Vol.:(0123456789) The European Journal of Development Research https://doi.org/10.1057/s41287-019-00228-0 ORIGINAL ARTICLE Dualism and Structural Transformation: The Informal Manufacturing Sector in India Surbhi Kesar 1  · Snehashish Bhattacharya 1 © European Association of Development Research and Training Institutes (EADI) 2019 Abstract We identify a basic dualism within the informal manufacturing sector (IMS) in India between a ‘traditional’/non-capitalist segment, comprising family-based household enterprises that constitute the vast majority of the IMS, and a segment of ‘modern’/ capitalist enterprises employing wage labour. We focus on the high-growth decade of 2000–2001 to 2010–2011 to analyse whether there has been a marked tendency of this ‘traditional’ segment to transform into a ‘modern’ segment. We construct a variable, the net accumulation fund, which indicates the ability of an enterprise to accumulate and grow, and explore its evolution, over time and across industries, for enterprises with diferent production structures and frm-level characteristics. We show that while, on one hand, the average ‘traditional’ enterprise has been able to economically reproduce itself rather than withering away, the dualism between the ‘traditional’/non-capitalist and the ‘modern’/capitalist segments has been repro- duced and further reinforced during this period of high economic growth, raising questions about the process of economic transformation as envisaged in much of development literature. Keywords Informal sector · Dualism · Structural transformation · Manufacturing · India Résumé Nous identifons un dualisme fondamental dans le secteur manufacturier informel (SMI) en Inde entre un segment “traditionnel”/non capitaliste, comprenant des en- treprises familiales, basées sur le foyer, qui constituent la grande majorité du SMI, et un segment “moderne”/d’entreprises capitalistes employant de la main d’œuvre salariée. Nous nous concentrons sur la décennie à forte croissance de 2000-01 à * Surbhi Kesar kesar.surbhi.05@gmail.com Snehashish Bhattacharya snehashish@econ.sau.ac.in 1 Faculty of Economics, South Asian University, Akbar Bhawan, Chanakyapuri, New Delhi 110021, India