The main objective of the paper is to investigate which factors influenced the output growth—fixed capital or workers? The paper analyzes the data by calculating Compound Annual Growth Rate (CAGR) for different years and different variables like workers, fixed capital and output collected for 62 manufacturing industries from the Annual Survey of Industries (ASI) in Andhra Pradesh. In general, Cobb-Douglas production function has been used in two variables framework and value added has been considered as output and labor and capital as inputs. The Cobb-Douglas production function analysis through panel data analysis was done. The study followed the 1998-99, National Industrial Classification (NIC). The main findings of the study are, firstly, not all industries influenced the output growth. Secondly, most of the industries (20 industries) did not provide employment opportunities. Thirdly, a few (18) manufacturing industries’ fixed capital CAGR has negatively declined. Fourthly, a few (12) manufacturing industries’ output CAGR has negatively declined. And, finally only manufacture of machinery and equipment industry’s workers per factory employed average declined, and rest of the industries’ average number of workers per factory employed increased.

Developing countries aim for economic development through rapid industrialization as a strategy for development. Indian manufacturing industry plays an important role in the industrial sector, which is the second major sector, after services sector, that plays a significant role in the country’s economy. Nearly 75% of India’s Gross Domestic Product (GDP) is contributed by these two sectors. While service sector contributes 45%, industrial sector contributes 30%, of which manufacturing accounts for 19%. Andhra Pradesh is one of the major states in India. Andhra Pradesh manufacturing sector’s contribution to Gross State Domestic Product (GSDP) was nearly 14.8% in 1995-96; but it came down nearly 12% in 2004-05. Andhra Pradesh state’s percent in total India’s GDP was 7.0% in 1980-81, 7.4% in 2000-01, and it declined 7.1% in 2004-05 (Economic Survey, 2004-05, various issues). During 2004-05, 15,568 factories were established; it used 3,526,698 lakh fixed capital, and 784,015 workers were engaged and received a total output of 10,236,470 lakh (Annual Survey of Industries, 2004-05, various issues).

India’s manufacturing industry has been registering a healthy growth rate since the 1950s. In fact, growth in manufacturing industry has consistently outstripped the overall growth, and manufacturing has consistently contributed to the overall growth of GDP. From August 1991 to November 2005, 5,711 new proposals with investment of 1,98,451 cr and an employment potential of 8,36,120 were received in Andhra Pradesh (Economic Survey, 2004-05, various issues).

Managerial Economics Journal, Economics of Cloud Computing, Information and Communications Technology Sector, European Economy, Macroeconomic Models, European Small and Medium Size Enterprises, SMEs, Government Agencies, European Health Sector, e-business Skills, Cost Reduction Process, Macroeconomic Literature, Online Services.