India's manufacturing under-performance Part 2: New clue from multi-plants

In multi-plant units, flexibility in hiring & firing labour comes from fact of having many plants. In single plants, there is no such flexibility, which renders use of contract labour more important

In Tuesday’s piece, we highlighted the rise of the multi-plant phenomenon and showed that when account is taken of it, large plants in India have not grown over time despite a number of favourable developments such as policy liberalisation and contractualisation of labour. We also documented their lower productivity, which could explain in part why Indian firms did not become competitive internationally, especially in labour-intensive sectors.

The next obvious question that arises is this: Why do we see the proliferation of multi-plants in the first place? One explanation is that land is difficult to acquire in contiguous