Indian Manufacturing Sector Research Articles

Impact of Labour Laws on Wage Differentials between Formal and Informal Sectors: Evidence from the Indian Manufacturing Sector

Labor laws in India have been a subject of contention since their inception. There are arguments against labor laws that say that an adherence to labor laws push up the wages in the formal sector and reduce employability of the labor. A hike in labor cost makes capital relatively cheaper, causing an increase in capital intensivity of the production. This study is an attempt to show that labor laws are necessary and empirically proves that it is not the labor laws that create the wedges between the formal and informal sector wages. We econometrically test the hypothesis of there being a significant difference between wages in the formal and the informal sector and its correlation with existence of labor laws in the formal sector. The Oaxaca’s decomposition technique is used to find out the difference in formal-informal sector wages that could be attributed to existence of labor laws. The results that we obtain show that 87 percent of the difference in wages between the formal and the informal sector is determined by the differences in income generating characteristics of the worker employed. We conclude that labor laws do not drive up the wages artificially, they just make employment more secure and worthwhile for the worker. We also point out the importance of public investments in human capital creation, underlining the fact that it is these investments that can reduce various inequalities among the wages of workers across employments and sectors.

Validity and reliability of sustainable supply chain management frameworks in Indian smart manufacturing industries

PurposeSustainable supply chain management (SSCM) ensures integration of socially, environmentally and economically feasible practices in entire supply chain. SSCM principles can be implemented to improve efficiency and productivity of a system by different attributes of the system. The purpose of this article is to identify the most appropriate existing (SSCM) framework that can be implemented suitably in Indian smart manufacturing industries.Design/methodology/approachValidity and reliability analysis on the existing SSCM frameworks was carried out with the help of empirical data collected using questionnaire survey methodology from various Indian smart manufacturing organizations. The empirical data were gathered from various experts from top- and middle-level management in different smart manufacturing organizations across the country. Further, factor analysis was carried on the collected data to estimate the unidimensionality of each SSCM frameworks. Cronbach's alpha value was used to assess reliability of each framework. Subsequently, the frequency distribution analysis was done to obtain familiar elements in the segregated frameworks based on validity and reliability analysis.FindingsThe work observed that only five SSCM frameworks have shown unidimensionality in terms of the elements or constructs. The work further found that these segregated frameworks have not shown sufficiently high level of reliability. Additionally, this work attempted frequency distribution analysis and observed that there were very few elements which were being repeatedly used in numerous frameworks proposed by researchers. Based on the findings of this work, the work concluded that there is acute need of a new SSCM framework for Indian smart manufacturing industries.Research limitations/implicationsThis study gathered empirical data from 388 Indian smart manufacturing organizations. Thus, before generalizing the findings of the study across the sectors, there is a possibility of some more explication.Originality/valueThe main purpose of this article is to explore the feasibility of the existing SSCM frameworks in Indian smart manufacturing sector. The study also assumes that the manufacturing managers and executives may have the complete understanding on the existing sustainable manufacturing frameworks and a chance to executing proper suitable framework in the respective manufacturing organization.

COVID-19 and Manufacturing Industries in India and Role of Human Resources Management

COVID-19 had put a halt to many manufacturing industries across the world, including India, and that led to one of the worst job crises. Manufacturing industry is one of the most important sectors in India that drives the economy. India’s manufacturing workforce in majority belongs to the unorganized sector which has progressed the economy in pre-COVID-19 times. The employees in the unorganized sectors have suffered immensely during the COVID-19 crisis. The Human Resources Management (HRM) experienced unprecedented challenges in understanding the crisis, employee challenges, and coming up with timely solutions to address these issues. The focus of the paper is to review the opportunities and challenges in the HRM policies and practices in the manufacturing industries during COVID-19 and provide recommendations to apply these findings and to develop a future HRM strategy in unorganized manufacturing sectors in India. To our knowledge this is the first review that addresses the potential role and challenges of HRM in the unorganized manufacturing sector in India during COVID-19 pandemic.

Stagnant manufacturing growth in India: The role of the informal economy

This paper examines the role of structural change in India's performance, and in particular the role of the informal segment in the stagnant growth of the Indian manufacturing sector. Using counterfactual analysis – including a modified shift-share approach – the paper considers to what extent the informal sector can help explain the poor performance of Indian manufacturing over the period 1980-2011. The results suggest that the informal segment of manufacturing has been a drag on overall manufacturing productivity growth, with the informal manufacturing segment unable to provide a productivity bonus when absorbing workers from the agricultural sector. Results from the shift-share analysis indicate that labor reallocation to the informal segment of the manufacturing sector is growth-reducing, with structural change being the main source of this reduction, an effect which in turn is driven by movements of employment within manufacturing sub-sectors.

