towards a competitive manufacturing sector
TRANSCRIPT
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Towards a Competitive Manufacturing Sector
By
Rajiv KumarDirector and Chief Executive, ICRIER
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Outline
• Aggregate Manufacturing Scenario
• Regional Disparities
• Employment Generation
• Unorganized Sector
• Export Performance
• Transition to Mass Manufacturing
• Policy Recommendations
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Aggregate Manufacturing Scenario
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Significance of Key Sectors in the Economy
0
5
10
15
20
25
30
35
40
45
50
55
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Years
Sh
are
in G
DP
(%
)
Manufacturing Agriculture Services Industry
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Cross Country Comparison
Share of Manufacturing Sector (2004)
24.07 24.00
16.10
39.41
28.34 28.74
31.40
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
Argentina Brazil India China Indonesia Korea Malaysia
Countries
Sh
are
in
GD
P
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Composition of Manufacturing Sector Across Countries
12.37
20.39
9.50 8.24
15.22
13.27
8.10 8.83
32.35 20.59
44.9840.90
28.0634.75
29.60 38.24
11.99 11.007.82
3.80
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
CHN IND KOR MYS
Countries
Sh
are
(P
erc
en
tag
e)
Chemicals FBT Mach & Transp Others Textiles
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Growth of Indian Industry
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
1950-54 1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2004-06
Mining Electricity Manufacturing
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Growth of Components of Manufacturing Sector
Growth of Manufacturing Gross Value Added (%)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
1950-59 1960-69 1970-79 1980-89 1990-99 2000-04
Years
Gro
wth
Ra
te (
pe
rce
nta
ge
)
Manufacturing Registered Unregistered
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Performance of the Manufacturing Sector
-10
-5
0
5
10
15
20
25
Q1
198
2-8
3
Q4
198
2-8
3
Q3
198
3-8
4
Q2
198
4-8
5
Q1
198
5-8
6
Q4
198
5-8
6
Q3
198
6-8
7
Q2
198
7-8
8
Q1
198
8-8
9
Q4
198
8-8
9
Q3
198
9-9
0
Q2
199
0-9
1
Q1
199
1-9
2
Q4
199
1-9
2
Q3
199
2-9
3
Q2
199
3-9
4
Q1
199
4-9
5
Q4
199
4-9
5
Q3
199
5-9
6
Q2
199
6-9
7
Q1
199
7-9
8
Q4
199
7-9
8
Q3
199
8-9
9
Q2
199
9-0
0
Q1
200
0-0
1
Q4
200
0-0
1
Q3
200
1-0
2
Q2
200
2-0
3
Q1
200
3-0
4
Q4
200
3-0
4
Q3
200
4-0
5
Q2
200
5-0
6
Q1
200
6-0
7
Quarters
Gro
wth
Rate
(P
erc
en
tag
e)
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Comparison of the Manufacturing with Other Core Sectors
0.0
50.0
100.0
150.0
200.0
250.0
300.01
98
1/8
2
19
82
/83
19
83
/84
19
84
/85
19
85
/86
19
86
/87
19
87
/88
19
88
/89
19
89
/90
19
90
/91
19
91
/92
19
92
/93
19
93
/94
19
94
/95
19
95
/96
19
96
/97
19
97
/98
19
98
/99
19
99
/00
20
00
/01
20
01
/02
20
02
/03
20
03
/04
20
04
/05
20
05
/06
Years
Ind
ex o
f In
du
str
ial P
rod
ucti
on
Electricity Coal Steel Petroleum Crude Manufacturing Cement
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Comparison of the Manufacturing with Other Core Sectors
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.0019
81/8
2
1982
/83
1983
/84
1984
/85
1985
/86
1986
/87
1987
/88
1988
/89
1989
/90
1990
/91
1991
/92
1992
/93
1993
/94
1994
/95
1995
/96
1996
/97
1997
/98
1998
/99
1999
/00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
Years
Gro
wth
Rat
e (P
erce
nta
ge)
Electricity Coal Steel Cement Petroleum Crude Manufacturing
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Change in Composition of the Manufacturing Output
1980-81
16%
15%
1%1%
1%
3%
8%
14%
3%
3%
15%
6%
5%
4%3% 2%
1990-91
16%
11%
1%
2%
0%
3%
9%
14%
3%
4%
17%
5%
4%
5%
3%3%
2003-04
