The Search for Flexibility in Indian Manufacturing

This paper provides estimates of production subcontracting in Indian manufacturing industries as a source of flexibility. Data on 84 three-digit industries within the organised manufacturing sector is used here. An index of subcontracting intensity is introduced and it is shown to have increased in aggregate manufacturing between 1970 and 1992-93. It is shown that subcontracting practices are concentrated in labour-intensive industries and greater in industries producing consumer non-durables. A non-linear relationship between factory size and subcontracting intensity is postulated. Regression estimates supported the hypothesis. Organisational diseconomies associated with large employment size seem to result in greater subcontracting.