Economic policy uncertainty and investment-cash flow sensitivity: evidence from India

PurposeThis study examines the impact of economic policy uncertainty (EPU) on the investment-cash flow sensitivity (ICFS) of Indian manufacturing firms.Design/methodology/approachThis study uses the fixed-effect method to investigate the effect of EPU on ICFS from 2004 to 2019.FindingsThis study finds that EPU increases ICFS, which is more (less) during the crisis (before and post-crisis) period. The authors also find that the effect of EPU on ICFS is more for smaller, younger and standalone (SA) firms than the larger, matured and business group affiliated (BGA) firms. This study also reveals that EPU reduces corporate investment (CI). Further, the authors find that cash flow is more significant for the investment of financially constrained firms and the negative effect of EPU is more for these firms.Research limitations/implicationsThis study considers the Indian manufacturing sector. Therefore, this study can be extended by analyzing the relationship between EPU and ICFS for the service sector.Practical implicationsFirst, this study can be useful for corporates, academicians and government bodies to understand the effect of EPU on ICFS and CI. Second, this study will help corporates to focus on internal funds to finance corporates' investment during the crisis period because EPU increases the cost of external finance which may increase ICFS and reduce CI. Third, lending agencies, investors and stakeholders should also focus on the firm's nature, ownership, size and age because these factors play a crucial role to reduce or increase the negative effect of EPU on ICFS. Fourth, the Government should make appropriate policy measures in terms of concessional interest rates to increase the easy availability of external finance for SA, small size, and young firms to reduce the negative effect of EPU on CI because these firms are considered as more financially constrained firms.Originality/valueThis study adds new inputs to the current literature of EPU in several ways. First, this study is one of the main studies focused on the relationship between EPU and ICFS (CI). Especially in emerging countries like India, examining this relationship extends previous research. Second, this study also examines the impact of EPU on ICFS for BGA, SA, small, large, matured and young firms as well as crisis and non-crisis periods. Third, this study uses the sample of the Indian manufacturing sector which has emerged the qualities to become a global manufacturing hub and attracting global investors. Therefore, examining the effect of EPU on ICFS for these firms will be more interesting.

Measuring the Factors Affecting Annual Turnover of the Firms: A Case Study of Selected Manufacturing Industries in India

The manufacturing sector works as an engine of growth as it creates the conducive path for socio-economic development. In the said perspective, numerous studied have empirically proved the positive contribution of manufacturing sector in social – economic development. However, limited studies could examine the factors affecting manufacturing sector in different industries in India. Thus, this study assessed the determinants of the annual turnover of the firms in the Indian manufacturing sector. For aforementioned investigation, it used financial statistics of 154 selected Indian manufacturing firms which were operating in seven different industries (i.e., automobile and auto component, chemicals and petrochemicals, construction, electronics, industrial equipment & machinery, pharmaceuticals, and textiles and apparels) from nine states of India. Log-linear regression model under the stochastic frontier production function technique was considered to examine the impact of specific factors on the annual turnover of the firms. It highlighted that annual turnover of the firms was significantly reflected with labour intensity; firm's age and size, R&D expenditure, and technology up-gradation; investment on machinery; annual salary of workers, skilled and un-skilled manpower. The findings of this study also indicate that India is required to adopt strict intellectual property rights (IPRs) policy to reduce the imitation rate of technologies for further improvement in technology transfer and commercialization. Effective education system, science & technology (S&T) and conducive research & development (R&D) ecosystem would be supportive to increase the performance of firms in the Indian manufacturing sector. It also provides the research direction to validate the empirical findings of this study.

Design and fabrication of multi cutting hack saw machine

The growth of Indian manufacturing sector depends largely on its productivity & quality. Productivity depends up on many factors one of the major factors being manufacturing efficiency with which the operation/activities are carried out in the organization. productivity can be improved by reducing the total machining time, combinating the operations etc. In the case of mass production where variety of jobs is less and quantity to be produced is huge, it is very essential to produce the job faster rate. This is not possible if we carry out the production by using general purpose machines. The best way to improve the production rate (productivity) along with quality is by the use of special purpose machine. Usefulness and performance of the existing radial cutter machine will be increased by designing and manufacturing of multi cutter head attachment. This paper details with design and development of multi cutter head for cycle time optimization of the component.

