Pace of job creation in manufacturing sector doubled between FY14 and FY23: MC Analysis

Manufacturing employment has done better in last decade

India’s manufacturing sector created jobs at a faster clip in the past 10 years than it did in the decade before the financial year 2014-15, a Moneycontrol analysis of the Reserve Bank of India (RBI) data shows.

Employment in the manufacturing sector grew at 1.6 percent annually between FY14 and FY23, almost double the 0.7 percent compounded annual growth rate achieved between FY05 and FY14, as per the KLEMS database. The KLEMS data, published by the central bank, provides employment estimates of the country’s private and public sectors.

Leader of opposition Rahul Gandhi during his visit to USA  has argued  that India had an "employment problem." Speaking at an interaction at University of Texas, Gandhi said, "You go to India, you look at the phones, you look at the furniture, you look at the clothes... you will see 'Made in China', that's a fact....If we carry on down this path... forgetting about manufacturing, you're going to see massive social problems in India, United States and Europe." He further asserted that  "...it's not acceptable that India simply says... manufacturing... is going to be the preserve of the Chinese."

In reality, however, employment growth patterns in manufacturing bely the claim of India abdicating its role in this sector.

The increase in job additions in the 2014-2023 period is despite output slowing during the NDA years.

Manufacturing output expanded 5.4 percent in this period, against 7.9 percent in the previous decade, RBI data shows.

The share of manufacturing in the gross domestic product (GDP) remained unchanged around 16-17 percent in 2014-2023 over the last decade, with higher contribution coming in from services.

The government plans to increase manufacturing share to 25 percent by the end of the decade.

While manufacturing jobs have risen faster, changing technologies and rise in exports shifted employment across industries, KLEMS data shows.

Employment in woods and wood products industry continued to contract in the FY14-FY23 period in keeping with the trend of the previous decade.

Other non-metallic mineral product industries also saw a contraction in employment.

But jobs grew faster in chemical and chemical products, one of India’s top export items. The rate of employment generation in chemical industries at 4.26 percent per annum was the fastest in the manufacturing sector.

Food products and beverages and textiles continued showed a tepid performance even during this decade.

India’s is trying to woo electronic manufacturers but the pace of employment in these industries has declined.

Electrical and optical equipment manufacturers added 3.9 percent jobs annually during the FY14 and FY23 period compared with 10.1 percent in the previous decade.

The trend is not unique to India. A comparison with other developed countries for the period also shows a decline in computer equipment and electronics manufacturing.

One reason, experts say, could be the increase in automation and growing reliance on technology in these sectors.

One of the concerns often raised about slowing growth in manufacturing is exploitation of labour.

Analysis shows that the labour share of output has increased over the last decade, indicating higher share of compensation to labour than payments to capital.

Between FY14 and FY23, the labour income share grew from 31.2 percent of the total to 32.6 percent.