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Economic Survey Highlights : – Manufacturing or Services ?

Excerpts from Economic Survey –
In order to bring about expansion and structural transformation, India should utilize its dominant resource of unskilled labour. But, “What should India make?Manufacturing or Services? ”
The Economic Survey distinguishes registered manufacturing ( formal sector) from the general manufacturing which covers informal sector as well.
Advantages of Registered Manufacturing ( Formal Sector )
  • Has the potential for structural transformation.
  • Exhibits high productivity compared to other sectors of the economy.
Issues with Registered manufacturing ?
  • Manufacturing productivity in India lags behind other nations.
  • All Indian states exhibit declining share of manufacturing in the State GDP.
  • Registered manufacturing couldn’t bridge regional disparities in India.
  • Registered manufacturing now in India has been identified as skill intensive which is not in line with the India’s comparative advantage in unskilled labour.
Factors for non development of manufacturing as an engine of economic growth :- 

• Distortions in Labour Market

• Distortions in Capital Market

• Distortions in Land Market

• Specialization not in line with India’s comparative advantage in unskilled labour

Certain subsectors of services – financial services and business services, exhibit higher productivity levels than registered manufacturing. However, these sectors being highly skill intensive (excluding construction) are out of line with the skill profile of the Indian labour force. They are unlikely to generate widely shared and inclusive growth. Though, service sector has the potential for domestic growth convergence across regions.

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