The growth of the manufacturing sector is important for employing a growing labour force and much is also dependent on their skill level. Enterprise surveys in six sample towns of Bihar, a state characterised by slow industrialisation and urbanisation, find evidence of fairly strong rural–urban linkages for manufacturing enterprises. Although the linkages indicate that the manufacturing sector has the maximum potential to create employment by absorbing the surplus labour in the rural areas, it was found that this sector has been languishing in the sample towns. The findings also flag the challenges and areas of growth for industries.