Weak infra, labour hobble India's manufacturing: NCAER

NEW DELHI: An unfavourable labour market and weak infrastructure have slowed the growth of manufacturing in India, economic think-tank National Council of Applied Economic Research (NCAER) said in its monthly report for February.

India's annual growth of 6.4 per cent between 1991-92 and 2007-08 was led by services, which grew 8 per cent, followed by industry, at 6.3 per cent, and agriculture, at 3 per cent, which is unlike the typical transition phase of a developing country, it said.

"Two of the most significant factors thwarting India's manufacturing sector growth include the lack of infrastructure including power and the labour market rigidities," the Council said.

The NCAER said that these obstacles came in the way of the unskilled, labour-intensive manufacturing sector growing at the rates of other developing countries, including China. The sector is yet to take off, the report says.

"India's growth experience is not a good fit with the accepted transition theory which postulates that a developing country moves towards an economy with a relatively large share of services once its industrial sector has outgrown the underdeveloped phase," it said.