India’s fragile industrial landscape and worker’s remuneration: some unanswered paradoxes

Abstract

Using Annual Survey of Industries (ASI) data, this paper seeks to provide estimates of rising Proprietorship (IP) in the Industrial sector in India and attempts to link the ownership pattern of industrial enterprises to job creation and wages paid. Evidence since 1984–85 shows that while Proprietorship enterprises have systematically increased in terms of number of factories, the employment generation has not increased at the same pace. They are labour intensive enterprises, yet in terms of size of employment, they are relatively small. This is in sharp contrast to the nature of Industrial Development in the Corporate Sector. The paper conducted Time-series analysis of the determinants of wages for the past thirty years. The evaluation of the Proprietorship enterprises shows the nature of enterprise formation and remuneration to the workers therein. The paper concludes that even as the corporate sector has been experiencing stagnation in terms of employment generation, the wage indexation to statutory levels has protected workers employed therein. In sharp contrast, the rise in the Proprietorship enterprises reflects the growing number of micro-enterprises that are riddled with low capital investments, poor remuneration and worsening employment conditions of vast proportion of the workforce. Thus, the composition of industries matters in employment creation and the wages paid.