Does manufacturing value added can increase output in South Asia? A panel data analysis

The contribution of manufacturing value added (MVA) to gross domestic product (GDP) cannot be ignored despite the large contribution of services sectors in South Asian economies. This paper analyzed the role of MVA in increasing output in South Asia using a panel data approach. This study shows that MVA is positively and significantly affecting the GDP of South Asian countries but it is not effective in reducing youth unemployment. This can be attributed to demand-supply mismatch of unskilled or half-skilled unemployed youth, or manufacturing is becoming highly labour saving and capital-intensive, which requires a minimum amount of skilled or unskilled unemployed youth. Therefore, it can be inferred that the process of deindustrialisation has been set in South Asian countries. Despite significant growth performance, regional economies are experiencing jobless growth. The study suggests a strong role of manufacturing technological transformation for sustainable growth performance, for which the role of innovative entrepreneurs through robust regulations is not overemphasized. New investment regimes should be explored and developed to foster the manufacturing sector. Besides, the development of the manufacturing sector to cater to the needs of local small markets and larger regional markets have immense potential to invite foreign capital, for which regional economic cooperation and integration should be strengthened.