Indian Manufacturing Sector

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INDIAN MANUFACTURING SECTOR

❖ INTRODUCTION:
Manufacturing sector is the backbone of any economy. It fuels growth, productivity, employment, and strengthens agriculture and service sectors. Astronomical growth in worldwide distribution systems and IT, coupled with opening of trade barriers, has led to stupendous growth of global manufacturing networks, designed to take advantage of low-waged yet efficient work force of India. ' Indian Manufacturing ' sector is broadly divided into - Capital Goods & Engineering, Chemicals, Petroleum, Chemicals & Fertilizers, Packaging, Consumer non-Durables, Electronics, IT Hardware & peripherals, Gems & Jewelry, Leather & Leather Products, Mining, Steel & non-Ferrous Metals, Textiles & Apparels and Water Equipment. The overall manufacturing growth rate is projected to rise to 9.5% in 2008-09, after declining to 8.8% in the 2007-08 from a high of 12.3% attained in the previous year (2006-07). Over the past year or two there has been mounting confidence about the new found strength of India's manufacturing sector and its long-term potential. The recently approved 11th Five Year Plan expects manufacturing to grow at 10-11 per cent a year during the period 2007-12. Of the 100 sectors surveyed, as many as 67 sectors are poised to achieve ‘excellent’ to ‘high’ growth rates ranging 10 to 20 per cent or more. While 12 sectors project excellent growth of more then 20 per cent or more, 55 sectors foresee high growth of 10 to 20 per cent, 32 sectors expect moderate growth of up to 10 per cent and 1 sector has projected a negative growth during 2008-09.

❖ CHALLENGES FOR THE INDIAN MANUFACTURING SECTOR:

The various factors are as follows:
1. Cost Disability Factors Faced By Indian Manufacturing Sector: Higher input costs for the Indian manufacturing sector can be attributed to: cascading effect of indirect taxes on selling prices of commodities; higher cost of utilities like power, railway transport, water; higher cost of finance and high transactions costs. 2. Low Operating Surplus In The Indian Manufacturing Sector: A detailed investigation of 15 major manufacturing sector in India shows that the share of operating surplus in the total value of output averaged 15% in India – much lower compared to 22.6% in Malaysia, 29.4% in Indonesia and 30.6% in Korea. 3. High Costs Of Input Materials And Utilities In India:

A comparison of costs of input materials and utilities in India, China, Malaysia and Korea across 15 important manufacturing segments showed that on the average the share of input materials and utilities in total output value was as high as 81.3% in India as against 75.5% in China, 68.7% in Malaysia and only 58.5% in Korea. 4. Agenda For Accelerating Growth And Improving Competitiveness Of Indian Manufacturing: • Infrastructure facilities: New initiatives for encouraging entry of more private sector investors in important sectors like electricity distribution, aviation, roads, railways, ports and airports. • Development finance: Concrete steps that would enable the development financial institutions to double the distribution of funds in the next year. • Inspector Raj: Announcing of new initiatives for self-regulatory checks and self-certification measures by entrepreneurs. • Labour legislation: A new bill for reducing plethora of regulations and for introducing a uniform labor laws for the whole country should be introduced in the next session of Parliament. • Contract labor: A new bill for encouraging Contract labor in all areas even while protecting the social security payments and minimum wages should also be introduced. • Opening up of small-scale sector: Removal of all restrictions on investment in labor-intensive small-scale industries should be done by the end of the first 100 days. • Fiscal policies: Steps for reducing incidence of indirect taxes on manufactured goods should be reduced to international benchmarks along with a...
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