Reforms and Employment Elasticity in Organised Manufacturing

Three periods may be distinguished showing large variations in employment elasticity in Indian manufacturing. The first period (1974-80) with an elasticity close to unity, the second (1980-86) with a negative employment elasticity ('jobless growth'), and the third (1986-96), the 'reform period' when employment started to recover along with an enhanced rate of growth of output, although employment elasticity did not reach the levels of the first period. The causes of the varying elasticities are diverse, but the decomposition analysis reported in this paper can throw some light on the relative importance of different factors affecting the variable.