Public Workers' Housing Helps Labour-Intensive Manufacturing

The National Manufacturing Policy (NMP) seeks to give a much-needed push to creation of jobs for the 220 million young people who will require jobs in the period up to 2025. It is hoped that with the NMP in place some 100 million additional jobs in manufacturing would be created by 2025. The shortcomings of the present scenario were identified as being inadequate physical infrastructure, complex regulatory framework and inadequate availability of skilled manpower. Within the “complex regulatory framework” is included the labour regulatory framework, particularly Section 31 of the Industrial Disputes Act, the “notorious” section that requires all units employing more than 100 workers to seek government permission to close the unit or otherwise retrench workers.

This regulatory requirement is likely to be a factor in the phenomenon of the “missing middle” in Indian manufacturing (see Mazumdar and Sarkar 2012). The size structure of manufacturing in India is that units are either very small, with less than 100 workers, or very large with more than 2,000 or so workers. Very small units escape the regulatory framework, while very large units are able to make up for the extra transaction costs of negotiating the complex regulatory framework.