Regional Disparities in Employment Intensity of Indian Industries: A State-level Analysis

Abstract

The pace of industrialization plays a crucial role in the economic growth of any country. It provides high employment opportunities to the labor force, diminishes the cost of production, upsurges the saving, and raises the demand for goods and services in the economy. Furthermore, it helps in relocating surplus labor from the agriculture sector. This study is an attempt to find the states in India wherein the industrial sector generates more jobs. It further unearths the decomposition of industrial output and the regional concentration and dominance of industrial activities in India. To accomplish the objectives, the study utilizes the secondary data collected from the Annual Survey of Industry. The period of the study is from 1980–1981 to 2013–2014, and it encompasses 18 major states in India. The findings of the study suggest that a weak relationship exists between employment and output of the industrial sector for the majority of the states during the study period. The decomposition results show that there exists a large degree of regional disparity in industrial growth across the states, which is mostly driven by labor productivity and not by an increase in the supply of labour. Therefore, in order to boost the industrial sector, the states lagging in industrial development should give more emphasis on state-specific industrial policy to attract more investment and create more infrastructure.

Keywords

Output employment organized industries employment intensity

Introduction

In the era of globalization, the problem of unemployment has increased rapidly in many countries across the world, including India. Every year, 5–7 million people join the Indian labor market; 2–3 million join the education sector, and approximately 5 million join the non- agriculture sector. Hence, approximately 12–15 million jobs are required every year in India (Bhattacharya & Bijapurkar, 2017). However, only 8.5 million jobs are added to the Indian economy, which clearly shows a huge gap of 4.7 million jobs from 2004 to 2012. The concern is related not only to the generation of quality and skillful employment but also to jobs for unskilled workers which are necessary for the Indian economy. This is only possible with the rapid and sustainable growth of the industrial sector. It helps in relocating surplus labor from the agriculture sector with high productivity. In comparison with the agriculture, the industry has the capability to provide more employment opportunities to the labor force and help the economies to grow at a faster rate.

Despite many advantages, the Indian economy has failed to boost the industrial sector, as its contribution to employment and output is low. However, the output of the industrial sector has grown at a faster pace, but the growth of employment is low. This shows a huge gap between employment and output growth in Indian industries. The problem of employment generation in the industrial sector has declined despite good performance in the output growth rate, thus leading to a fall in the value of employment elasticity (Sen & Das, 2015). In addition to this, regional disparities in the industrial sector have posed a challenging issue in the Indian economy (Bhattacharya & Sakthivel, 2004). Some states are growing at a faster rate, whereas other states are developing at a much slower pace (Goldar & Seth, 1989). However, during the post-reform period, most of the Indian states have witnessed higher output growth in the manufacturing sector (Awasthi, 2000).

In the present scenario, studies have reported that smaller Indian states such as Himachal Pradesh and Uttarakhand have experienced higher industrial growth rates as compared with other larger Indian states (Kumar & Pattanaik, 2017; Sharma, 2017). From 2003–2004 to 2008–2009, Himachal Pradesh has achieved 25 and 39 percent annual growth rate in employment and output of the industrial sector, respectively. During the same period, Uttarakhand has achieved 41 and 68 percent annual growth rate in employment and output of the industrial sector, respectively (Goldar, 2011). However, West Bengal is the only state that has experienced a lower growth rate in the manufacturing sector compared with most of the Indian states during 1970–2002 (Das, 2007; Das & Sengupta, 2015).

In literature, there are many indicators for judging the employment generating capacity of the economy. These indicators include unemployment rates, workforce participation rates, employment rates, and employment elasticity of output (Ehwany & Megharbel, 2009; Islam & Nazara, 2000). Employment elasticity of output is also known as the employment intensity of growth, and it is measured with the help of employment elasticity to output index. Specifically, it explains the amount of employment generated with respect to the output growth rate (Dopke, 2001; Kapsos, 2005). It further elucidates the ways through which output and employment evolved with time. To become acquainted with the employment generating capacity of the economy, state, industry, or sector, it even serves as a useful tool. The concept of employment intensity of growth has achieved overwhelming attention through the several publications of a famous economist, Okun. In 1962, Okun proposed a significant relationship between output and unemployment rate and stated that for reducing the level of the unemployment rate, the economy needs to grow at a higher rate. According to this law, several researchers in the recent past have estimated the employment intensity of growth for different countries. For example, Islam and Nazara (2000) estimated employment intensity of growth for the Indonesian economy; Dopke (2001) for Europe; Mazumdar (2003) for group of countries; Ali (2007) for Turkey; Seyfried (2007/2008) for Canada, France, Germany, Italy, UK, and the USA; Ajilore and Yinusa (2011) for Botswana; Crivelli, Furceri, and Bernate (2012) for a panel of 167 countries; Leshoro (2014) for the Botswana; and Sassi and Goaied (2016) for Tunisia.