Wage, Profit, Employment and Output in Indian Organized Manufacturing Sector during UPAI & UPA II and NDA I & NDA II (Modi I) Regimes

This paper comparatively examines wages, profits, employment and output in Indian organized manufacturing sector during two political regimes, National Democratic Alliance (NDA) and NDA under the Prime-minister of Mr. Narendra Modi, and United Progressive Alliance (UPA). These four aspects of industrial development in India are analyzed in the context of political economy of neo-liberal reforms and sustainable development goals (SDGs) to be achieved by 2030. By using data of Annual Survey of Industries (ASI), the political economy of the two regimes is comparatively analyzed in the four periods/year, viz., NDA I (1999-2004), UPA I (2004-2009), UPA II (2009-2014) and Modi I (2018-2019). There are four empirical results in this analysis: (i) decrease in share of wages of blue-collar workers to white-collar workers, (ii) higher level and share of blue-collar workers at 79% and constant respective shares of clerks and white-collar workers at 12% and 10% over fourth regimes, (iii) increase in contract blue-collar workers, (iv) increase in feminization of blue-collar workers. These empirical results advocates policy implications for descent work, inclusive industrial and sustainable development in the Covid era.

Executive compensation and the potential for additional efficiency gains: Evidence from the Indian manufacturing sector

We examine the relationship between executive compensation and technical efficiency. We highlight heterogeneity in this relationship, identify opportunities for within-sector efficiency gains, and the channels through which such gains occur. Previous research mainly focuses on excessive executive compensation that does not reflect firm performance. We develop unique measures for executive overcompensation and undercompensation, and account for endogeniety. Using firm-level data for the Indian chemical, textile, and pharmaceutical sectors during 2004–2015, we conclude that the median firm overcompensates and large firms undercompensate their executives. Overcompensation decreases firms’ profits as increased executive costs outweigh the benefits of efficiency gains. Firms in the top 10% in terms of sales in their industry undercompensate their executives and experience a median increase in profits when executive compensation increases. This new insight has important implications for executive compensation strategies: for the subset of large firms that undercompensate, increased executive compensation is a channel for improving profitability.

Interpretive Structural Modelling (ISM) of Enablers Affecting Green Accounting in Indian Manufacturing Sector: A Conceptual Model

Green accounting is vital for every economy in the world. Indian manufacturing sectors are regarded as one of the most significant contributors to environmental and socioeconomic problems, and as a result, the country lacks global sustainability and progress. This paper focuses on how these industries can contribute to the sustainability of the environment. The paper aims to analyze how these industries can promote ecopreneurial behavior. Also, the researchers and expert opinions lead to a theoretical framework and conceptual model using a well-defined and explained literature review and the derived model to understand, observe, and analyze various environment awareness concerns. To gather the expert opinions, various calls and surveys were scheduled with chartered accountants, academicians, environmental experts, commerce people, to understand how the identified variables are influenced by each other. Environmental management accounting and green accounting came out as the most significant and vital factors. All the identified variables were complementing. Three levels came out for the model. The authors created an ISM on factors affecting green accounting in the Indian manufacturing sector, emphasizing the context and concept related to the discovered variables that have been tested in the real world.

Impact of Globalization on the Manufacturing Sector of India and China

This research paper explores the impact of globalization on the manufacturing sector of India and China. It compares the manufacturing sectors of India across four factors: demand and supply of labour, labour cost, literacy rate, and productivity. Through this comparison, the paper concludes that while the trends in both India and China’s economies remained similar before globalisation, China’s manufacturing sector eventually grew much faster due to its access to better technology and skilled labour. The impact of globalization in the manufacturing sector is seen through capital as the economies shifted into the secondary sector with the increase in technological advancement. But how do these shifts unfold in developing economies? This paper analyses the labour market of India before and after globalization and the findings are compared to the labour market of China during the same period.

The penalty of work from home: gender gap in productivity of unorganised manufacturing firms in India.

