Dualism and Structural Transformation: The Informal Manufacturing Sector in India

  • Surbhi KesarEmail author
  • Snehashish Bhattacharya
Original Article


We identify a basic dualism within the informal manufacturing sector (IMS) in India between a ‘traditional’/non-capitalist segment, comprising family-based household enterprises that constitute the vast majority of the IMS, and a segment of ‘modern’/capitalist enterprises employing wage labour. We focus on the high-growth decade of 2000–2001 to 2010–2011 to analyse whether there has been a marked tendency of this ‘traditional’ segment to transform into a ‘modern’ segment. We construct a variable, the net accumulation fund, which indicates the ability of an enterprise to accumulate and grow, and explore its evolution, over time and across industries, for enterprises with different production structures and firm-level characteristics. We show that while, on one hand, the average ‘traditional’ enterprise has been able to economically reproduce itself rather than withering away, the dualism between the ‘traditional’/non-capitalist and the ‘modern’/capitalist segments has been reproduced and further reinforced during this period of high economic growth, raising questions about the process of economic transformation as envisaged in much of development literature.


Informal sector Dualism Structural transformation Manufacturing India 


Nous identifions un dualisme fondamental dans le secteur manufacturier informel (SMI) en Inde entre un segment “traditionnel”/non capitaliste, comprenant des entreprises familiales, basées sur le foyer, qui constituent la grande majorité du SMI, et un segment “moderne”/d’entreprises capitalistes employant de la main d’œuvre salariée. Nous nous concentrons sur la décennie à forte croissance de 2000-01 à 2010-11 afin d’analyser s’il existe une tendance marquée de ce segment « traditionnel » à se transformer en un segment « moderne » . Nous construisons une variable, le fonds d’accumulation net, qui indique la capacité d’une entreprise à accumuler et à se développer, puis nous étudions son évolution, dans le temps et selon les industries, pour des entreprises ayant des structures de production et des caractéristiques au niveau de l’entreprise différentes. Nous montrons que, si, d’une part, l’entreprise “traditionnelle” moyenne a été capable de se reproduire économiquement plutôt que de dépérir, le dualisme entre les segments “traditionnel”/non capitaliste et “moderne”/capitaliste a été reproduit et renforcé encore pendant la période de forte croissance économique, soulevant des questions sur le processus de transformation économique tel qu’envisagé dans de nombreux ouvrages sur le développement.

JEL Classification

O14 O17 J46 



We are grateful to Rohin Anhal for unreservedly sharing his expertise and for his detailed comments and several discussions. We thank Anirban Dasgupta for his comments and suggestions on various drafts of this paper. We would also like to thank the two anonymous reviewers for their rich and detailed comments and suggestions.

Compliance with Ethical Standards

Conflict of Interest

On behalf of all authors, the corresponding author states that there are no conflicts of interest.


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Copyright information

© European Association of Development Research and Training Institutes (EADI) 2019

Authors and Affiliations

  1. 1.Faculty of EconomicsSouth Asian UniversityChanakyapuriIndia

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