Former CEA’s Research Reveals Structural Shift In India's Manufacturing Sector

ENA Sectors 2024-11-29 15:18:15 New Delhi, Nov 29 (KNN) In a recent seminar hosted by the Centre for Social and Economic Progress (CSEP), former Chief Economic Advisor Arvind Subramanian presented a research highlighting structural transformations in India's manufacturing landscape. His comprehensive analysis unveiled a dramatic shift in the composition of industrial plants, with multi-plant firms experiencing substantial growth over the past two decades. The research demonstrated a remarkable increase in multi-plant firms, rising from 15 percent in 2001 to 30 percent of total large plants employing over 200 workers by 2022. Correspondingly, employment in these multi-plant establishments surged from 17 percent to 43 percent of total non-managerial workforce during the same period. Subramanian critically examined the Annual Survey of Industries (ASI) data, exposing potential statistical misrepresentations in firm sizing. The current reporting mechanism allows firms with multiple plants within a state to file joint returns, potentially inflating the perceived scale of manufacturing establishments. Diving deeper into the implications, the research uncovered three critical insights. First, contrary to conventional assumptions, large plants have not expanded in size, with top-percentile plants marginally decreasing in average workforce from 1,121 workers in 2002 to 1,108 in 2022. Additionally, their employment share contracted from 50.4 percent to 45 percent. Notably, the study revealed that multi-plant firms demonstrate lower productivity compared to equivalent single-plant firms, raising concerns about national competitiveness and export potential. This phenomenon also provides insights into how firms navigate complex regulatory environments by strategically diversifying operational risks. Complementing Subramanian's analysis, former Planning Commission deputy chairman Montek Singh Ahluwalia emphasised the role of restrictive labour laws in fragmenting manufacturing operations. He described the current regulatory framework as a metaphorical lawn-mower that discourages entrepreneurial scaling, particularly citing the Industrial Disputes Act's 100-worker limit as a significant impediment to industrial growth. The research also shed light on labour management strategies, revealing that contractual labour utilisation differs between single and multi-plant firms. Single-plant units rely more heavily on contract labour due to limited operational flexibility, whereas multi-plant firms can manage workforce dynamics more dynamically across their various establishments. These findings offer a critical examination of India's manufacturing sector, underscoring the complex interplay between regulatory frameworks, organisational strategies, and economic performance. (KNN Bureau) 40083 https://knnindia.co.in/news/newsdetails/sectors/former-ceas-research-reveals-structural-shift-in-indias-manufacturing-sector 2024-11-29 15:18:15 knnindia.co.in Former CEA’s Research Reveals Structural Shift In India's Manufacturing Sector