Fifty Years of India’s Manufacturing Sector Growth Journey- An Endogenous Break Perspective

Abstract

The manufacturing sector, together with its interconnected relationships, both forward as well as backward linkage, has significant potential for generating employment and plays an important factor in a country's growth and prosperity. With the development of machines and new manufacturing processes, goods could be produced more quickly and at a lower cost. Consequently, the expansion of the manufacturing sector took place, resulting in the generation of employment opportunities and a notable increase in output levels. In the last fifty year from 1970-71 to 2019-20 total four breaks in the manufacturing sector growth path. This study investigates structural breaks in India's manufacturing sector output growth (1970–71 to 2019–20), which grew at an average annual rate of 6.08%. Using Boyce's [4] kink method, Bai and Perron's [2] [3] approach, and the novel Further Modified Bai and Perron (FMBP) method, structural breaks were estimated endogenously via a FORTRAN algorithm. The FMBP method improves upon existing models by incorporating kinks, one- or two-year subperiods, V-shaped breaks, and truncated regimes with a minimum length of seven years (four for truncated regimes). Findings reveal five distinct growth regimes, including one truncated regime, offering a comprehensive analysis of growth dynamics and methodological advancements.