Profitability in India’s Organized Manufacturing Sector: The Role of Technology, Distribution and Demand

Abstract

Using aggregate data from the Annual Survey of Industries, we analyze profitability in India’s organized manufacturing sector from 1982–83 to 2012–13. Over the whole period of analysis, the rate of profit grew at about 1% per annum, primarily driven by a rising share of profits. We use visual inspection to identify five shorter-run profitability regimes: 1982–91, 1991–96, 1996–2001, 2001–07 and 2007–12. Profit rate decomposition analysis shows that both technological factors and aggregate demand have been important determinants of changes in profitability in these shorter periods.