Search results

In India, economic reforms adopted in 1991 in form of LPG (Liberalization-Privatization-Globalization) removed numerous barriers to grow and offered opportunities to improve productivity, particularly, for the manufacturing sector. But the rationale that manufacturing sector acted as main contributor to country's economic growth via GDP growth (called “engine of growth”) for a long time in India has been challenged now a day. The growing significance of the services sector across the world exhibits that at the present time, the services sector could become the new engine of economic growth in developing economies like India. The present study seeks to bring to light whether manufacturing is acting as an “engine of growth” at inter-state level in India or not and the cross section result indicates that potency of manufacturing growth and agricultural growth is gradually slowing down as a conforming part of economic growth and service sector is taking leading position in accelerating engine of growth in India.

This study empirically assessed the influence of foreign direct investment on the manufacturing sector growth in the Middle East and North African region using panel data of 18 countries covering the period of 1975–2017.

The study employed Levin et al. (2002) test (LLC) and Im et al. (2003) panel unit root test. Furthermore, Kao’s cointegration test was applied to examine the long-run relationship between the variables. Both the Dynamic OLS and Fully modified OLS were used in estimating the short-run relationship.

The results of the DOLS and FMOLS indicate that both inward and outward FDI influence the manufacturing sector growth positively. This shows that much of the manufacturing sector growth in the MENA region is driven by both inward and outward FDI. Our findings made a strong new proposition that aside from the negative influence proposed by Stevens and Lipsey (1992), outward FDI could also have a positive influence on the manufacturing sector of a country through effective utilization of domestic raw materials that are produced locally for production of goods in a foreign country.

MENA countries should concentrate more on making policies that will encourage the effective utilization of domestic resources for outward foreign direct investment in other countries of the world as it has the capacity to boost the manufacturing sector growth. Also, policies that will attract more inflows of FDI in the region should be encouraged. Both inward and outward FDI should be considered as an integral part of MENA economic policy in order to spur the manufacturing sector growth.

Previous empirical studies on the relationship between FDI and manufacturing sector growth have focused much on the influence of inward FDI. Thus, very little attention has been paid to the contribution that the outward FDI makes to the growth of the manufacturing sector of the host country. Our empirical study focused on the influence of both inward and outward FDI on the manufacturing sector growth with specific emphasis on the MENA region that remains the center of attraction of inward FDI and a source of inward FDI to most nonoil producing developing and developed countries given the oil-rich nature of the region.

Structural economists have been amongst the foremost proponents of a pro‐active industrial policy as the mechanism for promoting rapid economic growth (Lewis, 1956; Myrdal, 1957; Kaldor, 1967; Thirlwall, 1989). This is substantiated by the argument that manufacturing being characterised by increasingly specialised inter‐related activities, radiates tremendous impulses both intra and inter sectorally (Young, 1928: 527–42). Using a sample of 12 developed countries, Kaldor (1967:3–23; 1975:891–6; 1979; 1989:282–310) attempted an empirical study to support this relationship. A positive correlation between manufacturing growth and that of the economy has been defended on the grounds that manufacturing growth increases static (relate to size and scale of production units and are characteristic largely of manufacturing where in the process of doubling the linear dimensions of equipment, the surface increases by the square and the volume by the cube), as well as dynamic (relate to increasing returns brought about by ‘induced’ technical progress, learning by doing, external economies in production, etc.) returns (Thirlwall, 1989: 60). Since manufacturing also produces capital goods that are used in different industrial branches and other sectors, it is seen as a powerful mechanism for transmitting technical change (Weiss, 1988). It is for these reasons, structuralists generally prescribe government policies that favour manufacturing expansion. Malaysia is a good example of a natural resource rich country that has made manufacturing its main plank of economic growth especially since the launching of the New Economic Policy (NEP) in 1971 (see Malaysia, 1976). However, as industrial policy in each socio‐political space offers state‐specific characteristics, we will analyse industrialisation within Malaysia's setting.

The purpose of this paper is to examine the long-term relationship between the performance of the manufacturing sector and economic growth in Saudi Arabia. It does so by testing Kaldor–Verdoorn and Thirlwall’s laws.