16%
8%
1%
1%
0%
3%
14%
14%
3%
3%
4%
3%
6%
3%6%
15%
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Regional Disparities in India
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Statewise Decomposition of Manufacturing Output1990-91
Bih +Jha5% MP + Cha
5%
Raj3%
UP + Utt10%
Mah24%
Guj11%
TN11%
AP6%
Kar5%
Har4%
WB6%
Pun5%
Ker2%
Del2%
Other1%
1970-71
Bih +Jha5%
MP + Cha4%
Raj2%
UP + Utt7%
Mah26%
Guj10%
TN10%
AP5%
Kar4%
Har2%
WB13%
Pun3%
Ker3%
Del2%
Other4%
2003-04
Bih +Jha3%
MP + Cha5%
Raj3%
UP + Utt8%
Mah18%
Guj17%
TN11%
AP7%
Del1%
Other4%Kar
7%
Har5%
WB4%
Pun4%
Ker3%
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Contribution of States to Output and Employment in Manufacturing
Decomposition of Output Decomposition of Employment
2003-04
Bih +Jha3%
MP + Cha5%
Raj3%
UP + Utt8%
Mah18%
Guj17%
TN11%
AP7%
Kar7%
Har5%
WB4%
Pun4%
Ker3%
Other4%
Del1%
2003-04
MP + Cha3%
Raj3%
UP + Utt8%
Mah13%
Guj9%
TN16%
AP12%
WB7%
Kar6%
Ker5%
Pun4%
Har4%
Del1%
Other6%
Bih +Jha3%
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AP
GoaGuj
Har
Kar
Ker
MP & Cha
Mah
Pun
Raj
TN
UP & Utt
WB
1015
2025
20 30 40 50 60Share of Power Devoted to Industrial Sector
Share of Manufacturing in GDP Fitted values
Significance of Power for the Manufacturing Sector
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AP
Goa Guj
Har
Kar
Ker
MP & Cha
Mah
Pun
Raj
TN
UP & Utt
WB
1015
2025
20 40 60 80 100Share of Surfaced Roads
Share of Manufacturing in GDP Fitted values
Significance of Roads for the Manufacturing Sector
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AP
GoaGuj
Har
Kar
Ker
MP & Cha
Mah
Pun
Raj
TN
UP & Utt
WB
1015
2025
3 4 5 6 7Share of Students Enrolled in Higher Education
Share of Manufacturing in GDP Fitted values
Significance of Higher Education for the Manufacturing Sector
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AP
GoaGuj
Har
Kar
Ker
MP & Cha
Mah
Pun
Raj
TN
UP & Utt
WB
10
15
20
25
30
0 10000 20000 30000 40000Per Capita GDP
Share of Manufacturing in GDP Fitted values
Relationship Between Per Capita GDP and Manufacturing
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Performance of the Unorganized Sector
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Share of Unorganized and Organized Manufacturing in Valued Added and Employment (2000-01)
Workers (Percent) Gross Value Added (Percent)
Sectors Unorganized Organized Unorganized Organized
Food Beverages and Tobacco 87.43 12.57 35.24 64.76
Textiles and Wearing Apparel 88.65 11.35 43.37 56.63
Leather and Leather Products 77.71 22.29 39.16 60.84
Wood and Wood Products 99.29 0.71 93.30 6.70
Paper, Publishing and Printing 77.40 22.60 22.53 77.47
Coke, Refined Petroleum and Nuclear Fuel 31.87 68.13 0.59 99.41
Chemical and Chemical Products 51.10 48.90 2.68 97.32
Rubber and Plastic Products 64.01 35.99 17.69 82.31
Other Non Metallic Non Mineral Products 89.78 10.22 32.05 67.95
Basic Metals 23.91 76.09 3.14 96.86
Fabricated Metals 87.87 12.13 43.89 56.11
Machinery and Equipment 63.91 36.09 13.59 86.41
Electrical Machinery and Apparatus 61.46 38.54 13.71 86.29
Motor Vehicles 36.47 63.53 5.29 94.71
Furniture 97.13 2.87 74.62 25.38
Others 39.79 60.21 5.03 94.97
Total 86.15 13.85 24.76 75.24Source: NSSO 56th Round and Annual Survey of Industries
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Gross Value Added Per Worker in Unorganized and Organized Manufacturing (2000-01)
Gross Value Added Per Worker (Rs. Lakhs)
Sectors Unorganized Organized
Food Beverages and Tobacco 0.12 1.56
Textiles and Wearing Apparel 0.15 1.51
Leather and Leather Products 0.22 1.21
Wood and Wood Products 0.10 1.01
Paper, Publishing and Printing 0.29 3.44
Coke, Refined Petroleum and Nuclear Fuel 0.24 18.59
Chemical and Chemical Products 0.18 6.91
Rubber and Plastic Products 0.38 3.15
