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

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Analyses of India’s Informal Manufacturing Sector

Some Puzzles about Firms

Despite the presence of a large number of manufacturing firms in the informal sector in India, we know very little about their characteristics and evolution over time. We present some puzzles about firms in the Indian informal manufacturing sector, using unit-level data from the National Sample Survey Office surveys of unorganised enterprises from 2000-01 to 2010-11. There is clear evidence of a positive relationship between worker wages and firm productivity, indicating the importance of improving firm productivity in the Indian informal sector as a means to improve the living standards of workers. Our analysis also shows that there are social and economic barriers to informal enterprises increasing their productivity, which is a matter of major policy concern. There are also gender-related differences in the productivity of firms. Targeted government programmes are needed to address the issues that socially disadvantaged groups and female entrepreneurs face in the informal manufacturing sector.

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