The Case of the ‘Missing Middle’ in the Indian Manufacturing Sector: A Firm Level Analysis

Abstract

This study revisits the ‘missing middle’ phenomenon of the Indian manufacturing sector. Though ‘missing middle’ has been described and analyzed by many studies, a key gap in the literature that we note is that the phenomenon of ‘missing middle’ has been taken as an accepted artifact of the Indian manufacturing sector. We look into the size-structure relation based on the argument that ‘class interval based’ and ‘aggregate level’ analyses of the industrial sector may be misleading. We use the firm level data available for Annual Survey of Industries (ASI) to check for the ‘missing middle’. We look for the trend both at the aggregate and disaggregate levels. We are unable to find a ‘missing middle’, either at the aggregate or disaggregate level, once we drop the classification of data based on apriori class intervals. We find that most firms in India are small firms and there is no evidence of a clustering of firms at higher size categories.