status of manufacturing in india present scenario

7/28/2019 Status of Manufacturing in India Present Scenario

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Status of manufacturing in India

present scenario

Presented by

Manan Kothari 11120


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Manufacturing

Definition

Set of activities leading to and including transformation of materialsinto physical products needed by end-users or intermediaries, usingproductivity-enhancing tools, machines and methods.

Importance

Fulfills basic needs, comforts, luxuries; strategic importance

Creates productive employment opportunities for the labour force

Engine of growth for agricultural and service sectors also

Value added in manufacturing is US$ 5 trillion/year

Represents 70% of world trade and 22% of world economy.

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Manufacturing in Past - World

First wave: 18th century Dominated by Europe (Great Britain, Germany, France)

Innovations in textile, steam power and printing

From home to workshop to factory towards lower cost.

Second wave: 19th century

Dominated by North America

Steel, automobile, railroads and telephone

Industrial engineering towards higher productivity.

Third wave: 20th century

Dominated by Japan

Electronics: robots, NC machines, communication, computers

Lower defects, better features: towards higher quality.

Common factors

Starts in a country ripe for the wave (physical, intellectual, economic)

First caters to local need, then leads to export of surplus

Immigration: rural to urban, and from less developed countries. 3


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Manufacturing in India post

independence

Post-Independence

Massive investments in industry (23% ofoutlay in 1956-79)

Strategy: extreme import substitution (others:export led growth)

Small sector industry reservations

(disincentive for growth)Infrastructure gap and quality (power,

transport, communication)

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% Composition (sector-wise) of GDP of India from

1952-53 to 2010-11

SOURCE:- Statistics on the Indian Economy, September 2011, Reserve Bank of India

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Manufacturing Sector in IndiaGDP Growth rate in %

Source: CSO & FICCI Research

Industry2011-12

2012-13

Q1 Q2 Q3 Q4 Q1

Agriculture 3.7 3.1 2.8 1.7 2.9

Services 10 8.8 8.9 7.9 6.9

Industry 5.6 3.7 2.5 1.9 3.6

Mining & quarrying -0.2 -5 -3 4.3 0.1Manufacturing 7.3 2.9 0.6 -0 0.2Electricity, gas & water supply 7.9 9.8 9 4.9 6.3Construction 3.5 6.3 6.6 4.8 10.9GDP at factor cost 8 6.7 6.1 5.3 5.5

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Manufacturing Sector employed nearly 53.5 Millionpeople in 2005

Industrial growth rate: India < 6% (China almostdouble)

World Competitiveness rank ~ 40 (USA, Germany,Singapore among top)

India's share in exports witnessed a constant rise, from0.8 percent in 2003 and 2004 and 1.0 percent in 2005

to 1.1 percent in 2006 and 2007. Exports: $44 b - Agri/Min:25%, Low-tech: 64%, High-

tech: 11%

Trade deficit: 3% of GDP in 1990-91; 2.6% in 2001-02.

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Sectoral GrowthSector Growth

Cement LowPaper Low

Steel Low

Textile Low

Mics. Low

Chemical Moderate

Forging Moderate

Tyre Moderate

Machine Tool Strong

Automobile Strong

Consumer Durables Strong

Leather and Footwear Strong

Capital Goods Strong

Note : Strong > 10%; 5% < Moderate < 10%; Low < 5%Source: FICCI SurveyMarch 2011

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Textile

Average capacity utilization is hovering around84% in the textiles sector

Problems in Textile:

High real estate cost making business unavailableLabor Issues

Shortage in power

Raw material prices of cottonRising cost of capital

Restriction on cotton yarn exports

Source: FICCI SurveyMarch 2011 9


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Forging Industry

Forging industry is operating at an averagecapacity utilization of 50%-70%.

Plans to increase their capacity further in the next6 months

The forging industry is very confident of growthof Indian manufacturing sector in coming months

Problems

PowerHigh price of raw material

lack of skilled manpower



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Machine Tool Industry

The machine tools industry is operating at acapacity of 90% and above

Plans to add further capacity in next six months

by around 50% Problems

Bottlenecks in the supply chain.

Shortage of working capital finance,

Competition faced from imports

Lack of skilled manpower



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Consumer Electronics

On an average the capacity utilization in thissector stands at around 90% and above

most of the firms are not planning any further

increase in capacity in next 6 months Problems

For electronic industry prices of raw material hasbeen identified as the most significant problem

Power

Competition faced from imports.



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Lack of Infrastructure

India is still lagging behind in providing properinfra in terms of Roads , Power andTechnology

Many of the industry has stagnation due tounavailability of Power

The Transportation Facilities in India are still

not well developed as of other Countries Still India has to import technology from

foreign countries

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Lack of Skilled Labour

Studies conducted on the manufacturing industryhas concluded that India has a workingpopulation of 75%. Out of this, only 600 million

have acquired education till middle school. Due to this reason, the manufacturing industry in

India has less skilled labour

Due to which the productivity of India is

approximately 1/5 of USA and of south Koreaand Taiwan

Brain Drain problems in Research and IT Field

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Lack of Return on Investment

India today faces the key question whether it shouldin effect vacate the large manufacturing spaces toChina, given their strong competitive strengths andconcentrate its resources in building a lead in the

services sector and small niche of complex technologyand design intensive manufacturing products.

India can not afford to move away from the entire lightengineering and simple manufacturing, simply becauseif it does so, it will be unable to generate the required

number of employment opportunities for the growingworking population, including workers moving out ofagriculture.

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Low Investment in Research and

Development

Cross-country Comparison of Research and

Development (2005)

Country Spending on R&D as a

percentage of GDP

Amount Spent on Royalties and

License Fees as a % of GDP

India 0.77 0.05

China 1.30 0.14

South Korea 2.5 0.57

Source: Human Development Report 2005 and IMF Balance of Payment Statistics 2006

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Future drivers and enablers

Economic Drivers

Globalization - WTO

Intellectual Property RightsNeed to generate and protect indigenous IPR (eg.

turmeric and neem)

Technological Drivers

Artificial Intelligence - capability of a device to perform tasks associated with humans

Green materials

Direct manufacturing - Material removal & Molding and forming

Future Enablers

Bionics and Reverse Engineering - Goal: duplication and eventually improvement

Knowledge Management - Creation (Brahma), maintenance (Vishnu), recycling (Shiva) Product Lifecycle Engineering - Consider all aspects early, to evolve an optimal design

Will lead to

New materials, processes and applications (products)

New paradigms of manufacturing and trade. 17


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status of manufacturing in india present scenario

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