INTRODUCTION

The context

The prime goal of the National Manufacturing Policy, 2011, is to raise the share of manufacturing in India's GDP by about 10 percentage points between 2012 and 2022, making manufacturing GDP reach about a quarter of the aggregate GDP by 2022. For fulfilling this objective, a rapid growth in the output of the Indian manufacturing in the coming years at a rate of about 10 per cent or higher per year is necessary. An important initiative taken by the government is the ‘Make in India’ programme, which was launched in September 2014. The programme is directed at promoting a manufacturing-led economic growth in India. It focuses on policy initiatives to develop infrastructure, improve ‘ease of doing business’ and undertake reforms of the currently existing labour regulations to impart greater flexibility in the industrial labour markets. Some other associated aspects of the programme are the initiatives towards protection of intellectual property rights and development of skills among the Indian workers.

The current policy thrust for attaining accelerated growth of Indian manufacturing seems to be mostly directed at the supply-side constraints on growth. Arguably, Indian manufacturing is facing demand-side problems also and these problems may pose a serious challenge to the sustenance of a high rate of growth in manufacturing. This chapter deals with one demand-side problem, namely, increasing penetration of Chinese imports into markets for industrial products in India. It is needless to say that this factor can potentially have a serious adverse effect on the growth performance of Indian manufacturing, and therefore, needs a careful analysis.

Banga (2014) has argued that Indian manufacturing has been experiencing some degree of ‘hollowing-out’, manifested in a downward trend in the ratio of value added to output in the manufacturing sector. She ascribes this phenomenon to the intense import competition faced by the Indian manufacturing firms thanks to India's import liberalization, particularly from imports from China. She notes that a downward trend in value added share in the output of manufacturing, as observed, could arise from increasing cost of energy input in manufacturing. But, in the case of India, this does not apply as there has been a clear downward trend in energy cost as a ratio to the manufacturing sector output. Thus, this factor does not explain the observed fall in the share of the value added in the output in manufacturing.

Introduction

There have been a number of studies on gender discrimination in India. A common finding of these studies is that after controlling for endowments and certain other factors, the wages received by women are relatively lower than those received by men (see, for instance, Reilly and Vasudeva-Dutta, 2005; Menon and Rodgers, 2007; Khanna, 2012; Krishna and Bino Paul, 2012; and Paul and Paul, 2013). In this chapter, a different dimension of discrimination is studied, namely discrimination in job tenure (regular wage jobs versus casual jobs). The analysis is confined to Indian manufacturing, as in the paper of Menon and Rodgers (2007). The main hypothesis tested econometrically is that after controlling for endowments and industry affiliation, the women tend to get discriminated in the matter of getting regular jobs. A related hypothesis is about the effect of economic reforms, particularly trade liberalization, on gender discrimination. There are reasons to believe that liberalization of trade and industrial policies, inasmuch as it leads to increased competition, will reduce gender discrimination in wages. This view is based on a theory of discrimination (see Becker, 1971). The argument is that gender discrimination is costly and the employers do discrimination despite it being costly because of the nature of their preferences. Hence, the employers will have to curb their preference for discrimination if competitive forces bring down their profit margin.

A question of particular interest to this chapter is the inter-state differences in the extent of gender-based discrimination in manufacturing employment. The focus, as mentioned above, is on the tenure of employment i.e. how far women tend to be discriminated against in the matter of getting regular jobs. It would be interesting to find out which are the Indian states where the extent of gender discrimination in manufacturing employment is relatively high, and the states in which it is relatively low. What is more important is to look for an explanation of the observed inter-state differences.

INTRODUCTION

India's new National Manufacturing Policy (announced in 2011) aims at raising the share of manufacturing in aggregate Gross Domestic Product (GDP) from about 15 per cent at present to about 25 per cent by 2022 (or thereabout), and creating in that process an additional 100 million jobs. Achievement of this goal requires the real output of India's manufacturing to grow at the average rate of about 15 per cent per annum in the next 10 years if one assumes that the aggregate GDP will grow at the rate of 10 per cent per annum in that period. The required growth rate in real output of India's manufacturing is about 13 per cent per year if the growth rate in aggregate GDP in the next 10 years is taken to be lower at about 8 per cent per annum. During the period 1999–2000 to 2011–12, the trend growth rate in aggregate GDP was 7.7 per cent per annum and that in manufacturing GDP was slightly higher at 8.3 per cent per year. According to first revised estimates of national income released by the Central Statistical Office (CSO) (Press note dated 31 January 2014) and advanced estimates of national income released by the CSO (press note 7 February 2012), the growth rate in real GDP in manufacturing in 2012–13 over the previous year was 1.1 per cent, and that in 2013–14 is expected to be –0.2 per cent. Thus, the average growth rate in manufacturing GDP during the period 1999–2000 to 2012–13 was less than 8 per cent per year, which holds true also for the period 1999–2000 to 2013–14. Evidently, a huge increase in the growth rate in manufacturing real output (by 5 per cent or more) would be required if the target of enhancing the share of manufacturing in aggregate GDP to 25 per cent within a decade is to be achieved. Is such an increase in the growth rate of manufacturing real GDP possible and sustainable, and if so, what does it entail?