram Fasteners and Hi-Tech Gears are also supplying
components to companies in North America and Western Europe (Kant, K
(2003), ‘Auto Part Exports to Rise over 100 Per Cent to $ 2 bn in 2 Years’,
The Economic Times, May 20).
8 Dailmer Chrysler India (DCIL) has firmed up a base of 25 auto components
and ancillary manufacturers that supply these products to Dailmer Chrysler
AG (DCAG) globally. DCIL began with sourcing for local content in 1997.
However, catering to only its Indian division provided limited opportunities.
Hence it quickly moved to global outsourcing. Today, 28 Indian companies
export to DCAG. The vendor base developed in India by DCIL caters to
DCAGs three basic business groups, the Mercedes Benz passenger car plants
in Germany, Chrysler in North America and the commercial vehicle (CV)
division, comprising Mercedes Benz CVs in Europe and Freightliner and
Sterling Tricks in the US (Athale (2003)) The Economic Times, May 21).
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Economic and Political Weekly October 9, 2004