In the last 15 years, the share of manufacturing in the Indian economy has been stagnant at around 16%. Meanwhile, the share of services has edged towards 50%. This has led to experts arguing that services are more important for job creation. Is that true? Mint takes a look.
What’s manufacturing sector’s overall share?
The share of manufacturing in the Indian economy has varied between 14.7% of gross domestic product (GDP) and 16.7% of the GDP, between FY05 and FY20. GDP is a measure of the economic size of a country. As the sector has just kept pace with the growing economy, it has not created as many jobs along the way. Of course, just manufacturing cannot create enough jobs for the 10-12 million individuals who enter the workforce every year in India. In stark contrast, between 2004-05 and 2019-20, the share of services in the economy has gradually increased from 43.5% of the GDP to 50.4%.
Is manufacturing not key to job creation?
“Manufacturing activity leads to the creation of large employment in several service sector areas,” writes R.C. Bhargava, chairman of the carmaker Maruti Suzuki, in Getting Competitive—A Practitioner’s Guide for India. The problem is that these jobs are not recorded as manufacturing jobs, as the creation of a job is recorded in the sector it has been created in. For instance, let us say a factory comes up on the outskirts of a city. A lot of small eateries crop up around this factory and these eateries create jobs. These jobs will be recorded in the services sector, but they were created as a result of the factory setting up.
Source: livemint
