Innovation and Employment: A Study of Indian Manufacturing Sector

Abstract

While innovation is widely acclaimed as an important source of productivity and growth, its relationship with employment remained largely ambiguous. The debate assumes importance as the recent past has witnessed economic growth with falling or stagnant employment growth in a large number of countries. The loss of additional employment resulted in widespread inequalities and poverty that put the issue of economic growth in jeopardy. Moreover, there is a need to understand the relationship between innovation, employment and economic growth. This paper is an attempt towards deciphering this relationship to find the way-out for higher economic and employment growth using the case of Indian manufacturing sector. With the motive to find the impact of innovation on employment in different technological-intensive industries, four industries, namely pharmaceuticals (high technology), transport (medium–high technology), ferrous metals (medium–low technology) and textiles (low technology), for the period 2000–2001 to 2013–2014 are examined. It was found that the impact of ‘product innovation’ is positive on employment for different industries. Therefore, there is a need to build the ‘system of innovation’ in such a manner that radical innovations could be produced for long-term growth and employment.