ABSTRACT
This chapter examines the effect of the import composition of capital, that is, the ratio of imported capital to domestic capital, on the ratio of labour to output, namely, the amount of labour input required to produce unit value of output. The empirical results indicate that as the ratio of foreign to domestic capital stock increases, the ratio of labour to value added tends to be lower, with the ratio of labour to total capital being controlled for. The chapter shows the rapid upward trend in the ratio of foreign to domestic capital stock since the early 1990s. It explores that higher dependence on foreign capital imports resulted in weak absorption of labour, despite the rapid growth of the Indian manufacturing sector since the 1990s. The chapter focuses on the firms operating in the following eight industries: chemicals, plastics and rubbers, non-metallic mineral products, basic metals, non-electrical machinery, electrical machinery, electronics and transport equipment.
