Organized Manufacturing Sector Research Articles

Labour Market Flexibility and Changes in Employment: Spatial and Temporal Evidence from Indian Manufacturing

This paper delves into the debates concerning labour market flexibility in India and suggests an improved measure of labour market flexibility to overcome the shortcomings of the existing measures. A state-wise time-variant composite index considering both de jure and de facto indicators of flexibility is constructed to account for the stringency of regulation of hiring and firing practices that affect labour adjustment mechanism of organised manufacturing sector firms in India. The newly built index reaffirms the criticism and limitations of the existing measures which solely rely on de jure indicators by pointing out that de jure measures alone are highly misleading and insufficient to identify a state’s labour market flexibility status. The index has been put to application in examining the role of spatial variation in labour market flexibility in explaining the difference in employment growth in India’s organised manufacturing sector. The paper finds no evidence in support of a statistically significant effect of spatial variation in flexibility in explaining the variation in employment growth. Interestingly, the paper demonstrates that employment elasticity of growth was lower in “flexible” states as compared to the “rigid” states, indicating that greater flexibility is associated with a weaker employment performance.

Productivity Dynamics and Rural Industrialization in India

Since the late 1990s, industrialization in India has been driven by the rural organized manufacturing sector. This paper examines the effects of firms’ dynamics on rural industrialization in India, using plant-level panel data, to investigate the characteristics of rural industrialization in India in recent years. In particular, the paper focuses on productivity differences among continuing, entering, and exiting firms. The results show that both labour and total factor productivity of the organized manufacturing sector in rural areas increased during 2000–2006 and the aggregate productivity growth is supported by the productivity growth of the continuing firms, the entry of productive firms, and the exit of less-productive firms. The paper can conclude that firms’ productivity dynamics contributed to the current rural industrialization in India. JEL: O14, O47, O53

Industry level analysis of productivity growth under market imperfections

PurposeThis study aims to estimate total factor productivity (TFP) growth for the post-2008 period for selected industries in the manufacturing sector at NIC 3-digit. Total factor productivity growth (TFPG) estimates are based on the theoretical framework provided by studies such Hall (1988), Abraham et al. (2009) and Crepon et al. (2005) that incorporate market imperfection in labour and product market, thereby modifying the traditional TFP estimation as Solow Residual.Design/methodology/approachBased on the theoretical model that incorporates market imperfections in labour as well as product market in modifying the TFP estimates using the Levinsohn–Petrin framework of empirical estimation, the authors have calculated industry wise TFPG for 62 industries at NIC 3-digit level.FindingsThe study finds three distinct trends: first, there are considerable industrial disparities in productivity growth in terms of TFP. The estimates have been found to be higher than the conventional Solow Residual for most industries, indicating the role played by market imperfections in affecting the conventional measure of productivity growth. Second, estimates of bargaining power are found to be lower than those compared to the earlier estimates in Maiti (2013) for the Indian organised manufacturing case for 1998-2005. This observation is commensurate with the observation in recent years of a falling share in labour wage in total output in organised manufacturing sector. Finally, the study also found a statistically significant contribution of greater mechanisation on TFPG while an adverse effect of the rising dependence of organised manufacturing on contractual labour.Originality/valueThe role of market imperfections in measuring TFPG has been undertaken, and it has been found to be an important factor, as the estimated measures vary from the conventional measures of TFPG. Moreover, the study has considered a very recent period from 2008-2015 in estimating TFPG, as well as analysing the factors behind the trends in TFPG at industrial level.

International Trade and Productivity Growth in Indian Industry: Evidence from the Organized Manufacturing Sector

The present study attempts to examine the impact of international trade on manufacturing productivity in India through the effects of economies of scale, reallocation, competition and spillover channels. To study the net impact of these effects, we constructed trade-related variables such as relative import price, import penetration and export intensity for a panel of 17 two-digit organized manufacturing sector industries from 1980 to 2013. During this period, the manufacturing sector witnessed considerable liberalization and openness coupled with an increase in manufacturing growth and productivity, especially in the recent decades. The panel econometric estimation based on random effect modelling reveals that the productivity-enhancing effects of economies of scale, reallocation and spillover largely operate through imports and become prominent after 1–2-year lag. In the short period, there is some evidence of dominance of negative economies of scale induced by import competition. Although we find a positive association between exports and productivity during all selected periods, the relationship is found to be statistically significant only in the current period. Overall, the trade linked productivity gains is channelled through imports, which persist over time. This reveals that the impact of trade on manufacturing productivity in India is not static but dynamic in nature.

