Manufacturing Sector in India

Manisha Kunwar and Juanita Kasbe

SMBA 7

Contents

• Introduction to Indian Manufacturing Sector • GDP• Components and Role of GDP • History of Manufacturing Sector• Types Of Manufacturing Sectors in India • Current Scenario of Indian Manufacturing

Sector • Problems of Manufacturing Sector’s In India • Solutions to the Problems • Conclusion

Introduction

• Manufacturing can be defined as physical or chemical transformation of materials into products on large scale using machinery or capital equipments, in contrast to production of handmade goods for personal use.

• 30% of the economy is of Manufacturing Sector. • Manufacturing sector contributes 15.24 per cent of the

country’s GDP, and provides employment to over 6 million persons.

• Major Sectors includes textiles, capital goods, metals, chemicals, tyres, cement, electronics, automotive, leather & footwear, machine tools, Food, Ceramics, Textiles Machinery etc.

• Deloitte's global index, 2013, for 38 nations, has ranked India the fourth most competitive manufacturing nation, behind China, the US and Germany

GDP – Gross Domestic Product

• The primary indicators used to gauge the health of a country's economy.

• The value of country's overall output of goods and services, typically during one fiscal year at market prices, excluding net income from abroad.

• GDP per capita is often considered an indicator of a country's standard of living.

• In the first quarter of 2013, India’s GDP is 4.8 %.

Components of GDP

GDP= C+I+G+(X-M)GDP = Private Consumption + GrossInvestment + Government Spending + (Exports −

Imports)I. Personal consumptiona) Durables: Durable goods, such as autos (3.6%) and

furniture (3%) is the smallest, at only 8% of GDP.b) Nondurables : Non-durable goods are 20% of GDP.

The three largest components are food (10%), clothing (2.7%) and fuel (2.4%).

c) Services: More than 40% of GDP are services. The two largest components are real estate (10%) and health care (12%).

Continued..II. Private Investment• a) Nonresidential• b) Structures• c) Producers' durables• d) ResidentialIII. Exports & Imports• a) Goods• b) ServicesIV. Government expenditures• a) Federal – i. Defense and ii. Nondefense• b) State and local

Role of GDP • GDP is an important component of macroeconomics that

measures the total final goods and services produced in a country within a stated period, usually quarterly.

• An assessment of the GDP allows governments to gauge the states of their nations' economies.

• GDP figures are used by investors to assess the state of the economy in a country before making any investment decisions.

• When GDP rises sharply leading to a period of economic boom which lead to inflation.

• It is used to measure the productivity of a labor force, determine how the federal government controls the flow of money and estimate or predict tax revenues for national, state and local governments.

History of Manufacturing Sector In India

History of Manufacturing Sector In India

Ancient Period• Evidences found from the remaining if

Harappan Civilisation (4000 – 3000 BC).• Weights, Measures, Kilns and Casting and

Metal Tools• Technologies for lifting loading and

transportation of materials• Creation of Monumental Architectures and • Ports as Export sector for manufactured

products from smelted copper and bronze.

Period Milestones300 BC Porus presented Alexancer 30 LBS of Indian Iron.

Kautilya writes about minerals, including iron ores and the art of extracting the metals in Aarthashastra.

350 AD A 8-meter iron pillar erected near Delhi in memory of Chandragupta II. Another 16- meter iron pillar erected in Dhar near Indore.

13th Century

Massive Iron beams used in the construction of Sun temple.

16th Century

Indian steel known as “Wootz” exported to middle east and Europe.

17th Century

Manufacturing of cannons, firearms, swords and Agricultural implements. Suspension bridge built over Beas at Saugor with iron from Tendulkhama, MP. Iron smelter built at Porta Nova, Madras.

1870 Bengal Iron works established in Kulti.

Medieval Period History

Post Independence • Based on Agriculture sector and less on Industrial sector,

as a result of showing poor economic condition. • Government started improving the social and material

condition by introducing the “ Five Year Plan’s”.• Economy improved in the 2nd Five Year plan(1956-61)

emphasizing on heavy industry.• Major role of Public Sector in Industrialization by investing

heavily.• Government intervention in Private Sector through Fiscal

Policies and licensing system. • Growth rate of MS increased from 4% to 6% between

1940- 1980.• LPG was introduces in 1991 aiming at removing

Monopolies and Restrictive Trade practices • Offering integration of Indian Economy with Foreign

economy

Highlights of the LPG Policy

• Foreign Technology Agreements, • Foreign Investment,• MRTP Act, 1969 (Amended), • Industrial Licensing,• Deregulation,• Beginning of privatization,• Opportunities for overseas trade, • Steps to regulate inflation, • Tax reforms, • Abolition of License Raj or Permit Raj

Five Year Plan’s

1951-562012-2017

Types of Manufacturing Sector In India

• Capital Goods refer to products that are used in the production of other products but are not incorporated into the new product. This industry is the “MOTHER” of all manufacturing industry and is of strategic importance to

the National security and economic independence.• Consumer Goods represent final value-added

products that are distributed for consumption in mass consumption markets and which are purchased primarily for personal, family and/or household purposes.

Types of Manufacturing Sector In India

Capital Goods Consumers Goods

Growth of Indian Manufacturing Sector

• Contributes one-fourth of total GDP

• Employs 30% of non-agricultural workforce

• Industrial output valued at US$ 65 billion

• Rise in growth from 2.7% in 1998-99 to 9.3% in 2010-11

• Significant rise in index of growth for the manufacturing sector from 6.3% in2009 to 8.2% in 2011.

Current Scenario of Indian Manufacturing Sector

• Sharing 15% of GDP.• Having potential to share 25% of GDP.• At present sharing 9th largest manufacturing

nation and expected to be – 5th in position.• Indian manufacturing and services sectors

expanded more than China in February 2013• The 2nd preferred global investment

destination• India's currently exports manufactured

products worth about $50 billion.

Challenges of Indian Manufacturing Sector

• Electricity, Land and Water• Unskilled labour and Obsolete

Technology• Lagging in R&D• Easy Access to Finance• Complex Regulatory System• Inability to built talent internally• Corruption and Global Competition

Must Focus…

• Improving the urban Infrastructure• Ensuring Fair Competition• Access to Global Market • Quality Improvement in vocational

and higher education• Increase Investments in R&D• Reduction of Import Duties

Finally…..

• The share of manufacturing sector accounts for only 15% in our GDP which is very low compared to China, Malaysia and Thailand where manufacturing contributes to 1/3rd or more in their GDP.

• Government is asking NRIs to Invest more in the manufacturing sector to create more job opportunities.

Thank You!