The authors used data for the period 1980–2014 from databases of the World Bank, the Saudi Arabian Monetary Agency, the Penn World Table (PWT8) and the five-year plan of the Ministry of Planning and National Economy of Saudi Arabia. The authors used the bound test for the cointegration approach, which allowed them to test the two hypotheses in the long run, after examining the stability of the time series and ensuring the rank of its stability.

The results that emerged from the analysis show that Kaldor’s law is applicable to the data on the KSA, but with decreasing returns to scale, with coefficient equal 0.83. Verdoorn’s law is also applicable at both macro and sectoral levels with elasticity coefficient equal to 0.81 and 0.616, respectively, also with decreasing returns to scale. For Thirlwall’s model, the results show that the relationship was reverse, contrary to what expected, with a significant elasticity coefficient of 0.599.

This study recommends that policy makers in the Kingdom of Saudi Arabia focus on the industrial sector because of its impact on productivity, social returns and other sectors of the economy.

One of the important aspects of this paper is that it tests both Kaldor–Verdoorn’s and Thirlwall’s laws in the case of countries that depend on oil exports for growth and where the contribution of industrial output to GDP, in Saudi Arabia, is relatively low, at about 13 percent, across the period 1970–2013, and about 16.8 percent between 2000 and 2013 (see Figure 1). Since there have been few studies on this subject, the authors used data from Saudi Arabia to provide evidence of the importance of diversifying the economy by increasing the contribution of manufacturing to GDP to ensure increased productivity and to promote economic growth.

This paper aims to make an attempt to identify labour intensity of organized manufacturing industries in India using the Annual Survey of Industry (ASI) data at three-digit level. It estimates total factor productivity growth (TFPG) and technical efficiency for both labour intensive and all manufacturing industries during the pre- and post-reforms periods.

The study uses three approaches to estimate TFPG. They are growth accounting (GA) (non-parametric), production function with correction for endogeneity – Levinsohn-Petrin (LP) (semi-parametric) and stochastic production frontier (SPF) analysis (parametric). The study uses ASI data published by Central Statistical Organization, Government of India for the period 1980-1981 to 2007-2008 for the analysis.

The study finds that the rate of decline of the labour intensity is more pronounced in the case of labour-intensive industries than all the manufacturing industries. The results of GA method suggest that the TFPG of labour-intensive industries has declined continuously from the pre-reforms period to the post-reforms period. Similarly, LP method indicates a continuous decline in TFPG of labour-intensive manufacturing industries during the post-reforms period. Interestingly, the results of SPF method also corroborate the findings of earlier two methods at the aggregate level but vary at a certain degree at the disaggregated level.

This paper is useful in the context of India considering the importance given to labour-intensive industries by the present government in terms of reviving the sector and improving the productivity and output.

The purpose of this paper is to examine the performance of small manufacturing enterprises (SMEs) in India during the pre‐reforms (prior to 1991) and reforms period (1991 onwards) with focus on 15 major states from different levels of development.

In order to capture variation across different categories of states, 15 major states in India have been classified into high‐, middle‐ and low‐income states. Further, to capture productivity growth in the sector during the pre‐reforms and reforms period, both partial factor productivity and total factor productivity method (growth accounting approach) have been adopted. The analysis is based on different rounds of nationwide survey conducted by the National Sample Survey Organization (NSSO) of the Government of India during 1978‐2001.

The findings of the study reveal erosion in growth of output in the SMEs during the reforms period as compared to the pre‐reforms period with variation across different categories of states. The decline in growth of output during the reforms period can be primarily on account of fall in growth of employment and investment. The total factor productivity growth has also declined during the reforms period suggesting the need to enhance the level of technical efficiency and skills of the labour force in the sector. This is noticed in spite of major role played by the SMEs in providing employment (80 per cent of the total manufacturing sector employment) opportunities and in generating output (contributes 60 per cent of net domestic product) in the country.

On account of non‐availability of annual data, the study relied on data collected by the NSSO of the Government of India periodically. In addition, the study did not examine the factors that explain decline in productivity growth in the sector.

There is a large body of literature on regional growth and productivity in the Indian manufacturing sector but most of the studies have considered only the organized manufacturing sector. This study contributes to the literature by analyzing the inter‐state variation in growth and productivity performance of SMEs in the pre‐reforms and reforms periods.

