MSMEs, Elasticity of Employment, Autoregressive distributed Lag (ARDL) model, Structural break, Non stationarity, Cointegration


World over SMEs are playing a major role in the sphere of socio-economic enhancement of lives of millions. In India, the Micro, Small & Medium Enterprises (MSMEs) contribute 8 per cent to the country’s GDP, 45 per cent to the manufactured output and 40 per cent to the country’s exports. They provide employment to 101 million people through 45 million enterprises. As an employment generator, MSMEs are the second largest employment opportunity provider only behind the agriculture sector. The MSMEs also act as a catalyst for social change by helping reduce the income inequality among various social classes as also between regions. Within MSMEs, the performance of the MSME manufacturing sector has been particularly worth considering. No study has been done yet to evaluate the elasticity of employment of the MSME manufacturing sector. Our paper aims to ascertain the value of employment elasticity in the MSME manufacturing sector by way of application of appropriate econometric techniques for the period 1973-74 to 2012-13.