In India, studies have examined the output and employment relationship at a broad sectoral level such as primary, secondary, and tertiary (Pattanaik & Nayak, 2013a, 2013b). However, few studies explored this relationship at a greater disaggregate level. Most of the studies have explored the output and employment relationship for an industrial or subsectoral level (Goldar, 2000; Kumar & Pattanaik, 2017; Mazumdar & Sarkar, 2004; Kannan & Raveendran, 2009; Misra & Suresh, 2014). It has been reported in the literature that there is a large degree of regional disparities exists in the performance of manufacturing sector on various parameters, that is, labor productivity (Trivedi, 2004), wage rate, and contractualization (Jain, 2017). In accordance with the above-mentioned background, the present study has examined the output and employment relationship of the industrial sector in India at the state level. Specifically, the study has addressed the following issues:

Identification of the states in India which generate more employment with respect to the output of the industrial sector.

Examination of the drivers of industrial growth by decomposing the industrial output into two components, namely, employment and labor productivity.

From the above-mentioned studies, it is clear that there is a gap in the literature to find out the relationship between output and employment growth of the industrial sector at the subnational level. It would provide an insight into the differences in the behavior of the labor markets of each state as well as increase the understanding behind the different reactions of employment in different states toward the changes in industrial growth. Against this background, rest of this article is structured in the following manner. The following section presents the data source and methodology used in this study. Later, the section Results and Discussion is followed by the conclusion.

Data Source and Methodology

Data Source

The present study uses data from the Annual Survey of Industries (ASI), which is compiled by Economic and Political Weekly and Research Foundation (EPWRF). ASI is the only source that provides data on the industrial statistics of India. It works under the Ministry of Statistics and Programme Implementation (MOSPI) and provides data related to the growth, structure, and composition of organized manufacturing industries, which are registered under the factory act 1948. Therefore, these industries employed 10 or more workers along with the use of electricity or 20 or more workers without using electricity. We further considered the total number of persons engaged and the gross value added (GVA) as a measure of employment and output, respectively. In the ASI, the data related to the GVA are reported in their current prices.

For maintaining consistency in the prices, the GVA data was deflated by the wholesale price index of the manufacturing products. The employment elasticity is calculated using both the output and employment data. The time period considered is from 1981 to 2014, which is divided into two broad periods, that is, 1981–1990 and 1991–2014. The period from 1991 to 2007 is further divided into two periods, that is, 1991–2007 and 2008–2014. The aim of dividing the entire period is to know the impacts of major economic events, and the focus of this study is mainly on the state-level analysis.

Methodology

Estimation of Employment Elasticity and Growth Rates

Employment elasticity is a measure that is used to demonstrate the responsiveness or elasticity of employment with respect to the change in the output. Furthermore, it gives the percentage change in employment for 1 percent change in the output growth rate. There are mainly two ways for estimating the employment elasticity of output: (a) arc elasticity and (b) point elasticity (Lim, 1976; Misra & Suresh, 2014). The arc elasticity is calculated by dividing the percentage change in employment with the percentage change in output. The method is applicable to the availability of data for two points in time. However, the availability of data for a long period makes point elasticity more appropriate. Therefore, the present study uses the second method for the calculation of employment elasticity. It mainly relies on the regression equation and is estimated with the help of the following regression equation:

I n e m p l o y m e n t_{i} = a + b I n O u t p u t_{i} + e_{i},

(1)

where ln is natural logarithm, a is intercept, e_i is error term, and b is coefficient that gives employment intensity of growth with respect to output growth rate.

The employment elasticity provides the employment potential of the state or country or sector with respect to the output growth rate. To examine trends in the growth of employment and output rates, the study uses two models: (a) semilogarithmic model and (b) kinked exponential growth model. The semilogarithmic model is used to estimate the overall growth rates (1981–2014), while the kinked exponential growth model is utilized to calculate the piecewise growth rates for the three periods (1981–1990, 1991–2007, and 2008–2014). The semilogarithmic model is estimated with the help of the following regression equation:

\begin{array}{l} In output/employment/labor \\ productivity = a + b Time + e . \end{array}

(2)

This equation is similar to any other regression equations with a small difference in the regressor, which takes the value of 1, 2, 3, …, 34. The coefficient of time measures the constant proportional or relative change in output/employment/labor productivity for a given change in time. Similarly, the piecewise growth rate is estimated using the following kinked exponential regression equation:

\begin{array}{l} In Y_{t a} a = α_{1} + β_{1} (d_{1} t + d_{2} k_{1} + d_{3} k_{1}) + β_{2} \\ (d_{2} t - d_{2} k_{1} - d_{3} k_{1} - d_{3} k_{2}) + b_{3} (d_{3} t - d_{3} k_{2}) + u_{t}, \end{array}

(3)

where d is dummy variable, k₁, k₂, and k₃ are broken time periods, β₁, β₂, and β₃ give the growth rate for three periods, and u_t is error term. Boyce (1986) also used the equation for estimating the piecewise agricultural growth rate for Bangladesh and Indian State West Bengal. It has been suggested that the kinked exponential growth model gives better results than the conventional methods (Goldar, 1987).

