India’s growth performance has improved significantly over the past 20 years, but has been uneven
across industries and states. While some service industries, notably in the information and communications
technology sector, have become highly competitive in world markets – yielding considerable gains for
employees and investors – manufacturing industries have lagged and improved their performance only
recently. A divergence in performance has taken place, with firms in those states and sectors with the best
institutions gaining, and those in the more tightly regulated states and sectors falling further behind. As a
result, the competitive landscape is uneven across sectors and states and a high degree of concentration
continues to prevail in different industries. While this is partly the result of the legacy of licensing, change
has been politically difficult, making it harder for the manufacturing sector than for the service sector to
expand. The need for further institutional reforms is urgent, focusing on product and labour market
regulations at the central and state levels.
This working Paper relates to the 2007 Economic Survey of India (www.oecd.org/eco/surveys/india).