Employment Intensity of Food Products and Processing Industry in India

Indian food products and processing industry has seen significant growth and changes over the past few years, driven by changing trends in markets, changing demographics, growing population and rapid urbanisation. It is one of the labour intensive industries having the potential to provide massive skilled as well as unskilled employment to the growing Indian labour-force. The objective of this study is to investigate the employment elasticity of food products and processing industry in India at aggregate as well as disaggregate levels using Annual Survey of Industry data. Further, performance of food products and processing industry is also compared with the total organised manufacturing sector. The findings suggest a decline in the level of employment and output of food products and processing industry in India over the period 1999-2015. The decline may be due to fall in the share of major four sub-industries namely sugar, grain mill products, vegetable and animal oils and fats, and other food products. Any fluctuation in the growth of these industries would affect the overall growth of food products and processing industry. The resultant employment elasticity also declined over the period from 0.17 in 1999-2007 to 0.15 in 2008-2015. Significant difference is also seen in the value of employment elasticity at sub-industries level in the food products and processing industry over the period. However, food products industry is having the capability to drive the Indian economy towards higher growth because of strong comparative advantage over other nations and other sectors, with attention to investment, and generation of skilled man-power

Do Labour Laws and Rising Real Wages Explain Employment Stagnation in the Organized Manufacturing Sector of India? An Empirical Investigation

One of the most contentious policy issues in India is the demand for labour market flexibility. This paper empirically investigates two major reasons normally advanced in literature for explaining the phenomena of ‘jobless growth’ in the organized manufacturing sector and consequently introducing labour flexibility, namely (i) job security laws by strictly regulating hire and fire of workers makes labour adjustment process virtually impossible to undertake and (ii) rising real wages encourage adoption of capital intensive techniques in production – each impeding (not necessarily independently) employment growth. From our empirical analysis we find little evidence to support these claims. In fact, evidence suggests considerable flexibility in workforce adjustment already enjoyed by firms through growing use of contract workers. Employment stagnation is rather explained by the method employed by Annual Survey of Industries to estimate workers and the underlying nature of technological progress witnessed in the organized manufacturing sector during the study period.

Decomposition of Output and Productivity Growth in the Organised Manufacturing Industries in India: An Inter-State Analysis

This article examines and applies the theoretical foundation of the decomposition of output and total factor productivity growth (TFPG) of the aggregate manufacturing industries in 15 major industrialised states in India as well as in all-India during the period from 1981–1982 to 2010–2011, during the entire period, during the pre-reform period (1981–1982 to 1990–1991) and post-reform period (1991–1992 to 2010–2011), and also during two different decades of the post-reform period, that is, during 1991–1992 to 2000–2001 and 2001–2002 to 2010–2011. Output growth is decomposed into input growth effect and TFPG where the three attributes of TFPG are adjusted scale effect, technological progress (TP) and technical efficiency change. A stochastic frontier model with a translog production function is used to estimate the growth attributes of output and total factor productivity (TFP). The empirical results show that input growth is the major contributor to output growth, whereas TP is found to be the major contributor to TFPG and the decline in TFPG of the organised manufacturing sector in India and in its major industrialised states during the post-reform period is mainly due to the decline in TP of the same during that period. JEL Codes: C23, D24, L6, O47

Some Aspects of Organised Manufacturing Sector of Haryana-Trends and Patterns

Some Aspects of Organised Manufacturing Sector of Haryana-Trends and Patterns

Dynamic marketing capabilities, foreign ownership modes, sub-national locations and the performance of foreign affiliates in developing economies