Results and Discussion

In this section, we have examined the trends and pattern of employment intensity of the industrial growth for a panel of 18 major states in India. It gives a clear picture of employment with respect to the output growth of the industrial sector of each state, which further presents the Indian states that have experienced the highest and lowest industrial growth during different time period.

Employment Intensity of Industrial Growth by State

The results from the estimated regression equation (1) are presented in Table 1. Column 4 of the table shows the results of the employment intensity of industrial growth for the overall period. It shows a significant relationship between industrial employment and output growth for the majority of the states, except Uttar Pradesh and Madhya Pradesh. This relationship is negative only for West Bengal, which suggests that the output growth of the industrial sector in West Bengal is motivated by labor productivity and not by employment growth. Column 4 further demonstrates that Bihar is the most labor-intensive state in India, which is followed by Himachal Pradesh, Goa, and Tamil Nadu. All these states have witnessed that employment intensity of industrial growth is approximately 0.41. Similarly, the state of Maharashtra has witnessed the lowest employment intensity of industrial growth in India, followed by Assam, Andhra Pradesh, Orissa, and Gujarat. This finding suggests that industrial growth in these states is mostly driven by productivity growth rather than employment growth.

Column 1 of Table 1 shows the estimated results of employment intensity of the industrial growth for the pre-reform period (1981–1990) and also depicts that 10 out of the 18 states have a statistically significant value of employment intensity of industrial growth. Among the 10 states, Maharashtra has shown the statistically negative value of employment intensity of industrial growth, which suggests that industrial growth in Maharashtra is driven by productivity and not by increase of labor supply. Moreover, there is a strong relationship between employment and industrial growth in the states of Jammu Kashmir and Himachal Pradesh, which means that industrial growth in these states is driven by an increase in the supply of labor and not by labor productivity. The remaining states have shown that there is a positive and weak relationship between employment and industrial growth.

Table 1.

Employment Intensity of Industrial Growth in India across States

S. No	States	1981–1990		1991–2007		2008–2014		1981–2014
		(1)		(2)		(3)		(4)
		Coefficient	T Value	Coefficient	T Value	Coefficient	T Value	Coefficient	T Value
1.	Maharashtra	−0.155	−5.470*	0.051	0.637	0.844	4.529*	0.122	4.457*
2.	Gujarat	−0.011	−0.143	0.134	2.755*	0.445	2.564**	0.216	8.754*
3.	Tamil Nadu	0.182	6.561*	0.492	7.318*	0.327	4.124*	0.40	23.227*
4.	Karnataka	0.092	1.934***	0.282	5.600*	0.526	1.408	0.318	16.189*
5.	Haryana	0.349	5.496*	0.229	4.709*	0.164	1.217	0.38	17.371*
6.	Uttar Pradesh	0.026	0.499	0.226	0.971	0.34	2.959**	0.021	0.505
7.	Rajasthan	0.232	2.526**	0.119	1.436	0.319	2.921**	0.276	10.834*
8.	Orissa	0.12	3.942*	0.027	0.205	1.078	2.650**	0.193	5.645*
9.	West Bengal	−0.618	−1.264	−0.157	−0.564	0.869	3.805*	−0.324	−3.930*
10.	Andhra Pradesh	0.073	0.872	0.15	1.913***	0.916	6.712*	0.188	4.512*
11.	Himachal Pradesh	0.76	3.097**	0.023	0.194	1.278	7.872*	0.413	9.705*
12.	Madhya Pradesh	0.158	1.602	0.877	3.028*	0.849	3.770*	−0.006	−0.062
13.	Punjab	0.484	7.914*	0.13	0.682	0.352	4.401*	0.355	10.684*
14.	Kerala	−0.192	−1.653	0.046	0.353	0.003	0.034	0.275	6.781*
15.	Assam	−0.051	−1.238	−0.015	−0.219	0.382	3.378**	0.139	3.899*
16.	Goa	0.113	2.792**	0.389	23.039*	0.254	4.035*	0.411	29.417*
17.	Bihar	0.002	0.041	0.697	13.004*	0.317	1.822	0.768	10.986*
18.	Jammu & Kashmir	0.842	3.401*	0.421	4.318*	0.62	3.318**	0.338	7.235*
19.	Mean	0.13		0.23		0.55		0.25
20.	CV	2.51		1.14		0.63		0.91

Source: The authors (calculation based on the Annual Survey of Industry Data).

