Sectoral Divergence in Indian Manufacturing: Organised Sector Growth and Unorganised Decline

Santosh Mehrotra () and Dr Renu Chauhan ()
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Santosh Mehrotra: Higher School of Economics
Dr Renu Chauhan: Centre for INformal Sector & Labour Studies, Jawaharlal Nehru University, New Delhi, India

No 18688, IZA Discussion Papers from IZA Network @ LISER

Abstract: Manufacturing-led growth remains central to India’s structural transformation, given its potential to generate large-scale employment for unskilled and semi-skilled workers transitioning out of agriculture, as well as its strong interlinkages with services employment. However, the share of manufacturing in both employment and gross value added has remained stagnant. Against this backdrop, this paper analyses the performance of India’s organised (or formal) and unorganised (or informal) manufacturing during last decade using unit-level data from the National Sample Survey's Annual Survey of Industries, Periodic Labour Force Surveys, and Annual Survey of Unorganized Sector Enterprises. The findings reveal a slowdown in employment and gross value added within the unorganised manufacturing sector between 2015–16 and 2022-23, while the organised manufacturing sector recorded gains. Overall, the manufacturing sector is increasingly becoming organised with share of unorganised sector in total employment and value added reducing over the years which can pose an opportunity or a challenge, depending on the absorption of workers in the organised sector.

Keywords: manufacturing; organised sector; unorganised sector; informal sector; structural transformation; employment; formalisation; India (search for similar items in EconPapers)
JEL-codes: J21 J46 L60 O14 O17 O53 (search for similar items in EconPapers)
Date: 2026-05
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