Manufacturing sector in India: A study of Kaldor’s first Law using ARDL Bounds testing

This study seeks to probe the applicability and pertinence of Kaldor's First Law within the Indian economy, particularly examining the long-run relationship between the manufacturing sector's output and overall economic growth. Kaldor's proposition, which identifies manufacturing as the primary engine of economic growth, is central to understanding the potential trajectory of developing economies. However, this law is not without its criticisms, such as inquiries into the direction of causality and its universal relevance amidst diverse economic structures and the rise of service-oriented growth patterns. Despite criticisms, the Indian context presumes specific significance considering the nation's strategic push to invigorate its manufacturing base as evidenced by policy initiatives like ‘Make in India’. With a notable shift towards services and the emergence of a knowledge economy, evaluating the role of manufacturing in propelling economic growth is critical. Utilizing time-series data and employing an Autoregressive Distributed Lag modeling approach, this paper assesses the long-term co-integrating relationship between manufacturing output and GDP growth in India. Testing such a hypothesis is instrumental in informing policy directions to leverage manufacturing as a medium for sustained economic advancement and addressing the nuances of the contemporary Indian economic landscape. Findings from this study could elucidate the extent to which Kaldor's First Law holds within a rapidly transforming and globally significant economy, bearing implications for both economic theory and practical policy formulation