ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Service Producing Manufacturing Units and Their Impact on Sectoral GDP

Manufacturing services are characterised as outsourced parts of a total production process and comprise output of those manufacturing activities that are performed on the physical inputs owned by units other than the units providing the service. According to standard industrial classifications, these are included in manufacturing. Sixty-four per cent of the unregistered manufacturing establishments in India are, in fact, engaged - more often than not solely - in providing manufacturing services. Generally, these activities are treated as "manufacturing" while estimating domestic product or supply side aggregates, but as "services" while estimating expenditure or use side aggregates. This paper presents a profile of the manufacturing services providing segment of the unregistered manufacturing sector and briefly dwells on the ambiguities inherent in the accepted definitions of "manufacturing" activities and "services". It illustrates the implications of the dual treatment in estimating sectoral distribution of domestic product and concludes that distinguishing manufacturing services from other manufacturing activities in the industrial classification might help resolve this issue as well as related problems in a wide range of applications.
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