Manufacturing sector

This study examines technology diffusion resulting from foreign direct investment in the domestic manufacturing sector in India, by employing unit-level panel data from 2000 to 2007, covering all medium- and large-size manufacturing enterprises. The attempt is to empirically capture evidence of FDI technology spillover effects through two key mechanisms: horizontal spillover and vertical spillover. Vertical spillover effects can be further divided into backward linkages and forward linkages. Technology diffusion can also be the result of both short- and long-term spillover effects.

Has India deindustrialised prematurely, after three decades of free market reforms? Probably not. The manufacturing sector’s share in gross domestic product has stagnated, and Kuznetsian structural transformation has stalled. The dispersion and rankings of the major states’ manufacturing employment and output shares have broadly remained unchanged. In the top and bottom 50 districts, the share of manufacturing employment in total employment has remained constant since 1991. Yet, the district-level spatial concentration of employment by industry has increased, and the coefficient of localisation is rising. Thus, the industrial change discernible at the micro level seems too feeble to show up in the aggregate.

The `Kerala model' of development has been facing a serious crisis due to low growth, high cost, low productivity, low investment and low employment in the state economy. This paper analyses the performance of major sectors of the state economy, such as agriculture, industry and the financial sector, during the past two decades and brings out the problems they confront. The paper highlights the lack of a development strategy in Kerala for growth and employment generation.