Other Non Metallic Non Mineral Products 0.15 2.85
Basic Metals 0.45 4.34
Fabricated Metals 0.23 2.18
Machinery and Equipment 0.35 3.98
Electrical Machinery and Apparatus 0.39 3.88
Motor Vehicles 0.41 4.19
Furniture 0.22 2.50
Others 0.37 4.59
Total 0.16 2.98
Total (Less Products with VA<10% in Unorg. Sector) 0.15 2.07
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Employment Generation
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Employment Growth Rate in Manufacturing Sector
Major Industrial Groups Unorganized Organized
Food, Beverages and Tobacco 0.9 0.96
Textiles and Leather 3.05 1.21
Paper and Products 1.69 0.1
Chemicals and Products 0.87 2.02
Non-Metallic Mineral Products 0.65 0.82
Basic Metals 3.9 -0.91
Metal Products 2.89 2.05
Machinery and Equipment 4.1 0.82
Transport Equipment 1.44 0.02
Other Manufacturing (Including Wood) 1.29 3.88
Note: * Period covered for Unorganized Manufacturing is 1989-90 to 2000-01. ** Period covered for Organized Manufacturing is 1990-91 to 2003-04Source: Annual Survey of Industries and NSS reports, various years
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Employment in Organized Manufacturing Sector
4000000
4500000
5000000
5500000
6000000
6500000
7000000
7500000
8000000
19
73-
74
19
74-
75
19
75-
76
19
76-
77
19
77-
78
19
78-
79
19
79-
80
19
80-
81
19
81-
82
19
82-
83
19
83-
84
19
84-
85
19
85-
86
19
86-
87
19
87-
88
19
88-
89
19
89-
90
19
90-
91
19
91-
92
19
92-
93
19
93-
94
19
94-
95
19
95-
96
19
96-
97
19
97-
98
19
98-
99
19
99-
00
20
00-
01
20
01-
02
20
02-
03
20
03-
04
Years
Nu
mb
er o
f w
ork
ers
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Change in Labor Intensity in Top 5 Labour Intensive Goods
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Export Performance of Labor Intensive Industries
0
2
4
6
8
10
12
14
16
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Sh
are
in
To
tal
Ex
po
rts
(P
erc
en
tag
e)
Tobacco Garments Sports goods Leather Products (except Footwear)
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Export Performance
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Share of Manufacturing Exports to India's Total Merchandise Exports
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Years
Sh
are
(P
erc
en
tag
e)
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Manufacturing Exports: Cross Country Comparison
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.0019
70
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Years
Sh
are
(Per
cen
tag
e)
China Argentina Brazil India Korea Indonesia
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Levels of Manufactured Exports Across Countries
9.94
52.19
542.20
55.0540.55
233.99
95.80
0.00
100.00
200.00
300.00
400.00
500.00
Argentina Brazil China India Indonesia Korea Malaysia
Countries
US
$B
illio
n
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High Technology Exports
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Years
Sh
are
in M
anu
fact
ure
d E
xpo
rts
(Per
cen
tag
e)
Argentina Brazil China India Indonesia Korea Malaysia
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Change in Composition of Indian Manufactured Exports
2005
4%
13%
28%
12%
11%
23%
9%
1992
10%
12%
17%
19%
17%
20%
5%
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Transition to Mass Manufacturing
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Value Added by the Manufacturing Sector in Some Major Developing Countries (2004)
36.83
144.95
761.67
111.30
73.02
195.32
37.15
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
Argentina Brazil China India Indonesia Korea Malaysia
Countries
US
$ B
illio
n
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Per Capita Value Added by the Manufacturing Sector in Some Major Developing Countries (2004)
959.13
788.22
587.62
103.08
335.57
406.08
1492.01
0.00
