In pre-independence, India was exporting huge quantities of manufacturing products, most of them were handicraft products that have been declined due to the regressive policies of the government (Kathuria, 1986). After independence, the government has implemented the industrial policy in 1956, and there was the development of basic and heavy industries such as iron & steel, heavy engineering, lignite projects, and fertilizer, etc. The new economic policy has increased the competition of domestic products in the international markets.
The India Brand Equity Foundation (IBEF) has categorized the manufacturing industries based on size, and use of inputs or raw materials (IBEF Report, 2019). The size of manufacturing industries depends on capital investment, workers employed and quantities production, such industries are household or cottage industries (includes bamboo, leather, wood, bricks, fabrics, stones, mud materials, etc.), small scale manufacturing industries (workshop outside home or cottage production), and large scale manufacturing industries (includes superior technology, large capital, large production, etc). The second type of classification was based on the use of inputs or raw materials, and such industries are agro-based industries (includes rural and urban businesses like; food processing, fruits juices, pickles, beverages, cotton, silk, etc.), food processing (includes the production of cream, canning, confectionary, and fruits), mineral-based industries (includes iron & steel industries and non-ferrous metallic minerals like cooper, aluminium & jewellery, etc), chemical-based industries (like sulphur, potash, synthetic fibre, plastics, etc.), forest-based raw material using industries (includes; minor and major forest products, wood and grass, etc.), and animal-based industries includes leather and wool industries, etc.
Market Size and Performance: India has ranked 30th in the global manufacturing index in 2018, and the gross value added (GVA) of the manufacturing sector at basic prices was US$ 403.23 billion in the financial year 2019 (World Economic Forum, 2019). The compound annual growth rate (CAGR) of GVA in manufacturing sector was recorded at 4.29% during the financial year 2012-19. The index of industrial production (IIP) of manufacturing sector grew at 3.50%, where the high growth rate was recorded in the production of basic metals, intermediate goods, food products, and tobacco products (DES, 2017). The gross fixed capital formation (GFCF) or net investments in fixed assets was US$, 405.88 billion in 2019-20, and was expected that it may touch US $1 trillion by the end of 2025 (MOSPI, 2020).
It has been observed that the contribution of the manufacturing sector to India's GDP was 6.8% in 2018, whereas, the contribution to world GDP was 3%, which suggests that the manufacturing sector has a significant contribution to the national income of India (World Bank, 2019). The growth rate of the manufacturing sector and the economic growth rate during 1991 to 2018 are reported in Figure-1, which indicates that both growth rates have fallen after 2007 and have more volatility, but FDI is more volatile than the GDP growth rate in the study period, that makes worrisome to the policymakers in India.
The manufacturing output has various uses, which is broadly categorized into six uses such as primary goods (34%), capital goods (8%), intermediate goods (17%), infrastructure/construction goods (13%), consumer durables (13%) and consumer non-durable goods (15%). It indicates that the manufacturing outputs are largely used as primary goods followed by intermediate goods, and the least output is used in capital goods in India (Figure-2).
Figure-3 draws the picture of Gross Value Added and Employment growth rate of manufacturing industries from 1987-88 to 2017-18. And found that GVA has been rising steadily over the years witnessing a growth rate of 62.8% in 2017-18. The growth rate of employment has been relatively lower i.e. 3.8% in 2017-18.
The compound annual growth rate (CAGR) of major manufacturing product industries in India during the period 2012-13 to 2017-18 is reported in Table-1. It shows that the Tobacco products industry has the highest CAGR (2.48%), followed by other manufacturing industries (1.27 percent) and electrical equipment (1.02 percent). The wood, and products of wood & cork, except furniture of articles had a positive CAGR (0.98 percent). All other manufacturing industries have a negative compound growth rate but the pharmaceutical, medicinal products, and botanical products, and furniture had a larger negative CAGR during 2012-13 to 2017-18 in India.
Table 1: Compound Annual Growth Rate of Major Manufacturing Industries in India
Industry group
|
2012-13
|
2017-18
|
CAGR (2012-13 to 2017-18)
|
Food products
|
103.3
|
108.1
|
-0.90%
|
Beverages
|
106.7
|
105.4
|
0.25%
|
Tobacco products
|
107.5
|
95.1
|
2.48%
|
Textiles
|
108
|
117.1
|
-1.60%
|
Wearing apparel
|
99
|
137.5
|
-6.36%
|
Leather and related products
|
110.6
|
123.9
|
-2.25%
|
Wood and products of wood and cork, except furniture of articles
|
97
|
92.4
|
0.98%
|
Paper and paper products
|
103.3
|
108.9
|
-1.05%
|
Printing and reproduction of recorded media
|
96.8
|
99.7
|
-0.59%
|
Coke and refined petroleum products
|
105.9
|
123.5
|
-3.03%
|
Chemicals and chemical products
|
103.9
|
116
|
-2.18%
|
Pharmaceuticals, medicinal chemical, and botanical products
|
108.1
|
212.1
|
-12.61%
|
Rubber and plastic products
|
101
|
110.6
|
-1.80%
|
Other non-metallic mineral products
|
102.9
|
113.9
|
-2.01%
|
Basic metals
|
107.8
|
138
|
-4.82%
|
Fabricated metal products, except machinery and equipment
|
97
|
107.9
|
-2.11%
|
Computer, electronic and optical products
|
100.6
|
148.5
|
-7.49%
|
Electrical equipment
|
113
|
107.4
|
1.02%
|
Machinery and equipment
|
102.9
|
120.5
|
-3.11%
|
Other transport equipment
|
99.2
|
133.9
|
-5.82%
|
Motor vehicles, trailers and semi-trailers
|
100.1
|
114.5
|
-2.65%
|
furniture
|
112.9
|
196.6
|
-10.50%
|
Other manufacturing
|
113.1
|
106.2
|
1.27%
|
Manufacturing
|
104.8
|
126.6
|
-3.71%
|
Source: Hand Book of Statistics, RBI
|
|
|
|