Note: * Significant at 1% level; ** significant at 5% level; and *** significant at 10% level. It is showing the significance level of employment intensity.

Similarly, columns 2 and 3 of Table 1 provide the estimated results of employment intensity of industrial growth during the post-reform period (1991–2007 and 2008–2014). Column 2 clearly shows the positive and statistically significant value of employment intensity of industrial growth for the states of Gujarat, Tamil Nadu, Karnataka, Haryana, Andhra Pradesh, Madhya Pradesh, Goa, Bihar, and Jammu Kashmir. During the study period, all these states have further demonstrated an increasing trend in employment intensity of industrial growth, except Haryana and Jammu Kashmir. Considering the highest value of employment intensity of industrial growth, it is observed that Madhya Pradesh has become the most labor-intensive state followed by Bihar, Tamil Nadu, and Jammu Kashmir. The finding suggests that industrial growth in these states are driven by employment but not by productivity; therefore, employment intensity in these states is higher. The employment intensity of industrial growth in the other states—Gujarat, Karnataka, Haryana, Andhra Pradesh, and Goa—has been noted to range from 0.13 to 0.38.

Furthermore, the employment intensity of industrial growth from 2008 to 2014 is presented in column 3 of the table. This column shows the positive and statistically significant value of employment intensity of industrial growth for the majority of the states, except Karnataka, Haryana, Kerala, and Bihar. Furthermore, an increasing trend in employment intensity of industrial growth has been noted for most of the states over the period of study. It means that industrial growth has played a crucial role in employment generation. Interestingly, the two states, namely, Himachal Pradesh and Orissa have performed exceptionally well in employment generation and have witnessed employment intensity value to be more than unity. Industrial growth in these states is completely driven by employment growth. Besides, the industrially developed states such as Maharashtra, Gujarat, and Karnataka have also successfully generated more employment regarding industrial growth. These states have shown employment elasticity of 0.84, 0.45, and 0.52, respectively. The other states such as Madhya Pradesh, Andhra Pradesh, and West Bengal have further shown that there is a strong relationship between employment and industrial growth. The growth in these states is also motivated by employment increment. It has been observed that a large degree of variation exists in the employment content of industrial growth across the states; however, the variation is declining.

Decomposition of Industrial Growth by State

In this section, the growth rate of output, employment, productivity, and decomposing value of output for the selected states have been discussed for the overall study period (1981–2014) as well as the subperiods (1981–1990, 1991–2007, and 2008–2014), thus helping in developing more detailed understanding about the nature of growth of Indian industries across the states. For the overall study period, the results of the regression equation (2) for the growth of output, employment, and productivity are reported in Table 2. Columns 1, 2, and 3 of the table show the statistically significant value of output, employment, and productivity growth rate to be at 1 percent level for most of the states. The results clearly demonstrate an interstate variation in the growth rate of output, employment, and productivity. For example, the disparity of performance between Himachal Pradesh and Bihar is clearly evident from the selected variables. Furthermore, a huge gap in employment and output growth in most of the states has been witnessed, which indicates that industrial growth in most of the states is driven by productivity rather than employment growth, except in Bihar where employment motivates growth.

Table 2.

Decomposition of Industrial Growth by the State from 1981 to 2014 (in %)

States	GVA	T Value	Employment	T Value	Productivity	T Value	Productivity Driven	Employment Driven
States	(1)		(2)		(3)		(4)	(5)
1. Maharashtra	2.90	26.450*	0.300	3.305*	2.60	32.594*	89.7	10.3
2. Gujarat	3.70	35.366*	0.790	7.585*	2.91	28.688*	78.6	21.4
3. Tamil Nadu	3.00	27.207*	1.200	15.020*	1.80	22.562*	60.0	40.0
4. Karnataka	3.60	38.425*	1.100	13.247*	2.50	30.679*	69.4	30.6
5. Haryana	3.70	38.207*	1.400	15.118*	2.30	23.668*	62.2	37.8
6. Uttar Pradesh	2.41	13.682*	−0.086	−0.765	2.49	17.065*	103.6	−3.6
7. Rajasthan	3.30	23.098*	0.800	8.112*	2.50	22.488*	75.8	24.2
8. Orissa	3.60	17.153*	0.500	3.597*	3.10	21.724*	86.1	13.9
9. West Bengal	1.40	12.709*	−0.700	−7.904*	2.10	27.708*	150.0	−50.0
10. Andhra Pradesh	3.10	15.112*	0.300	2.162**	2.80	28.144*	90.3	9.7
11. Himachal Pradesh	5.00	17.213*	1.900	6.928*	3.10	12.703*	62.0	38.0
12. Madhya Pradesh	1.70	8.572*	−0.600	−3.469*	2.30	27.162*	135.3	−35.3
13. Punjab	2.60	18.842*	0.800	7.256*	1.80	17.996*	69.2	30.8
14. Kerala	1.80	17.637*	0.500	7.589	1.30	10.197*	72.2	27.8
15. Assam	2.40	12.825*	0.400	4.632*	2.00	9.479*	83.3	16.7
16. Goa	4.90	28.020*	2.000	21.189*	2.90	22.159*	59.2	40.8
17. Bihar	−2.14	−3.516*	−2.794	−7.410*	0.65	2.095*	−30.2	130.2
18. Jammu & Kashmir	4.10	8.855*	1.000	3.347*	3.10	10.257*	75.6	24.4
Mean	2.76		0.46		2.30
CV	0.58		2.44		0.28