200.00
400.00
600.00
800.00
1000.00
1200.00
1400.00
1600.00
Argentina Brazil China India Indonesia Korea Malaysia
Countries
US
$
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Scale of Production of Major Commodities Across CountriesPersonal Computers (2004)
3.70
19.35
52.99
13.03
3.02
26.20
4.90
0.00
10.00
20.00
30.00
40.00
50.00
60.00
Argentina Brazil China India Indonesia Korea Malaysia
Countries
Nu
mb
er
of
PC
s (
Mil
lion
s)
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Scale of Production of Major Commodities Across CountriesMotor Vehicles (2005)
319.76
2528.30
5707.69
1626.76
494.55
3699.35
0.00
1000.00
2000.00
3000.00
4000.00
5000.00
6000.00
Argentina Brazil China India Indonesia Korea
Countries
Nu
mb
er o
f M
oto
r V
ehic
les
(000
s)
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Scale of Production of Major Commodities Across CountriesSteel (2005)
5.39
31.62
352.54
38.0847.77
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
Argentina Brazil China India Korea
Countries
Ste
el P
rod
uct
ion
(M
MT
)
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Scale of Production of Major Commodities Across Countries
Telephone Mainlines (2004)
8.70
42.38
312.44
43.96
9.99
26.06
4.45
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
Argentina Brazil China India Indonesia Korea Malaysia
Countries
Tel
eph
on
e M
ain
lines
(M
illio
ns)
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Size of Labor Force in Manufacturing Sector
1.36
11.72
160.00
53.06
11.65
4.23 2.02
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
Argentina Brazil China India Indonesia Korea Malaysia
Countries
Nu
mb
er
of
Wo
rker
s (M
illio
n)
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Possible Routes to Achieving Mass Manufacturing in India
Route I : Improve Export Market Share– No sector where India enjoys a big share of exports– Lack of FDI– Role of MNCs
Route II : Expand the Indigenous Market Base– Small size of the domestic market– Low purchasing power
• Need to develop High Quality and Low Price products
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Spending on R & D as a percentage of GDP (2003)
0.42
1.03
1.3
0.77
0.2
2.5
0.7
0
0.5
1
1.5
2
2.5
3
Argentina Brazil China India Indonesia Korea Malaysia
Countries
R &
D E
xpen
dit
ure
as
a P
erce
nta
ge
of
GD
P
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Researchers Involved in R&D (2003)
715
324
633
120
413
2979
294
0
500
1000
1500
2000
2500
3000
3500
Argentina Brazil China India Indonesia Korea Malaysia
Countries
Res
earc
her
s in
R &
D (
per
mill
ion
peo
ple
)
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Use of Foreign Technology (2004)
0.23
0.19
0.29
0.14
0.05
0.57
0.21
0.63
0.39
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
Argentina Brazil Chile China India Korea Philippines Thailand Hong Kong
Countries
Am
ou
nt
Sp
en
t o
n R
oya
ltie
s a
nd
Lic
en
se F
ees
(%
of
GD
P)
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Number of Resident Patent Filed (2004)
Patent Filings per Million Population
Patent Filings per $Billion GDP
Patent Filings per $Million R&D Expenditures
Argentina 28.41 2.32 0.56
Brazil 21.16 2.81 0.29
China 50.75 9.37 0.71
India 6.65 2.3 0.22
Korea 2188.96 116.19 4.4
USA 645.44 17.7 0.68
Source: World Intellectual Property Organization
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Policy Recommendations
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Policy Recommendations
(i) Remove Entry Barriers 1. Heavy hand of petty functionaries 2. Clearances 3. Processes
(ii) Remove Exit Barriers
(iii) Weaken distinction between organized and unorganized sector
(iv) Labour market reforms
(v) Improve labour conditions and real wages
(vi) Education Sector Reforms
(vii) Infrastructure
(viii) Foreign Direct Investment