Contrary to popular perception, labour intensive sectors of the Indian economy are attracting more investment than capital intensive sectors. Labour intensive manufacturing sectors registered over 52 per cent growth in investment during the last financial year, resulting in an outstanding investment of Rs 19,14,246 crore as on March 31, 2007, according to CMIE.

Capital intensive manufacturing registered about 38 per cent growth in investments during the same period. The total outstanding investments in this sector were Rs 14,17,989 crore as on March 31, 2007.

Labour intensive manufacturing units employ the maximum number of unskilled and low-skilled labour and, therefore, generate huge employment. Capital-intensive manufacturing (by its very nature) creates little employment, especially for unskilled workers. Thus, with positive investment trends in this sector, employment generation for India’s vast pool of unskilled workers will receive a boost.

“It is true that in the last few years we have been moving towards a more optimal pattern of growth, mainly towards export-oriented growth,” said HDFC Bank chief economist Abheek Baruah. “Export intensive industries are by definition labour intensive. Hence, we can say that the Indian economy is now laying emphasis on the labour intensive manufacturing sector.”

According to CMIE, the quantum of investment in labour intensive manufacturing industries is substantially higher than that in the services industry. Data as on March 2007 reveals that the total outstanding investment in labour intensive manufacturing stands at Rs 19,14,246 crore, while the services industry has an outstanding investment of Rs 15,25, 098 crore.

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