Chapter 21 The Role of the Manufacturing Sector in Driving India’s Long-Term Growth

Purpose : Manufacturing has always been considered a backbone for economic growth. It has been considered an imperative sector in the growth of an economy. This study aims to trace the long-term relationship between gross domestic product (GDP) and manufacturing sector in the context of Indian economy. Need for the study : According to research, the significance of the manufacturing sector is waning over time. This chapter studies the long-term relationship between the GDP, an indicator of growth, and the manufacturing sector. Over the last few decades, the contribution of manufacturing has been stagnant in the GDP of India. Methodology : The decadal growth of various sectors in the GDP of India is studied using time series analysis. This study used the data released by the Ministry of Statistics and Programme Implementation (MOSPI) from 1950–1951 to 2013–2014. The long-term relationship between the sector of manufacturing and the GDP is examined through the augmented Dicky–Fuller (ADF) test and auto-regressive distributed lag (ARDL) models. Findings : The findings suggest that in the Indian scenario, there is no relationship for an extended period between the GDP and the manufacturing sector, which calls for further policy implications. Practical implications : India, while having the world’s fastest-growing economy, must continue to take steps to attain high growth rates and long-term sustainability by reducing obstacles to the expansion of the service sector in addition to manufacturing. Manufacturing-led services are to be boosted through policy interventions.