Abstract
Historically capital investment and employment generation were found to be positively correlated. This tendency was found to occur as observed in 1st, 2nd, and 3rd census while making a comparative assessment of states in India. That meant the states with more capital investment had more employment, and those with less investment had less employment. However, in the fourth census, there was found a deviation from above trend as the states had differential patterns of growth and concentration of employment and investment per enterprise. There were states with more capital investment share but less employment share and vice versa. The purpose of the present paper is to offer analytical description of the manner in which the Indian states have behaved vis-a-vis one another over the different Censuses carried out since the one in 1987–88 (that is, second census). It is attempted to provide a clear picture of the behaviour of the employment intensity per unit, labour productivity, capital intensity measured as ratio of Capital share to working unit share, and Capital-labour ratios to try to draw conclusions about the contribution to the overall convergence/divergence of each of these variables across the states. Section first introduces the paper, its content, genesis, hypothesis, important issues addressed in the paper. Section two reviews the literature on the subject and their major inferences, third section about what are the findings with respect to tendencies across states. Fourth section analyses the findings in context of factors and determinants of tendencies. Fifth and concluding section makes recommendations and future inferences as arrived from the paper.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
The issue here is more controversial than one might suppose. For example, a time honoured evidence of divergence amongst regions lies in observed differences in growth rates in labour and capital employed per unit. So, the so-called convergence hypothesis raised doubts on this score (Barro and Sala-i-Martin 1995). Following the dictates of the neo-classical growth model (Solow 1956), it claims that, two regions differing mainly in the levels and growth rates of economic attributes in question may actually be approaching closer, provided that the lower growth rate region was richer than the higher growth rate regions at some initial point of time.
- 2.
But as the first census conducted in 1972–73 was not a complete census of all organised and unorganised units, for comparison purpose, the paper uses data and statistics of second (1987–88), third (2001–02) and fourth (2006–07) censuses.
- 3.
In fact while correlating the LP with other variables like Location quotients of a Capital or Labour and lagged CLRs we found that P-value for the three censuses for all the relevant factors was observed to be much more than 0.15, we had to reconsider only the factors meeting criteria of P-value to be less than 0.15 and thus the above conclusion.
Coefficients
Standard error
t stat
P -value
II census
Intercept
4.57286104
0.67565688
6.76802258
5.3239E−07
CQ
0.84228019
0.70996803
1.18636355
0.24709074
CLR
−6.994E−05
5.0131E−05
−1.3951657
0.17574369
EQ
−0.3827057
0.77988853
−0.4907184
0.62808254
III census
Intercept
5.42172098
0.40891236
13.2588827
2.4493E−13
CQ
−0.1102718
0.19778228
−0.5575414
0.58175107
CLR
3.2557E−05
2.0202E−05
1.61155858
0.11868795
EQ
0.01705631
0.01858035
0.91797585
0.3667595
IV census
Intercept
3.818958
0.463308
8.242807
3.35E−09
CQ
−0.12369
0.147595
−0.83804
0.408637
CLR
1.9E−06
1.65E−06
1.147608
0.2602
EQ
0.58855
0.252571
2.330241
0.026709
- 4.
MitraArup and Prakash Singh, ‘Trade liberalisation enhances productivity and wages at the aggregate level, and also in the case of basic goods and capital goods. However, in an attempt to raise productivity, firms may extract more work from those who are already engaged, and tend to pay them less than their due share in certain industry groups. Contractualisation and feminisation show similar effects for all the industry groups except the intermediate goods industries, and has a worsening effect on wages and also productivity’. Explanations Based on India’s Industrial Sector: Why Wage Differences Exist across Sectors? Economic and Political Weekly, Vol. 51, Issue No. 38, 17 Sep, 2016).
- 5.
Regression statistics
Multiple R
0.588684
R²
0.346549
Adjusted R²
0.326128
Standard error
292.1858
Coefficients
Standard error
t stat
P-value
Lower 95%
Upper 95%
Lower 95.0%
Upper 95.0%
Intercept
24.32858
70.03112
0.347397
0.730568
−118.32
166.9773
−118.32
166.9773
Labour productivity III
0.290629
0.070549
4.119556
0.00025
0.146926
0.434332
0.146926
0.434332
- 6.