Source: The authors (calculation based on the Annual Survey of Industry Data).

Notes: * Significant at 1% level; ** significant at 5% level; and *** significant at 10% level.

GVA, gross value added.

Table 3.

Decomposition of Industrial Growth by the State from 1981 to 1990 (in %)

States	GVA	T Value	Employment	T Value	Productivity	T Value	Productivity Driven	Employment Driven
States	(1)		(2)		(3)		(4)	(5)
1. Maharashtra	3.26	6.250*	−0.03	−0.101	3.29	9.019*	100.91	−0.91
2. Gujarat	3.22	6.204*	−0.07	−0.216	3.29	8.228*	102.18	−2.19
3. Tamil Nadu	3.96	9.608*	0.90	2.626**	3.07	13.070*	77.65	22.75
4. Karnataka	3.10	6.876*	0.40	1.234	2.70	8.563*	87.10	12.90
5. Haryana	2.61	6.028*	1.06	2.693*	1.55	3.575*	59.36	40.64
6. Uttar Pradesh	5.38	8.140*	0.20	0.518	5.18	11.224*	96.29	3.71
7. Rajasthan	4.00	6.647*	1.00	2.856*	3.00	5.807	75.00	25.00
8. Orissa	5.30	5.810*	1.20	2.525**	4.10	6.195*	77.36	22.64
9. West Bengal	0.90	1.931***	−0.70	−2.448**	1.60	4.637*	177.78	−77.78
10. Andhra Pradesh	3.60	3.725*	1.00	1.435	2.60	5.636*	72.22	27.78
11. Himachal Pradesh	2.26	2.074**	4.45	5.336*	−2.19	−3.366*	−96.98	196.98
12. Madhya Pradesh	4.82	6.005*	1.85	2.935*	2.96	7.598*	61.52	38.48
13. Punjab	4.87	9.202*	2.39	5.253*	2.47	5.517*	50.81	49.19
14. Kerala	3.13	8.180*	0.18	0.51	2.95	6.066*	94.29	5.71
15. Assam	4.03	4.422*	0.06	0.172	3.98	3.951*	98.59	1.41
16. Goa	2.09	3.053*	0.00	0.000	2.09	3.530*	99.99	0.01
17. Bihar	5.79	2.866*	1.29	1.07	4.50	3.566*	77.65	22.35
18. Jammu & Kashmir	−1.27	−0.715	−4.41	−4.068*	3.14	2.282*	−247.49	347.50
Mean	3.39		0.60		2.79
CV	0.51		2.86		0.56

Source: The authors (calculation based on the Annual Survey of Industry Data).

Notes: * Significant at 1% level; ** significant at 5% level; and *** significant at 10% level.

GVA, gross value added.

The results of the kinked exponential equation (3) for the pre-reform period (1981–1990) are given in Table 3. Considering the growth rate of output and productivity, we have observed positive and statistically significant results at 1 percent level for most of the states. In the case of employment growth rate, 9 out of 18 states have shown statistically significant results. In the case of decomposition of industrial output growth rate, we have found that labor productivity has been the major source of output growth rate for most of the states. Among the 18 states, three states—Maharashtra, Gujarat, and West Bengal—are driven by labor productivity that leads to an increase in output growth rate. Furthermore, employment has played a significant role in output growth rate for the state of Himachal Pradesh and Jammu Kashmir. However, in Punjab, both employment and productivity play an equal role in the output growth rate.

