In India, which state has the highest capital intensity in manufacturing sector in 2017 - 18 ?

Question

UnlockIAS · Accepted Answer

Correct — D, Madhya Pradesh. Capital intensity in manufacturing is a ratio, not a total: it is fixed capital per worker in the registered factory sector, the kind of figure reported through the Annual Survey of Industries. Madhya Pradesh tops it not because it has the country's biggest industrial base — it does not — but because its factory sector is dominated by a small number of very large, capital-heavy plants (petroleum refining at Bina in Sagar district, the Satna-Katni cement belt, fertiliser and power-linked units) while its factory workforce is comparatively small. A large numerator over a small denominator gives the highest capital-labour ratio.

Why the other options are wrong — (a) Gujarat does have some of India's most capital-heavy plants (refining and petrochemicals), but it also carries one of the country's largest factory workforces — chemicals, textiles, ceramics, engineering — which dilutes capital per worker. Leading in total investment is not the same as leading in capital intensity.  (b) Maharashtra leads on the size of the factory sector — number of factories, output and employment — and that breadth is exactly what pulls a per-worker ratio down. A diversified industrial structure with a very large workforce lowers capital intensity.  (c) Tamil Nadu's manufacturing is famously labour-absorbing — textiles and garments, leather, auto components, light engineering. It ranks near the top on factory employment, which is precisely why it ranks lower on fixed capital per worker.

Concept: Capital intensity is the capital-labour ratio: fixed (or invested) capital divided by the number of workers in the factory sector. Being a per-worker measure, it tells you how much plant and machinery stands behind each job — not how large a state's industry is. High capital intensity comes from process industries such as refining, petrochemicals, cement, fertiliser, metals and power, which need huge fixed assets but employ few people. Low capital intensity comes from labour-absorbing industries such as textiles, garments, leather and food processing.

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