This study estimates the contribution of gendered social norms in explaining the gender gap in productivity of unorganised manufacturing firms. Restrictions on mobility and burden of household work mean that female firm-owners primarily operate from their household premises. Using data from unorganised firms operating in the manufacturing sector in India, this paper finds gender gap in firm productivity. The Blinder-Oaxaca decomposition at mean show that despite controlling for size of the firm, assets and other conventional factors, the location of a female proprietary firm within the household premises of the owner explains 19% of the observed gender gap in productivity. The RIF decomposition results show that at the different quartiles, this contribution varies from 19 to 36% of the composition effect. The evidence suggests that the persistence of the gender gap in firm productivity is associated with the persistence of gendered social norms.Supplementary InformationThe online version contains supplementary material available at 10.1007/s11187-022-00637-2.

Dynamics of export competitiveness of India and China: a study of HS 6-digit manufacturing exports

PurposeThe export competitiveness has only calculated on only two aspects either comparatively advantageous or comparatively disadvantageous products for India or China. There is not any thorough study that has been undertaken for Indian manufacturing sector at a segregated level along with that of China. So, in the light of these shortcomings, the purpose of this study is to analyse the dynamics of export competitiveness of indian manufacturing sector vis-à-vis its emerging counterpart, china in the global market.Design/methodology/approachA modified revealed comparative advantage index has been used in two different phases of 2001–08 and 2010–18 to find the dynamic pattern of manufacturing exports of India and China in the world market.FindingsThe study revealed that India has shown a positive response in increasing its competitive positioned products from low-technology to medium-technology products during the study period. There has been a decline in the competitive positioned products of China and simultaneously China’s threatened product lines have shown an immense increment over the years. Moreover, Indian exports are concentrated to few low-technology and resource-intensive products, that share more than 50% of total exported value for its manufacturing in the global market, whereas, China is much diversified and the exported value is more scattered over its manufactured items.Research limitations/implicationsThe study does not include the factors that impacted the export competitiveness of the sample economies and thus adds a limitation to this study.Originality/valueAs there is very limited research on dynamics of export competitiveness of Indian manufacturing exports at harmonised system 6-digit level with China, this study fulfils the gap.

Knowledge Spillovers and Productivity Growth: Role of Absorptive Capacity in the Indian Manufacturing Sector

Knowledge Spillovers and Productivity Growth: Role of Absorptive Capacity in the Indian Manufacturing Sector

Employment Protection Legislation and Labour Market Outcomes: A Unit Level Analysis of the Indian Manufacturing Sector

Abstract Building on insights from the insider-outsider theory, we examine the effects of the Employment Protection Legislation (EPL) on labour market outcomes, using high-court verdicts on labour disputes invoking Chapter 5-A and 5-B of the Industrial Disputes Act. Our regression analysis of a statewise unit-level dataset suggests that pro-worker judicial verdicts lead to an increase in wages and labour productivity especially in labour intensive industries, but discourage employment. The study demonstrates how the insider-outsider model combined with the labour market segmentation theory, unlike labour adjustment models, explain such findings consistently. The results suggest that loosening the EPL regime will have implications on the balance between the quantity and the quality of jobs, with serious consequences on industrial performance.

Analysis of carbon productivity for firms in the manufacturing sector of India

Emission estimation and carbon productivity at the firm level for India's manufacturing sector are scanty. We fill this gap by estimating CO2 emissions at the firm level and further determining the optimal and the actual trade-offs between emissions and output at the firm level. We use data from the center for Monitoring Indian Economy (CMIE) Prowess IQ, and MoEF&CC, Government of India. Between 1998 and 2019, growth in CO2 emission and output is estimated to be 3 and 9%, respectively. This indicates a case of weak decoupling for the manufacturing sector where technology, export promotion strategies, environmental taxes, energy mix at the firm level, and cap-and-trade policy are the significant determinants of carbon productivity for the sample firms in India's manufacturing sector. We conclude that improving carbon productivity is necessary for better decoupling and R&D intensity to be complemented with R&D efficiency to gain carbon productivity for the manufacturing industry. These findings are crucial for better energy and climate policy for the Indian economy.

