Trends in Employment, Productivity, Real Wages and Labour Standards in Indian Manufacturing in Recent Years

Several surveys of India's micro, small and medium enterprises (MSMEs) undertaken during 2020 and 2021 have revealed that these enterprises which account for about 90% or more of manufacturing employment were severely affected by the COVID-19 pandemic. In addition, there are data to indicate that even the formal manufacturing enterprises in India were adversely impacted by the COVID-19 pandemic. Yet, using Periodic Labour Force Survey (PLFS) data, we estimate that manufacturing employment grew by about 5 per cent in 2020-21 and about 8 per cent in 2021-22, reversing the previous downward trend. However, these increases in manufacturing employment based on the usual principal and subsidiary status (UPSS) concept do not correctly measure the growth in labour input. According to our estimates, labour input in manufacturing fell by about 6 per cent in FY2021 (financial year 2020-21) and rose by about 13 per cent in FY2022. Labour productivity in manufacturing rose sharply in FY2021 and fell slightly in FY2022. Analysing data on wages, tenure of job contracts, and provision of social security to workers, we find that during the two years affected by the COVID-19 pandemic, the large increases in manufacturing employment were not accompanied by any significant lowering of real wages, nor with a deterioration in labour standards. Instead, the evidence points towards a rapid formalisation of informal industrial enterprises, significant increases in the real product wages of regular and casual workers, and an improvement in labour standards for hired workers.