The performance of industrial growth during the post-reform period (1991–2007) is presented in Table 4. In this period, 10 out of 18 states have shown deteriorating growth of output as compared with the previous period. The highest decline has been seen in Bihar and Uttar Pradesh probably because of the poor performance of labor productivity. Despite the poor performance of labor productivity, industrial growth has played a crucial role in the growth rate of output in most of the states. In the states of Bihar and Kerala, employment has played a crucial role in the growth rate of output. The output growth of approximately 82.3 percent in Bihar and 57.8 percent in Kerala are driven by employment, and the rest are determined by labor productivity. Similarly, more than 42 percent output growth rate in the states of Tamil Nadu, Goa, and Jammu Kashmir are also influenced by employment. For the recent period (2008–2014), we have obtained interesting results regarding the growth rate of the industrial sector. The industrial growth in terms of output and employment has increased in most of the states in relation to the previous period (Table 5). However, compared with the earlier period, most of the states have reported that the growth rate of labor productivity is gradually declining. The average productivity growth rate is also lower than the average rate of employment growth for all the states. Only five states, that is, Tamil Nadu, Andhra Pradesh, Kerala, Bihar, and Jammu Kashmir, have reported an upward trend in the growth rate of labor productivity (Table 5). While analyzing the decomposition of industrial output growth, it is found that employment is the primary contributor to the growth rate of industrial output for the majority of the states. The highest contribution of employment in the growth rate of industrial output has been noted in Himachal Pradesh followed by Maharashtra, Haryana, and Punjab. Furthermore, it has been found that employment contribution is negatively related to the growth rate of industrial output in three states, namely, Uttar Pradesh, West Bengal, and Madhya Pradesh (Table 5).

Both output and employment growth have shown a large degree of variation across the states during the study period. However, it has been observed that employment growth has shown a higher degree of variation as compared with output growth. Furthermore, during the post-reform period variation has been increased in both employment and output growth as compared with the pre-reform period. However, during the post-financial crisis period, it has been observed that there is a convergence among the states and variation in industrial performance has been reported less.

Table 4.

Decomposition of Industrial Growth by the State from 1991 to 2007 (in %)

States	GVA	T Value	Employment	T Value	Productivity	T Value	Productivity Driven	Employment Driven
States	(1)		(2)		(3)		(4)	(5)
1. Maharashtra	2.64	11.415*	−0.05	−0.371	2.69	16.622*	101.8	−1.8
2. Gujarat	3.90	16.986*	0.57	3.968*	3.33	18.817*	85.3	14.7
3. Tamil Nadu	2.31	12.664*	1.03	6.901*	1.28	12.299*	55.4	44.6
4. Karnataka	3.82	18.547*	1.07	7.193*	2.75	19.099*	71.9	28.1
5. Haryana	4.02	20.928*	1.21	6.952*	2.80	14.592*	69.8	30.2
6. Uttar Pradesh	1.28	4.379*	−0.71	−4.163*	1.99	9.745*	155.4	−55.4
7. Rajasthan	2.62	9.734*	0.3	1.915***	2.33	10.032*	88.6	11.4
8. Orissa	2.59	6.313*	−0.43	−1.947	3.02	10.269*	116.7	−16.7
9. West Bengal	1.24	5.738*	−1.16	−8.653*	2.40	14.9245	193.0	−93.0
10. Andhra Pradesh	3.35	7.667*	0.71	2.257**	2.64	12.650*	78.8	21.2
11. Himachal Pradesh	4.84	10.022*	−0.19	−0.508	5.03	17.425*	103.9	−3.9
12. Madhya Pradesh	0.46	1.306	−1.91	−6.836*	2.38	13.757*	512.0	−412.0
13. Punjab	1.73	7.385*	0.06	0.281	1.67	8.430*	96.7	3.3
14. Kerala	1.09	6.440*	0.63	4.071*	0.46	2.137**	42.2	57.8
15. Assam	1.84	4.554*	0.13	0.918	1.71	3.826*	92.7	7.3
16. Goa	5.93	19.584*	2.53	21.308*	3.41	12.998*	57.4	42.6
17. Bihar	−6.9	−7.707*	−5.68	−10.602*	−1.22	−2.184*	17.7	82.3
18. Jammu & Kashmir	4.38	5.567*	2.07	4.299*	2.31	3.789*	52.8	47.2
Mean	2.29		0.01		2.28
CV	1.19		1.69		0.57

Source: The authors (calculation based on the Annual Survey of Industry Data).

Notes: * Significant at 1% level; ** significant at 5% level; and *** significant at 10% level.

GVA, gross value added.

Table 5.