And as a Semi log function:
Regression statistics
Multiple R
0.662776
R 2
0.439272
Adjusted R2
0.421749
Standard error
0.648952
Observations
34
Coefficients
Standard error
t stat
P-value
Lower 95%
Upper 95%
Lower 95.0%
Upper 95.0%
Intercept
4.410074
0.155541
28.35317
3.03E−24
4.093248
4.7269
4.093248
4.7269
Labour productivity III
0.000785
0.000157
5.006864
1.95E−05
0.000465
0.001104
0.000465
0.001104
References
Barro, R., & Sala-i-Martin, X. (1995). Economic growth. New York: McGraw-Hill.
Boots, B. N., & Getis, A. (1988). Point pattern analysis. Newbury Park, CA: Sage Publications.
Cashin, P., & Sahay, R. (1996). Internal migration, centre-state grants, and economic growth in the states of India. IMF Staff Papers, 43(1), 123–171.
Comtois, C. (2017). The specialization index and the location coefficient. New York, USA: Department of Global Studies & Geography, Hofstra University.
Dasgupta, D. (2000, July 1). Inter-state disparities in India. Economic and Political Weekly, 35(7), 2413–2422.
Dholakia, R. (1994, August 21). Spatial dimension of acceleration of economic growth in India. Economic and Political Weekly, 29(35), 2303–2309.
Ghosh, B., Marjit, S., & Neogi, C. (1998, June 27). Economic growth and regional divergence in India, 1960 to 1995. Economic and Political Weekly, 33(26), 1623–1630.
Intellectual Capital Advisory Services Private Limited. (2012, November). Micro, small and medium enterprise finance in India: A research study on needs, gaps and way forward (pp. 23, 29). USA: International Finance Corporation.
Lu, Y. (2016). Spatial cluster analysis for point data: Location quotients verses kernel density (page 2 of 24). Buffalo: Department of Geography, State University of New York (http://dusk.geo.orst.edu/ucgis/web/oregon/papers/lu.htm).
Lessmann, C., & Seidel, A. (2017). Regional inequality, convergence, and its determinants—A view from outer space. European Economic Review, 92, 110–132.
Lucas, R. E. (1998). Ón the mechanics of economics development. Journal of Monetary Economics, 22(1), 3–42.
Marjit, S., & Mitra, S. (1996, August 17). Convergence in regional growth rates: Indian research agenda. Economic and Political Weekly, 31(33), 2239–2242.
Ministry of Micro, Small & Medium Enterprises. (2007). Micro, small and medium enterprises in India: An overview. Ministry of Micro Small and Medium Enterprise, Government of India.
Mitra, A. (1999, July 31). Total factor productivity growth and technical efficiency in Indian industries. Economic and Political Weekly, 34(31).
Nagaraj, R., Varoudakis, A., & Veganzones, M. A. (1997). Long run growth trends and convergence across Indian states. IGIDR, Mumbai (Mimeograph).
Quah, D. (1993). Empirical cross-section dynamics in economic growth. European Economic Review, 37, 426–434.
Raman, J. (1996). Convergence or uneven development: A note on regional development in India. USA: Valparaiso University (Mimeographed).
Rao, M. G., Shand, R. T., & Kalirajan, K. P. (1999, March 27–April 2). Indian states: A divergent view. Economic and Political Weekly, 34(13), 769–778.
Rodrigue, J.-P. (2017). The specialization index and the location coefficient in chapter 10 methods in transport geography. In The geography of transport systems (4th ed., 440 pages). New York: Routledge. ISBN 978-1138669574.
Sarker, P. C. (1994, March 12). Regional imbalances in Indian economy over plan periods. Economic and Political Weekly, 29(2), 621–633.
Sharma, N. (2013). Growth and structural changes in Indian manufacturing since liberalization. Discussion Paper No 6, in Development Economics and Innovation Studies, Centre for Development Economics and Innovation Studies, Punjabi University (https://www.scribd.com/document/311440162/6-Niharika-Sharma).
Solow, R. M. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70, 65–94.
Subina, S. (2015). Role of MSMEs in the growth of Indian economy. Global Journal of Commerce and Management Perspective, 4(5), 40–43. ISSN: 2319-7285 (for 2, 3).
