Band-aid economics

Rather than showing a steady increase over the years, the share of the industrial sector in GDP has stagnated around 20-21% from 1991-92 to 2002-05, and thereafter actually declined to about 18% in 2010-11. The transformation of the agrarian economy directly to the one dominated by services, bypassing manufacturing, has been a matter of concern for policymakers. This has, inter alia, entailed a lop-sided growth with low employment elasticity of manufacturing growth and low value addition per unit of labour and capital. To meet this concern, the government of India has come out with the National Manufacturing Policy (NMP). Unfortunately, this is yet another attempt at a band aid type policy formulation and if one expects that this will provide an impetus to industrial revival to significantly enhance the manufacturing sector’s share in GDP and employment, one may be sorely disappointed.

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