PurposeThe purpose of this paper is to examine the role of dynamic marketing capabilities (DMC), foreign ownership modes and sub-national locations on the performance of foreign-owned affiliates (FOAs) in developing economies.Design/methodology/approachBased on a sample of 254 FOAs in the Indian manufacturing sector (covering the period of 2000-2008 leading to 623 firm-year observations), the empirical paper adopts the panel data regression approach.FindingsThe study confirms the significant importance of DMC to assist FOAs to gain better sales performance in an emerging market such as India. The findings indicate that wholly owned foreign affiliates (WOFAs) have better sales performance than international joint ventures (IJVs), and majority-owned international joint ventures (MAIJVs) perform better than minority-owned international joint ventures in the Indian manufacturing sector. The results confirm that effective deployment of DMC leads to better sales performance in WOFAs and to some extent in MAIJVs. Perhaps the most interesting finding is that developing DMC in non-metropolitan areas is associated with higher sales growth than in metropolitan locations.Originality/valueThe study contributes to the literature by examining the impact of DMC on performance of FOA by considering the organised manufacturing sector in a large and fast growing developing economy. In addition, the results for the moderating effects provide novel evidence of the conditions under which DMC of FOA interact with different ownership modes and influence firm performance.

Reduction in Carbon Emissions Intensity and Impact on Export Competitiveness: Evidence from Indian Manufacturing Firms

India’s organized manufacturing sector experienced a 11% fall in its carbon di oxide (CO2) emissions intensity during 2009–2012, while a majority of the manufacturing plants achieved over a 30% fall during the corresponding period. How did such a reduction in CO2 emissions intensity affect the export competitiveness of Indian manufacturing firms? Using firm-level data for 2009–2013, this paper attempts to empirically answer that question. It is found that large firms and capital intensive firms have achieved a relatively faster decline in CO2 emissions intensity and that containment of CO2 emissions in manufacturing firms did not cause any major loss in their export competitiveness. Rather, it is found to be positively associated with increases in exports.

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

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.

Work Life Balance of Employees Working in Organized Manufacturing Sector: A Study with specific reference to Chennai, Tamil Nadu, India

Human Resource is infinitively significant for the society and for the organization. The Work Life Balance is a delicate equilibrium which is critical due to its level of significance. It is established that there are number of factor that affect the sensitive equilibrium between work and life. Such factors are observed as variable for the chosen are of study with the objective to study the variables to suggest better of ways and means to manage WLB is attempted by the researchers. The study revels number of factors that are significant and influential. The article put forth suggestions for the employee as well as employers toward attaining an ideal Work Life Balance.

Basic Metal and Alloy Industry in Organised Manufacturing Sector of Punjab: An Analysis of Pre and Post Reform Period

Basic Metal and Alloy Industry in Organised Manufacturing Sector of Punjab: An Analysis of Pre and Post Reform Period

Productivity Growth in Organised Manufacturing Sector in India:Evidence from Technology Intensive Classification of Industries

This paper examines the trends in productivity, both labour productivity and Total Factor Productivity (TFP), of organised manufacturing in India. It uses the growth accounting technique based on value added and gross output production framework for assessing the productivity dynamics of 62 industries at the 4-digit level of disaggregation during the period of 1980 to 2007.The study finds a marked shift of industrial composition towards technology and skill intensive production activities. These segments have witnessed considerable growth in labour productivity and total factor productivity, the latter being more pronounced since 2000. Though TFP trend is highly cyclical, there is evidence of a revival in recent period. This suggests that Indian manufacturing has been experiencing sizeable technical change and dynamism of late. However, for a large number of industries, especially the traditional low-technology intensive sectors, the results are sensitive to the method of measuring TFP.

Labour Market Regulations and In-formalisation of Migrant Worker: Evidence from Indian Manufacturing Sector

Abstract India is considered as one of the countries with a stringent body of labour laws. Though there is no lack of pro-worker employment protection legislation (EPL) and contract labour laws, the vulnerabilities of workers seem to be increasing rapidly in this neo-liberal phase of the global economy. Over the past two decades, there has been a rising trajectory of in-formalisation even in the organised manufacturing sector. Under this backdrop, we study the in-formalisation of migrant labour and try to find out whether EPL does protect the interests of migrant workers. We found that in-formalisation of migrant workers are higher in the states with relatively stringent labour laws. The finding of our econometric analysis indicates that informal migrant labour is used to evade the social security provisions laid down under the Industrial Disputes Act, 1947 among other legislation. Since informal workers fall outside the purview of most of the pro-workers labour laws, the trajectory of in-formalisation is likely to have serious repercussions on the welfare of workers especially that of migrants. Migrant labour, which occupies a substantive role in the contemporary labour markets, must be brought into an apt regulatory framework to address its vulnerabilities.

Has the Performance of the Indian Organized Manufacturing Sector Improved?

Has the Performance of the Indian Organized Manufacturing Sector Improved?

