The promotion of the manufacturing sector and its exports has been a key pillar of the
growth strategy employed by successful developing countries, especially labor abundant ones. In
this context, India's recent growth experience is puzzling on two accounts. First, while India's
economy has grown rapidly over the last two decades the growth momentum has not been based
on manufacturing. Rather the main contributor to growth has been the services sector. Second,
the relatively lackluster performance of Indian manufacturing cannot be ascribed to a lack of
policy initiatives to jumpstart the sector. India introduced substantial product market reforms in
its manufacturing sector starting in the mid-1980s, but the sector never took off as it did in other
high-growth countries. Moreover, in so far as subsectors within manufacturing have performed
well, these have been the relatively capital- or skill-intensive industries, not the labor-intensive
ones as would be expected for a labor abundant country like India