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This paper examines the impact of Liberalisation on employment in the Indian Manufacturing sector. It covers the period from 1983 to 2003 as the intention is to look for pre reform and post reform effect on employment. The paper attempts to solve the ambiguity in the literature concerning trade liberalisation and employment puzzle by concluding that reform process was detrimental for the same. India has been following an inward looking policy of import-substitution since its Independence. The financial and balance of payments crisis of 90’s forced India to embark upon a range of economic reforms(stabilization and structural assessment) as dictated by the International Monetary Fund(IMF) and the World Bank. Among the various reforms introduced, most important were the abolition of the Industrial Licensing System, substantial liberalisation of Foreign Trade, Foreign Direct Investment (FDI) regimes, opening of foreign portfolio investment and removal of ceilings on interest rates. Trade liberalisation led the country to adopt export-oriented industrialisation policies. The change in the policy framework saw a clear departure from restrictive autarkic strategy to partial liberalisation of the economy (removal of control and reliance on market economy) which brought with itself, growth of the economy in general and manufacturing sector in particular. India followed a policy of export pessimism and import substitution with high tariff and restrictions which resulted in high cost inefficient manufacturing sector. The country witnessed stagnation in the manufacturing sector in the mid ‘50s-‘60s .It resulted from unequal income distribution and low demand but most importantly the Industrial policy framework which led to inefficient allocation of resources. Around 2 decades later, the country was again trapped under similar circumstances which was reflected in the industry’s performance in the initial years, declining from 2% to around 0.5% in 1990. In order to boost the performance of this sector and to promote growth, quantitative restrictions on imports of intermediate and final goods were relaxed. Liberalisation was expected to impact growth, particularly employment in the manufacturing sector in the view to release the country from shackles of poor performance in the world market and underdevelopment. Some economists like Sen and Raj (2008) share the same view that liberalisation would increase the size of the market by integrating with the world market which would further lead to increase in competition and efficiency since there would be better allocation of resources (moving towards Pareto optimum). On the other hand some believed that liberalisation could affect the employment patternssome being optimistic about the fact that such a change would result in a shift to more labour intensive good manufacturing ,resulting in new job opportunities while some being pessimistic of the fact that such an integration with the world market would give an easy entry to capital intensive technology resulting in higher capital to labour substitution. In the light of the background presented above, my paper tries to examine the impact brought upon by liberatisation on employment in the organised manufacturing sector of the Indian industries. THEORETICAL FRAMEWORK There are many theories in International trade which show how liberatisation impacts employment growth in developing and developed nations, one of the most important being the H-O theory. Under Heckscher-Ohlin (H-O) framework, a country will export goods that use its abundant factor intensively and import goods that uses its scarce factor intensively. In a two factor case (say Capital and Labour), it states that “capital abundant country will export capital intensive good, while the Juhi Lohani “Impact of Trade Liberalisation on Employment in the Indian Manufacturing Sector” 14 International Journal of Research in Humanities and Social Studies V4 ● I3 ● March 2017 labour abundant country will export the labour-intensive good. Therefore talking in the Indian context, trade was expected to imcrease the labour demand in the economy and hence, employment.