Labour Markets & Industrialisation
Aggarwal, R. (2019): State Industrial Policies in India: Did they work? (Under Review at the IZA Journal of Labor Policy)
Abstract- This article analyses the impact of state-level industrial policies implemented in India on employment and gross value added (GVA) in the manufacturing sector, utilizing data from the Annual Survey of Industries conducted by the Government of India. I employ panel data fixed-effects regression models to evaluate the effects of the industrial policy on state-industry specific industrial performance over the 2007-08 to 2014-15 period, incorporating potential effects of the state government's political alignment, infrastructure provision and educational expenditure in the state. The results provide evidence of a positive impact of an industrial policy on firm output and employment in the range of 12.6 - 14 per cent. However, subsequent introductions of an industrial policy have significantly negative effects on employment and no impact on industrial GVA. This analysis has implications for economic policy in light of the Central Government's plans to implement a revised industrial policy at the national scale.