Launched in 2014, the ‘Make in India’ initiative envisaged fostering innovation to boost manufacturing sector growth and increase its contribution to the economy. The idea was not just to become self-reliant but also position India as the global manufacturing hub. Consequently, a series of policy initiatives like production-linked incentives, National Infrastructure Pipeline, India Industrial Land Bank, ease of doing business and One District One Product (ODOP), among others, were launched. Also, specific targets, such as enhancing manufacturing sector’s share in the economy from 15-16 percent to 25 per cent by 2025 and creating 100 million additional jobs by 2022, were fixed.
Unfortunately, globally economies suffered various shocks like Covid and the continuing Russia-Ukraine and Israel-Hamas conflicts, which have affected the domestic manufacturing sector, too. Employment generation in the country has also become a major concern.
Therefore, it may be worthwhile examining the growth in employment in the manufacturing sector based on the data now available in the Annual Survey of Industries (ASI), that is, till 2021-22, and from Annual Survey of Unincorporated Sector Enterprises (ASUSE) for 2021-22 and 2022-23.
Corporate manufacturing
Corporate manufacturing units consist of units registered under sections 2(m)(i) and 2(m)(ii) of the Factories Act, 1948 having 10 or more workers with power or 20 or more workers without power, and all units employing more than 100 workers registered in other Acts. The number of factories in the corporate manufacturing sector has significantly increased between 2015-16 and 2020-21 from 2.33 lakh to 2.50 lakh, around 7.24 per cent increase over six years. Employment in these factories have also increased from 1.43 crore to 1.72 crore, a growth of 20.39 per cent.
A comparison between six years preceding and succeeding 2015-16 for corporate manufacturing brings out a mixed picture. The CAGR of number of factories from six years preceding 2015-16 (i.e., from 2009-10) was 6.60 per cent, which has come down to 1.17 per cent in the six years after 2015-16. However, the CAGR of number of employees has seen a minor decline from 3.27 per cent to 3.14 per cent. This shows quick recovery of the sector after the Covid shock but it may take a little more time to fully recover.
Employment growth in certain sectors has accelerated in the latter six years compared to the previous period. For instance, jobs in the ‘food products’ sector grew 18.92 per cent between 2015-16 and 2021-22, higher than the 8.54 per cent between 2009-10 and 2015-16. Similarly, employment in ‘chemical and chemical products’ saw a rise of 38.06 per cent compared to 26.29 per cent in the six years preceding 2015-16. Sectors like ‘rubber and plastic products’ and ‘basic metals’ also experienced significantly higher increases in employment.
Unincorporated units suffer
Unincorporated manufacturing comprises mostly smaller units belonging to the MSME sector. There has been significant decline in the number of factories in the unincorporated sector over the last six years — declining from 1.96 crore to 1.72 crore, a fall of 12.27 per cent. Employment in this sector has also declined from 3.60 crore to 2.79 crore in these six years, a fall of 22.52 per cent. The recovery in this sector has been slow, and a full recovery may take a longer time and will hinge on a conducive and supportive industrial environment.
The number of own-account enterprises (OAEs) in the unincorporated manufacturing has increased. The proportion of OAEs amongst all the unincorporated enterprises has risen from about 85 per cent to 89 per cent, with a corresponding rise in their share of employment from about 62 per cent to 68 per cent in over the six-year period, implying a reduction in hired-worker establishments and encouraging job seekers to undertake some form of self-employment or shifting to the services sector.
More than 90 per cent of the manufacturing sector enterprises were engaged in just nine types of activities, indicating concentration of unincorporated enterprises in a few activities. The five top activities having 80 per cent of all units were in manufacture of wearing apparels, textiles, tobacco products, food products, and wood products excluding furniture. These provided employment to about 71 per cent of the workers.
Enterprises producing apparel and textile goods, including accessories like hats, gloves, jerseys, and cardigans, accounted for 28 per cent of all unincorporated sector enterprises in 2015-16, and this position was maintained through 2021-22. This sector has been the primary source of employment, accounting for nearly 22 per cent of all workers in unincorporated manufacturing. Over the six years, its share of enterprises has grown to 37 per cent, with a corresponding increase to 29 per cent in terms of employment contribution. Two other activities that have shown a substantial increase both in number of units and employment are: food products, processing and preservation, and manufacturing activities related toiron, steel, zinc copper, aluminium, etc. In sectors like glass works, there has been a contraction in both number of units and employment due to consolidation and adoption of improved technology.
While the corporate manufacturing sector is witnessing strong recovery after Covid, the unincorporated manufacturing sector is yet to recover from the sharp fall. There are indications of increasing corporatisation in the manufacturing sector after the launch of ‘Make in India’ initiative, resulting in qualitative improvement in employment. The unincorporated sector, especially MSMEs in manufacturing, needs special attention for its importance in job creation and supply of inputs to large manufacturers.
Kumar, former DG, MOSPI, is Distinguished Fellow, and Jain is Research Associate, with Pahle India Foundation