Employment Growth in Manufacturing Sector Shows Striking Increase: Insights from KLEMS and RBI Data

Employment Growth in Manufacturing Sector: A KLEMS Analysis

India’s manufacturing sector has significantly increased its job creation rate over the past decade. According to the Reserve Bank of India (RBI) and KLEMS data, employment grew at a steady 1.6% annually from FY14 to FY23, nearly double the 0.7% seen in the preceding decade. This growth occurred despite a dip in overall manufacturing output, which expanded at 5.4% compared to 7.9% in the previous decade.

Changing Employment Trends Across Sectors

• Despite the rise in overall manufacturing jobs, certain sectors like woods and wood products faced contractions.
• Employment soared in chemical industries with a remarkable growth rate of 4.26% per annum, driven by exports.
• Food, beverages, and textiles showed minimal growth patterns during this period.

Pace of Job Creation Affected by Automation

In contrast, sectors like electrical and optical equipment witnessed a slowdown. The employment rate in these areas dropped to 3.9% annually from a previous 10.1%. This trend reflects a broader shift towards automation and technological advancements across developed economies.

Labour Share of Output: A Positive Shift?

Concerns over manufacturing growth often revolve around labor exploitation; however, data indicates the labor share of output has increased. From FY14 to FY23, labor income's portion of the total output rose from 31.2% to 32.6%, suggesting better compensation for workers.