The purpose of this paper is to extend the theory of services‐led industrial policy in services dominated but industrially lagging developing Asian economies and discuss its implications for employment, competitiveness, and diversification.

An inductive approach using qualitative methodology is adopted reviewing the available literature and evidence from Pakistan. The critical synthesis of the history of economic growth and industrial policy has followed Kuhn's paradigm approach.

Focusing on Pakistan, the paper synthesizes the history of industrial policy to identify the major paradigm shifts, especially the structural reforms era of the 1990s. The evidence suggests that the reforms under the structural adjustment program (SAP) have proved to be the necessary but not sufficient conditions for inclusive growth and industrial competitiveness in services dominated economies. Services‐led growth without an integrated and competitive industrial sector can lead to severe external accounts deficits and unemployment. The traditional role of services as “driver of demand/growth” is extended as “driver of productivity/competitiveness” through forward linkages with other sectors of the economy. The services sector's enabling role as the “software” of the economy and its impact on total factor productivity growth, diversification, and inclusive growth is postulated.

A quantification of forward and backward linkages is needed to identify the potential of services sub‐sectors in driving growth and productivity, respectively.

The paper identifies the need to match the existing industrial policy regimes with the economic structures in services‐dominated developing economies. The role of forward linkages in the productivity growth has implications for measurement of services output in national accounts in order to fully capture the contribution of this sector.

This study examines the impact of China’s trade, aid and foreign direct investment (FDI) on the economic growth of Africa.

Our study covered 41 countries in Africa, cutting across the western, eastern, central, southern and northern sub-regions. The study adopted the dynamic system generalized method of moments (SGMM), feasible generalized least squares (FGLS) and Dumitrescu–Hurlin Panel Granger causality techniques for estimations.

Overall, FDI, trade and aid from China have a nonlinear relationship with Africa’s economic growth. The findings reveal a key novelty in that the marginal effect on real per capita GDP increases when China’s FDI interacts with the manufacturing sector in Africa. These findings are robust to long-run estimations.

Given that we have examined the short-and long-run symbiotic effects of China’s FDI and Africa’s manufacturing sector and China’s aid and Africa’s manufacturing sector, more studies are warranted in this area, particularly to produce further empirical evidence of these findings. Moreover, future work could focus on investigating the country-specific effects of China’s trade, China’s FDI and China’s aid on real GDP per capita in each African country as our results reflect within-country elasticities.

This study provides new evidence on the impact of China’s trade, aid and FDI on the growth of African economies. To the best of our knowledge, this is the first study to empirically explore the long-run effects of China’s trade, FDI and aid on economic growth in African countries. This study also tests the claim of the displacement of Africa’s manufacturing industry by its Chinese counterparts.

The contribution of the different sectors in gross domestic product (GDP) growth significantly implies the relative strength of the sectors over the country. The countries are classified by world agencies in terms of regional variation as well as income classification on the basis of the topographical location and international economic strength. This chapter considers the contribution of allied sectors over GDP considering manufacturing as a separate entity under the regional variation and different income classifications. It uses World Bank recent data set of 2010 and 2018 for cross-sectional analysis of GDP growth incorporating regional variation and income classification as discrete variables. Region-specific and income classification–specific regression identifies the variations in scores and changes in importance of different allied sectors.

There is a rich literature which states that India did not suffer much from the impacts of the US financial crisis, but there is a school of thought which believes that the idea of India being insulated or decoupled from the contagion on account of limited integration into the world economy has been proved to be wrong. What is interesting is the focus has always been on the services sector and not on the manufacturing sector in India. In this background, this chapter tries to understand whether manufacturing sectors' productivity growth was one of the reasons that the crisis worsened in India or was it because of the crisis that India's manufacturing sector went into a deep recession. To look into the causality issue, the author estimates the productivity loss index (PLI) for the Indian industries during the period between July 2007 and July 2010 by estimating the fall in growth percentages in consecutive months for a total of 9,000 manufacturing, mining, and electricity industries. The data at monthly level have been retrieved from the Centre for Monitoring Indian Economy (CMIE) Prowess database. Based on the causality results, the chapter shows that it was because of the subprime crisis that India's manufacturing sector went into a deep recession. Using a probit model, the chapter also estimates the probability of the US subprime crisis being responsible for the productivity loss in India's manufacturing sector during the above-mentioned period.