Decomposition of Industrial Growth by the State from 2008 to 2014 (in %)

States	GVA	T Value	Employment	T Value	Productivity	T Value	Productivity Driven	Employment Driven
States	(1)		(2)		(3)		(4)	(5)
1. Maharashtra	4.50	6.311*	2.76	6.898*	1.74	3.487*	38.64	61.36
2. Gujarat	4.00	5.629*	3.32	7.444*	0.67	1.230*	16.85	83.01
3. Tamil Nadu	5.62	9.978*	2.58	5.597*	3.04	9.461*	54.12	45.88
4. Karnataka	3.50	5.495*	2.69	5.833*	0.81	1.825***	23.21	76.79
5. Haryana	4.01	6.766*	3.10	5.748*	0.91	1.535	22.71	77.29
6. Uttar Pradesh	4.11	4.541*	2.92	5.550*	1.18	1.871***	28.78	71.22
7. Rajasthan	5.95	7.149*	3.81	7.908*	2.14	2.987*	35.92	64.08
8. Orissa	7.09	5.604*	5.03	7.345*	2.06	2.272*	29.09	70.91
9. West Bengal	3.13	4.678*	1.73	4.203*	1.40	2.811*	44.59	55.41
10. Andhra Pradesh	1.16	0.859	−2.56	−2.638*	3.72	5.778*	321.04	−221.04
11. Himachal Pradesh	10.40	6.977*	10.06	8.815*	0.34	0.381	3.26	96.74
12. Madhya Pradesh	4.18	3.811*	2.79	3.232*	1.39	2.604**	33.22	66.78
13. Punjab	4.04	5.583*	2.99	4.798*	1.05	1.709***	25.94	74.06
14. Kerala	3.75	7.165*	0.64	1.338	3.11	4.672*	82.92	17.08
15. Assam	3.73	2.992*	2.60	5.758*	1.14	0.825	30.45	69.55
16. Goa	3.56	3.800*	2.38	6.495*	1.18	1.453	33.08	66.92
17. Bihar	11.95	4.323*	6.88	4.161*	5.07	2.937*	42.40	57.60
18. Jammu & Kashmir	11.06	4.552*	3.99	2.688**	7.07	3.751*	63.92	36.08
Mean	5.32		3.21		2.11
CV	0.56		0.79		0.82

Source: The authors (calculation based on the Annual Survey of Industry Data).

Notes: * Significant at 1% level, ** significant at 5% level and *** significant at 10% level.

GVA, gross value added.

Figure 1.

Source: Based on Table 5.

Table 6.

State-wise Distribution of Output and Employment (in %)

	Output								Employment
States	1980–1981	Rank	1990–1991	Rank	2000–2001	Rank	2013–2014	Rank	1980–1981	Rank	1990–1991	Rank	2000–2001	Rank	2013–2014	Rank
1. Maharashtra	23.90	1	22.82	1	22.74	1	24.74	1	17.71	1	15.58	1	15.83	1	16.33	2
2. Gujarat	9.74	4	8.87	4	13.88	2	16.83	2	9.33	5	8.54	6	10.15	5	11.88	3
3. Tamil Nadu	10.10	3	11.07	2	12.23	3	11.56	3	10.58	3	12.11	2	15.34	2	17.72	1
4. Karnataka	5.12	7	5.34	8	6.16	6	7.32	4	5.25	7	5.27	7	6.40	7	8.03	4
5. Haryana	4.10	11	4.32	10	5.98	7	6.74	5	2.45	13	3.19	12	4.06	10	5.30	7
6. Uttar Pradesh	6.08	5	9.29	3	7.49	4	6.58	6	10.18	4	9.95	4	7.29	6	7.90	5
7. Rajasthan	2.86	13	3.12	13	3.90	10	3.54	7	2.53	12	3.04	13	3.13	12	4.07	10
8. Orissa	1.90	14	2.41	14	1.86	13	3.18	8	1.75	14	1.92	14	1.74	13	2.26	13
9. West Bengal	10.82	2	5.92	7	4.29	9	3.01	9	12.52	2	9.26	5	7.69	5	5.59	6
10. Andhra Pradesh	5.01	9	6.20	5	6.69	5	2.93	10	9.01	6	10.49	3	12.24	2	4.52	9
11. Himachal Pradesh	0.54	16	0.70	16	0.93	16	2.85	11	0.29	17	0.67	16	0.53	16	1.68	14
12. Madhya Pradesh	5.06	8	6.13	6	4.48	8	2.77	12	4.28	9	5.22	8	3.42	11	2.79	12
13. Punjab	3.38	12	3.68	11	3.17	12	2.58	13	3.21	11	5.10	9	4.84	8	5.52	8
14. Kerala	4.46	10	3.15	12	3.52	11	2.31	14	3.68	10	3.40	11	4.23	9	3.04	11
15. Assam	1.02	15	1.39	15	0.97	15	1.0	15	1.63	15	1.36	15	1.52	14	1.61	15
16. Goa	0.53	17	0.31	17	1.04	14	0.91	16	0.20	18	0.22	17	0.42	17	0.49	18
17. Bihar	5.20	6	5.17	9	0.54	17	0.63	17	5.02	8	4.51	10	0.85	15	0.98	16
18. Jammu & Kashmir	0.19	18	0.14	18	0.12	18	0.50	18	0.37	16	0.17	18	0.31	18	0.58	17

Source: The authors (calculation based on the Annual Survey of Industry Data).

