ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by Rajesh Raj S NSubscribe to Rajesh Raj S N

Unmaking ‘Make in India’

India’s business climate has historically been considered poor, resulting in low-rankings in the World Bank’s Doing Business Indicators. The National Democratic Alliance government has attempted to reverse this situation by improving the de jure rules related to the business climate. Whether this approach will improve the ease of doing business in India is analysed by using firm-level data on the number of days it takes to get an operating licence or construction permit. De facto deals between the state and businesses, rather than de jure rules, characterise the state–business relationship in Indian states. States with weaker quality of governance provide higher proportions of good deals in terms of the speed of obtaining licences and permits, and easing the norms of business regulations need not necessarily lead to higher productivity.

Some Puzzles about Firms

Despite the presence of a large number of manufacturing firms in the informal sector in India, we know very little about their characteristics and evolution over time. We present some puzzles about firms in the Indian informal manufacturing sector, using unit-level data from the National Sample Survey Office surveys of unorganised enterprises from 2000-01 to 2010-11. There is clear evidence of a positive relationship between worker wages and firm productivity, indicating the importance of improving firm productivity in the Indian informal sector as a means to improve the living standards of workers. Our analysis also shows that there are social and economic barriers to informal enterprises increasing their productivity, which is a matter of major policy concern. There are also gender-related differences in the productivity of firms. Targeted government programmes are needed to address the issues that socially disadvantaged groups and female entrepreneurs face in the informal manufacturing sector.

Organised versus Unorganised Manufacturing Performance in the Post-Reform Period

This paper analyses the productivity performance of both the organised and unorganised segments of the Indian manufacturing sector using unit level data. Both partial and total factor productivity measures are employed. Our analysis reveals that labour productivity has increased for the organised sector over time, whereas both labour productivity and capital intensity growth have slowed down in the unorganised sector during the period between 2000-01 and 2004-05. The improvement in TFP growth in organised manufacturing in the post-2000 period as compared to the second half of the 1990s across most states in India is heartening as also the fact that output growth was mostly productivity-driven in the post-reform period. However, the declining TFP and the increasing capital intensity of the unorganised sector are causes of worry and raise several important questions.
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