Pattern and drivers of profitability in India’s unorganised manufacturing sector

Abstract

Using data from National Sample Survey Organisation surveys, the paper analyses the profit rate and its drivers in India’s unorganised manufacturing sector for the period 2000–01 to 2015–16. The entire period has been subdivided into three smaller periods to examine the short-run fluctuations in profitability. The study has been carried out at disaggregate level, namely, state and industry levels as well. The output-capital ratio has behaved cyclically over the years, whereas a steady rise in the profit share has been the driver of cyclically rising profit rate over the period. A rapid growth in labour productivity with a non-commensurate rise in wage rate has been the reason behind the rise in profit share. The ranking of states and industries on profit rate has been found to be relatively unchanged.