A persistent delinking of growth and employment during the high-growth phase of the Indian economy followed by sluggish growth and eventually episodes of absolute decline in employment in the aftermath of the 2008 global financial crisis is the pretext for a quest towards a growth trajectory that facilitates gainful employment. The macro indicators of growth slowdown, decline in the growth of corporate capital formation, persistently low capacity utilisation at 70 per cent and simultaneously declining absorption capacity of agriculture resulting in a shift of employment from agriculture to the non-farm sector to the tune of 20 percentage points in the past three decades raise serious doubts about the possibility of mending the widening gap between the growth of output and employment. The relative stagnation of manufacturing in terms of share in gross domestic product (GDP) for the past few decades have been the cause of concern for policymakers. Given the assumed advantages of manufacturing in terms of relatively faster growth in productivity, higher backward and forward linkages and spillover effects as well as the potential to create gainful employment, this sector had attracted policy attention by successive governments (Kaldor 1966, 1967). However, the production structure within manufacturing is undergoing major changes with rising capital intensity and declining employment elasticities. Additionally, in a liberalised regime, the dichotomy between the domestic and the global market is largely attenuated. Erstwhile local monopolies face a competitive market as price takers, and hence are increasingly inclined to introduce technologies borrowed from the global shelf which are expectedly labour displacing in nature. In such a milieu, the dominant mode of industrialisation, namely export-oriented growth strategies with hardly any choice of technologies left and reliance on inserting domestic production structures into global networks as the shortcut towards industrialisation, is unlikely to proffer necessary solutions.

The problem, however, cannot be resolved by a straightforward solution of promoting labour-intensive industries. It is not only about employing labour but employing them gainfully. Interestingly, industries that are relatively more labour intensive show a low share in manufacturing value-added in India, and also the share of labour in value-added in these industries is much lower compared to other industries (Roy 2016).