India’s government claims to “transform India into a global manufacturing hub” and in the process raise manufacturing to 25% of gross domestic product and create 100 million new manufacturing jobs. This would entail a structural change comparable to that witnessed by several East Asian countries beginning in the 1960s. This study projects a formal-sector manufacturing boom over 20 years at the sectoral level, assuming India can take the necessary steps to initiate such a boom. Projection parameters are carefully constructed based on the Indian and the East Asian historical experience. The projections break out the key growth areas of formal-sector manufacturing and modern services to capture their unique characteristics. The results show large positive gains to aggregate output and employment from initiating an East Asia-style manufacturing boom. Reflective of the small size of the formal-sector manufacturing employment currently, the results indicate that the government’s specific employment goals appear unattainable in the next 20 years.
Read the full article in Economic & Political Weekly.