Industrial Sector in India Performance & Challenges
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Industrial Sector In IndiaPerformance & Challenges
Group 7:11PT2-56 - Rajeev Kumar Singh
11PT2-57 Ranjan Birla
11PT2-59 Renuka Dabas
11PT2-60 Sachin Anand
11PT2-61 Satyabrata Pati
11PT2-62 Sayak Chakrabarti
11PT2-63 Shakti Tandon
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Agenda
Introduction : Industrial Sector Industrial groups
Growth Stages
Indian Industrial Policy 1991
Index of Industrial Production Performance : Indian Industries
Challenges : Indian Industries
Recommendation
Q & A
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Industrial Sector - Introduction
The industrial sector of the economy is one that make finished productswhich can then be utilized viz. construction and manufacturing industry.
Industrial sector is also known as secondary sector.
Industrial sector usually accepts the primary sector end product and thenapplies them to construct completed products that are then either purchased
by the end user or sent for further processing or fabrication. The industrial or secondary sector can be classified into two types:
- Heavy Industry.
- Light Industry.
Large quantities of energy are consumed to run the process.
Manufacturing industry creates wealth compared to the service sector. Countries that export manufactured goods are usually found to have higher
marginal GDP growth.
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Industrial Sector - Divisions
Automobile industry Chemical industry
Consumer electronics
Industrial equipment
Steel production
Tobacco industry
Aerospace manufacturing
Brewing industry
Textile industry
Energy industry viz.electricity industry, natural gas industry,petroleum industry Metal working
Telecommunications
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Industrial Sector-Growth Stages
5% of total Budget plan outlay was allocated for the industries. Small Scale Industriesdevelopment as prime focus (1951-56)
Development of Basic & Capital goods industries-60 Industrial estates and 1000 smallUnits & Steel plants were setup (1956-61)
Expansion of heavy industries automobile, diesel engines, cement and heavychemical units made considerable progress. (1961-66)
The prime aim was to focus on green revolution. Industrial development took a backseat. (1966-69)
Development of Large Scale industries, Number of Industries increased to 465(1969-74)
Development of export industries, mass consumption goods, backward regions andapplication of modern technology in industries(1974-79)
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Industrial Sector-Growth Stages
Increase in installed capacity of industries in the public and private sectors not only toproduce mass consumption goods but also intermediary and capital goods. (1980-85)
Increase in production of consumer goods across industries(1985-90)
Annual Plans 3 Fold Strategy-Liberalization, Privatization, Globalization (1990-92)
Modernization of Industries& Entry of Foreign companies and their industrialproducts(1992-97)
Development of Private Sector & Backward Regions(1997-2002)
Industry became competitive, R&D, modernization and technological up gradationinfrastructure development, power generation, development of roads,railways, air-ports etc(2002-2007)
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Index of Industrial Production (IIP)
Index of Industrial Production (IIP) is a composite indicator that measuresthe short-term changes in volume of production of a basket of industrial
products during a given period with respect to that in a chosen base period.
I = (WiRi)/ Wi.
where I is the index, Ri is the production relative of the ith item for the month
in question and Wi is the weight allotted to it. Base year needs to be decided on the basis of which all the index figures
would be arrived at.
Base year has been fixed at 1993-94 hence the same would be equivalent to100 Points but now it changed its based year to 2004-2005.
Weight is generally determined on the basis of Gross value added from thatindustrial activity.
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Index of Industrial Production (IIP)
Covers No of Item from different divisions as follows based on newseries with base 2004-05
- Mining & Quarrying 61 Items with weightage of 14.16%.
- Manufacturing 620 items with weightage of 75.53%
- Electricity 1 item with weightage of 10.32%.
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Indian Industrial Policy 1991
A major shift in the industrial policy was made by the Congress (I) Government led byMr. P.V. Narasimha Rao on July 24, 1991.
Liberalization: it refers to procedural simplification, removal of restrictions,delicensing and removal of unnecessary bureaucratic hurdles.
Privatization: It refers to opening the economy for privatization. In privatization, theareas earlier reserved for public sector public sector were made open for privatesector. The private sector was given the main importance.
Globalization: It refers to opening of the domestic economy for foreign enterprises.Import duties were reduced.
The average annual growth rate was 4.4% per annum.
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Major Growth Drivers
Economic Growth
Infrastructure Development
Government Initiatives.
Increasing Presence of Multinationals.
Outsourced Manufacturing.
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Performance : Indian Industries
Group 711 Source : Ministry of Statistics and Programme Implementation
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IIP(May12) YoY-
Group 712 Source : Ministry of Statistics and Programme Implementation
-6
-4
-2
0
2
4
6
8
Sep'11 Oct'11 Nov'11 Dec'11 Jan'12 Feb'12 Mar'12 Apr'12 May'12
IIP Growth (%)
Index for Industrial Production grew 2.4% in
May12 as against the revised growth of -0.9% inApr12 & 6.2% in May11. This is mainly
attributed to a contraction in capital goods &
mining output.
IIP Data reveals a decline in capital goods output
which declined 7.7% in May12 against 6.2% in
May11. Consumer durables production showed
a faster growth rate of 9.3% in May12 as against
5.1% in May11.
