Faced with easier access to foreign technology and imported capital goods, firms in India's
organised manufacturing sector adopted advanced techniques of production leading to
increasing automation and a rise in the capital intensity of production. This has raised much
concern about the ability of the manufacturing sector to create jobs for India’s rapidly rising
largely low-skilled and unskilled workforce. However, what has attracted less attention in the
literature is the impact of capital augmenting technological progress on the distribution of
income and wage inequality. This paper attempts to fill this gap using enterprise level data from
the Annual Survey of Industries. We find that with growing capital intensity of production, the
role of labour vis-à-vis capital has declined. The share of total emoluments paid to labour
fell from 28.6% to 17.4% of gross value added (GVA) between 2000-2001 and 2011-12, while,
the share of wages to workers in GVA declined from 22.2% to 14.3%. Importantly, even within
the working class, inequalities have increased.