Spatial disparity in gender pay gap and female workforce participation: a sub-national level study in Indian manufacturing sector

PurposeThe paper intends to identify the factors that determine the variations in the gender pay gap and female workforce participation at low-skill manufacturing job across Indian states over the time period 2006–2014.Design/methodology/approachGender pay gap is measured in two ways: one is scale insensitive and second one is scale sensitive. To construct scale-sensitive gender pay gap measure wage discrimination index is used. For main analysis, a panel framework is used. Fixed effect model and random effect model are estimated along with all relevant diagnostic tests.FindingsEmpirical analysis elucidates that male literacy rate, female literacy rate and gender parity index are important factors in explaining the variation in gender pay gap and women workforce participation at sub-national level in India. Female literacy rate significantly reduces the crude pay gap; however, it has insignificant effect on scale-sensitive gender pay gap in low-skill manufacturing sector. Educational enrolment widens up the crude wage gap but narrows down the other one. In case of workforce participation educational attainment and school enrolment both reduce women workforce participation in low-skill manufacturing job.Research limitations/implicationsThe present research suffers from two major limitations. Due to lack of information, the paper is unable to study the impacts of female representation in trade unions, availability of supporting infrastructure like day-care facilities for working mothers, etc. in explaining the variation in gender pay gap and women workforce participation. The second limitation is that the research fails to address the issue related to selection into employment. The present paper uses the macro-level state-specific statistics instead of micro-level data; hence the imputed wage for unemployed but potential workers cannot be calculated.Originality/valueThe paper is unique in the sense that it highlights gender pay gap and female workforce participation issue in low-skill manufacturing sector at Indian sub-national level. There are no such papers that highlight these issues in the context of Indian manufacturing sector. Another contribution is that the present paper considers the scale-sensitive gender pay gap, whose determinants are different than crude gender pay gap.

A PDCA based approach to evaluate green supply chain management performance under fuzzy environment

ABSTRACT This paper proposes a novel plan-do-check-act (PDCA) based group decision making model to evaluate the GSCM performance of manufacturing organizations. This research employs an integrated fuzzy multi-criteria decision-making (MCDM) approach in which the fuzzy-analytical hierarchy process (FAHP) method determines criteria weights and the fuzzy-technique for order preference by similarity to the ideal solution (FTOPSIS) method ranks the organizations. Five qualitative criteria are selected from the extant literature, which encompass both environmental, operational, and economic aspects of sustainability. Data is collected by developing a questionnaire, establishing a decision-makers’ committee, and carrying out a survey. To illustrate the industrial application of the proposed model, this study considers a real-world case study in the Indian manufacturing sector, in which three organizations (Organization A, Organization B, and Organization C) are selected from three distinct industrial segments, namely the leather industry, the pharmaceutical industry, and the steel industry, respectively. The result reveals that the environmental impact of harmful substances released from production is the most influential parameter. The result also reveals that Organization C is the benchmark organization and its strategies can guide other organizations for GSCM performance improvement. Moreover, the proposed model is capable of handling vagueness and ambiguity in decisions.

Nexus between export, productivity, and competitiveness in the Indian manufacturing sector

This article assesses the nexus between export, productivity, and competitiveness in the Indian manufacturing sector. To do this, we examine the “learning by exporting” and “self-selection” hypotheses using firm-level data relating to Indian manufacturing firms relating to period from 1994 to 2017. The empirical analysis supports the “learning by exporting” hypothesis, but does not support the “self-selection” hypothesis. We also investigate the impact of export on competitiveness, and the results indicate a positive relationship. These findings remain consistent when we segregate manufacturing firms based on industries, intensity use of labor and capital, and firm ownership. In the light of these findings, we recommend that policy focus on enhancing the export capacity of manufacturing firms to further strengthen the competitiveness of Indian manufacturing.

Incidence of Corporate Income Tax: Estimates from Indian Manufacturing Firms


 
 
 
 The purpose of this paper is to examine the incidence of corporate tax on capital and labour in Indian manufacturing sector. The paper employs ‘Seemingly Unrelated Regression Method’ with add-up restriction based on the work of Desai, Foley and Hines (2007). The study shows that, for the manufacturing sector in India for the period 2005-19, the corporate tax has a significant adverse impact on both wages paid to employees and profit after tax. Capital owners bear 96.3% of the tax burden and labours bear only 3.7%. The adverse effect on wages is slightly higher in public firms than in private firms. The relative tax burdens of labour and capital remained the same in the pre-2008 global economic crisis and post-crisis periods. The impact on both wages and profits increase with age and size of firms but decrease with leverage. These results will be useful to policymakers and other stakeholders to take appropriate strategies to design the corporate tax policy such that it is more redistributive, and not a burden for labour in manufacturing firms in India. The paper contributes to the scant empirical literature on corporate tax incidence.