Labour law, enforcement and the rise of temporary contract workers: empirical evidence from India’s organised manufacturing sector

There is an intense debate on the impact of labour regulation in India today. Labour regulation in India differ state-wise and apply differently across types of workers (both regular and contract workers). This paper examines the joint effects of Employment Protection Legislation (EPL) and variable enforcement intensity on the growth in a size of temporary contract workers in the organised manufacturing sector. It uses the state level amendments to Industrial Dispute Act of 1947, and the average size of total number of labour inspectors for each state, as independent variables to capture the variation in labour regulations and enforcement intensity across thirty-one Indian states for the period 2000–2007. This paper argues that, average Indian firms located in strict EPL states hire differentially more temporary contract workers as compare to regular workers in response to variable enforcement intensity. Among other findings, the empirical analysis shows that firms prefer to employ excessive number of contract workers to circumvent firing and overall compliance costs of regular workers as stipulated by the Indian labour laws. Our results are robust to alternative specifications.

Creating jobs in India’s organised manufacturing sector

Despite witnessing a decade of rapid economic growth, an acceleration of growth in the organised manufacturing sector has eluded India. Using state-level data from the Annual Survey of Industries, we examine the factors constraining the growth of output and employment in this sector. We find that states with inflexible labour regulations witnessed slower growth in employment and output than states with flexible labour regulations. However, it would be incorrect to put the entire onus of the dismal performance of this sector on labour regulations as firms are responding to rigidities in the labour market by greater use of contract workers. Factors such as restrictive product market regulations and infrastructural bottlenecks have also adversely affected the performance of the manufacturing sector. Importantly, given that the days of industrial licensing are gone, much of the action for improving the business environment needs to be taken at the state level.

Determinants of Emission and Energy Intensities in Indian Organized Manufacturing Sector

The emission and energy consumption in absolute form is not considered as a better measurement of emission intensity and energy intensity respectively. This paper estimates the factors which influence emission and energy intensity in the Indian manufacturing sector. For estimating these variables, the panel data analysis has been deployed across three manufacturing industry groups, viz., overall manufacturing sector, high emission-intensive industries and low emission-intensive industries. The random effect model highlights that an increase in energy intensity and material intensity leads to higher emission intensity. The study also reveals that the manufacturing sector does not support the Environmental Kuznets Curve hypothesis. Further, high emission-intensive industries are capital-intensive industries while less emission-intensive industries are labour-intensive industries. This raises the question about the technology used by the manufacturing sector, especially high emission-intensive industries.

Regional export advantage of rising power SMEs

Purpose– The purpose of this study is to examine the subnational regional dimension of exports by small and medium-sized enterprises (SMEs) in India, one of the prominent emerging economies or “rising powers”.Design/methodology/approach– To understand the forces driving the variation in subnational region’s share in international business of rising power SMEs, an analytical conceptual framework on regional export advantage (REA) was formulated based on the review of relevant theoretical and empirical literature. The model was estimated for Indian states using the most appropriate and recently developed econometric technique of fractional logit model.Findings– The paper provides evidence that the emergence of exports by rising Indian power SMEs is geographically limited to a few select regions/states. Southern Indian states alone accounted for half of exports from SMEs in the organized manufacturing sector during 2000-2008, followed by Western India. The REA analysis has brought to the fore that regional stock of technological knowledge, availability of skill, port facilities, urban areas and foreign direct investment stocks are crucial factors determining states’ share in SME exports across technological subcategories. However, the size and sophistication of local demand continue to influence states’ efforts at enhancing exports by SMEs, at least those belonging to the medium- and high-technology categories.Research limitations/implications– The proposed empirical framework could be extended to include institutional and political economy factors. Its application to subnational regional shares in total exports by all firms taking into account fixed effects for regions may be another feasible line of future research.Practical implications– Empirical findings recognize that appropriate strategies by subnational policymakers are important for a region to achieve a higher contribution in national SME exports. Subnational policy measures aimed at upgradation of regional technological assets and skill base through the promotion of technology clusters and R & D of local firms, facilitation and creation of better industry-university linkages and investments in education and training institution may help the states to gain higher export advantage.Originality/value– This paper provides new analytics and insights into the role of subnational spaces in the internationalization of rising power SMEs from India and serves to contribute to the extant international business research that is predominantly occupied with “nation” as the unit of location.