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Annexure
Annexure
Distribution of States According to LQ Versus CQ
Census-II | Census-III | Census-IV | Remarks | |
|---|---|---|---|---|
Quadrant-1 (Low Labour and Low Capital) | M.P. (0.22,0.34) HP (0.58,0.72) Haryana (0.72,0.95) J and K (0.71,0.78) Mizoram (0.73,0.95) Punjab (0.72,0.78) Rajasthan (0.67,0.79) Bihar (0.83,0.60) Manipur (0.78,0.63) Meghalaya (1.03,0.95) | M.P. (0.55, 0.30) Bihar (0.58, 0.46) Chhattisgarh (0.60, 0.53) HP (0.77, 0.59) J and K (0.77, 0.78) Karnataka (0.96, 0.68) Uttarakhand (0.59, 0.85) Jharkhand (0.86, 0.29) Kerala (0.82, 0.43) Mizoram (0.75, 0.39) Assam (1.00, 0.67) Manipur (0.96, 0.70) Gujarat (0.93, 0.71) Arunachal (1.05, 1.08) UP (0.80, 0.94) | Arunanchal (0.38, 0.36) Assam (0.97, 0.56) HP (0.73, 1.04) Odisha (0.95, 0.04) Bihar (0.87, 0.31) Meghalaya (0.98, 0.28) Chhattisgarh (0.82, 0.34) M.P. (0.78, 0.29) Jharkhand (0.86, 0.40) Tripura (0.80, 0.36) UP (0.95,0.68) Karnataka (1.04,0.72) Rajasthan (0.82, 0.83) Uttarakhand (0.84, 0.8) | Five states, namely, Bihar, MP, Chhattisgarh, Jharkhand and HP in IV Census were still with low capital and low labour, and they were there in second and third census too While some of the states moved out from here: Andaman, J and K, Mizoram and Manipur appear only in census IV All the 5 States newly added to this category in Census III also figured in Census IV However 2 states newly figured in the category in Census III, Kerala and Gujarat moved out from the category in Census IV Rajasthan and Meghalaya figured in the category in Census II and re-appeared in Census IV Haryana moved out from this category Post-II census Odisha and Tripura were new additions in Census IV |
Qudrant-2 (Low Labour and High Capital) | Karnataka (0.96, 1.02) Kerala (0.94, 1.05) | Rajasthan (1.03, 1.36) | Maharashtra (1.03, 1.19) T.N. (1.10, 1.26) Punjab (0.83, 1.37) Haryana (0.98, 1.60) J & K (0.84, 1.46) Goa (0.99, 2.37) Gujarat (0.99, 4.09) | There are different states figuring in the category in the three different censuses |
Qudrant-3 (High Labour and High Capital) | Assam (1.24, 1.32) Odisha (1.33, 1.18) Goa (1.14, 1.68) Gujarat (1.28, 1.61) Delhi (1.93, 2.50) Maharashtra (1.89, 2.64) T.N. (1.49, 1.19) Tripura (1.98, 1.14) UP (1.66, 1.15) Nagaland (2.69, 2.5) Sikkim (2.41, 7.44) | WB (1.35, 1.18) Punjab (1.16, 1.62) Andhra (1.36, 1.75) Haryana (1.36, 1.80) T.N. (1.09, 1.54) Odisha (1.45, 1.38) Goa (1.73, 2.6) Maharashtra (1.69, 3.00) Nagaland (1.92, 4.20) Tripura (2.72, 2.97) Delhi (2.61, 8.4) | Nagaland (1.98, 1.75) | There seems a gradual reduction in this category of high capital intensity and high labour productivity Only Dadra Nagar Haveli, Damn and Diu, Nagaland and Pondicherry were consistently in this category for all the three Censuses; Chandigarh, Delhi, Goa, Maharashtra, Odisha, T.N., and Tripura were found to be in the category till III census |
Qudrant-4 (High Labour and Low Capital) | Andhra (1.12, 1.00) WB | Meghalaya (1.21, 0.63) Sikkim (1.54, 0.79) | Manipur (1.17, 0.38) Andhra (1.23, 0.67) Mizoram (1.26, 0.74) WB (1.12, 0.61) Kerala (1.01, 1.07) Sikkim (2.09, 0.23) Delhi (1.62, 0.98) | There is a general tendency of states to be appearing more and more in this category of high labour productivity and low capital intensity |
Rights and permissions
Copyright information
© 2018 Springer Nature Singapore Pte Ltd.
About this chapter
Cite this chapter
Kumar, Y., Pandey, G., William Wordsworth, A.P., Chauhan, J.S. (2018). Regional Imbalances in MSME Growth in India. In: NILERD (eds) Reflecting on India’s Development. Springer, Singapore. https://doi.org/10.1007/978-981-13-1414-8_2
Download citation
DOI: https://doi.org/10.1007/978-981-13-1414-8_2
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-13-1413-1
Online ISBN: 978-981-13-1414-8
eBook Packages: Economics and FinanceEconomics and Finance (R0)