Distribution in the Share of Output and Employment of Industrial Sector by State

This section presents the state-wise share of industrial output and employment from 1980–1981 to 2013–2014. For nearly three decades, three states, namely, Maharashtra, Gujarat, and Tamil Nadu, have been on the top of the industrial map. During the pre-reform period, the contribution of these states has been more than 42 percent of the total output of the industrial sector (Table 6). The contribution of these states has increased to 53.13 percent in the post-reform period, thus showing the domination of the industrial activities in these states. Over the last 34 years, the output share of Gujarat has increased by 7.04 percent as compared with 1.46 and 0.84 percent of Tamil Nadu and Maharashtra, respectively (Figure 1).

With the passage of time, industrial concentrations have also spread in other states such as Karnataka, Haryana, and Himachal Pradesh (Table 6). In the pre-reform period, the output contributions in Karnataka, Haryana, and Himachal Pradesh have been very low, and they have occupied 4th, 5th, and 16th positions, respectively. The rankings of Karnataka, Haryana, and Himachal Pradesh have improved to 4th, 5th, and 11th, respectively, during the post-reform period. The highest changes in output share of Himachal Pradesh have been noted between 2000–2001 and 2013–2014 (Table 6) probably owing to the impact of state-level industrial policy and the Central special packages. The ranking of Uttar Pradesh is more or less same over the period. Rajasthan and Orissa have also shown improvement in their rankings, particularly, between 2000–2001 and 2013–2014 (Table 6).

Furthermore, it has been observed that there is a declining trend in the pattern of output contribution in 7 out of 18 states during the study period. These states are West Bengal, Andhra Pradesh, Madhya Pradesh, Punjab, Kerala, Assam, and Bihar. The highest decline has been noted for West Bengal and Bihar, though these states have occupied at the top of the industrial ranking in the pre-reform period. With regard to the employment, almost similar trends have been observed with small variations over the period. In the pre-reform period, Maharashtra has a higher contribution in the total employment followed by West Bengal and Tamil Nadu. The combined shares of these states were about 40.81 percent of the total industrial employment. The lowest contribution toward employment has been made by Goa, which is followed by Himachal Pradesh, Jammu Kashmir, and Assam (Table 6).

However, during the post-reform period, the situation of employment share in most of the state has changed, particularly after 2000–2001. Tamil Nadu has gradually become the highest employment generating state with 17.73 percent contribution in total employment, followed by Maharashtra and Gujarat (Table 6). However, Goa and Jammu Kashmir have shown the lowest employment share during the period. Furthermore, a declining trend has been observed in the pattern of employment in eight major states in India, which are Maharashtra, Uttar Pradesh, West Bengal, Andhra Pradesh, Madhya Pradesh, Kerala, Assam, and Bihar. The highest decline has been noted in West Bengal (6.93 percent), which is followed by Bihar (4.04 percent), Uttar Pradesh (2.28 percent), Madhya Pradesh (1.49 percent), and Maharashtra (1.38 percent). The rest of the states have shown an increasing trend in the pattern of employment during the period.

Conclusion

The findings of the study suggest that there is a weak relationship between employment and output of the industrial sector for most of the states during the study period. This suggests that with 1 percent point change in the output of industrial sector, employment has grown at the lesser rate. Between the pre-reform and post-reform periods, the study has noted the differences in the pattern of employment intensity of industrial growth in the selected states. During the pre-reform period, employment intensity has been the highest in Himachal Pradesh, followed by Punjab and Haryana. Himachal Pradesh has achieved the highest employment intensity because of negative productivity growth rate. Punjab has shown almost equal employment and productivity-driven industrial growth. The most industrialized state is Maharashtra, which has been observed as the lowest employment generation state owing to higher productivity growth rate. It has shown a negative employment growth rate despite reasonable growth in output.

The study has also noted reasonable improvement in the employment intensity of industrial growth for most states during 2008–2014 as compared with 1991–2007. Interestingly, the two states, namely, Himachal Pradesh and Orissa, have performed exceptionally well in employment generation during this period. Besides, the industrially developed states such as Maharashtra, Gujarat, and Karnataka have also successfully generated more employment with respect to industrial output. With regard to the dominance of industrial activities, the three states, namely, Maharashtra, Gujarat, and Tamil Nadu, are still dominating the industrial activities in India. During the period, the industrial concentrations are further spread in other states such as Karnataka, Haryana, and Himachal Pradesh. Therefore, in order to boost the industrial sector, the states lagging in industrial development should give more emphasis on infrastructural facilities, ease of doing business, tax exemption, and relaxation in land allotment laws. Moreover, the level of employment can be increased by developing labor-intensive industries, technical literacy, and relaxation in labor laws.

Footnotes

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The authors received no financial support for the research, authorship, and/or publication of this article.

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