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GDP Q4 FY11-12 Manufacturing Sectorslows down
Group 713 Source: MOSPI, Times of India dt 31stMay12,
-2
0
2
4
6
8
10
GDP at Factor Cost Agriculture, Forestry &Fishing
Mining & Quarrying Manufacturing Construction
Q4 2010-11 Q4 2011-12
GDP in Q4 FY2011-12 slipped to 5.3%, lowest in 9years mainly due to poor performance of
manufacturing & farm sectors.
Growth in Manufacturing sector decreased to -0.3% in Q4 FY2011-12 as compared to 0.6% in Q3
FY2011-12.
Construction sector has also experienced a fall in growth to 4.8% in Q4 FY2011-12 as compared to
6.6% in Q3 FY2011-12.
Forecasts hold that Indias economy will expand by 7.6% in 2012-13.
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Capital Goods sector
Group 714 Source: MOSPI, Money Control dt 13 thjun12
-6
-4
-2
0
2
4
6
8
Sep'11 Oct'11 Nov'11 Dec'11 Jan'12 Feb'12 Mar'12 Apr'12 May'12
IIP Growth (%)
Index for Industrial Production grew 2.4% in
May12 as against the revised growth of -0.9% in
Apr12 & 6.2% in May11. This is mainly
attributed to a contraction in capital goods &
mining output.
IIP Data reveals a decline in capital goods output
which declined 7.7% in May12 against 6.2% in
May11. Consumer durables production showed
a faster growth rate of 9.3% in May12 as against
5.1% in May11.
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IIP(May12) YoY- Mining sector shrinks
Group 715 Source: MOSPI, Moneycontrol dt 13thJul12
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Mining Manufacturing Electricity
May'11(%) May'12(%)
The growth of Industrial Production for
Mining, Manufacturing & Electricity sectors
stand at -0.9%, 2.5% & 5.9% respectively in
May12.
Manufacturing Output, having the highest
weight in IIP grew at 2.5% in May12, betterthan the growth of 0.1% witnessed during the
previous month. 12 out of 22 industry groups
in manufacturing sector have shown positive
growth during May12.
Mining Growth, forming 14% of the indexdeclined to -0.9%, owing to bans & restrictions
due to scandals over illegal mining in several
states.
Electricity output grew at 5.9% in May12 as
compared to 5.2% in Mar11. Thermal electricitygeneration expanded by 8.5% in May12 while
hydro electricity generation contracted by 12.3%.
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Core Sectors (May12) YoY FertilizerProduction falls
Group 716 Source: MoC & I, & www.ecofin-surge.co.in
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
Coal CrudeOil
NaturalGas
Pet RefProd
FertProd
Steel Cement Elect
Core Infra SectorsMay'11 May'12
Growth of core sectors grew at 3.8% in
May12 as against 2.2% in Apr12 & 5.8%
in May11. During Apr11-May12 the
growth rate slowed down to 3.4% as
compared to 5.0% during Apr10-May11.
Coal Production witnessed a growth of
8.0% in May12 as against 1.3% in May11.
Growth in coal production will help the
power sector as about 55% of Indias
Power generation capacity is based on
thermal coal.
Output of Fertilizer Production saw the highest
decline from 7.3% in May11 to -15.1% inMay12. Natural gas also experienced a
slowdown from -9.6% in May11 to -10.8% in
May12.
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Automobile Sales (May12) Slowest in sevenmonths
Group 717 Source: SIAM, Times of India dt 12thJun12 & ET dt 11thJun12
0
400,000
800,000
1,200,000
1,600,000
P V C V Cars 2 W 3 W
May'12 May'11
Car Sales grew 2.8% in May12, lowest in
seven months attributed to increased petrol
prices & high interest rates. Two wheeler
sales, continued to grow, led by market leader
Hero Motocorp.
Passenger Vehicle Sales in India rose 7.54% in May12
to 221,135 units. In the past few months on-road price
of cars has also gone up by Rs 30,000 to Rs 1 lakh. The
demand for diesel cars has not picked up in spite a rise
in petrol prices.
Commercial Vehicle & 3 W sales rose 9.12% &
2.78% in May12 to 62,025 units & 37,184
units. The dwindling sales have forced the
auto makers to reduce its annual sales
forecast to 10%-12% for the current fiscal.
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Challenges Ahead
Land Acquisition. Higher input costs for the Indian manufacturing sector as a result of
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 puts the sector at a severe disadvantage.
The manufacturing sector needs to access the vast market possibilitiesavailable at the bottom of the income pyramid in the country.
The first essentiality for ensuring manufacturing competitiveness ismacroeconomic stability.
Lowering the cost of manufacturing and improving the quality are essential
for competitiveness. The inverted duty structure caused by FTAs as well as in all cases even
otherwise needs to be rectified.
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Challenges Ahead
Domestic indirect taxes are often singled out as a major reason whyIndian manufacturing is uncompetitive.
Each labor legislation has a separate inspector and visits ofinspectors are not synchronized across all labor enactments.
Group 719
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Recommendation
Indian manufacturers lag behind their global peers in productionplanning, supply chain management, quality, and maintenance areas
that contribute to their lower productivity.
Improve Labor Productivity
Improve Capital Productivity
Education of Trade Unions & Industrial Workers
Joint Ventures: Public &Private Sector
Investment in Infrastructure
Development of Backward Regions
Building of Techno Parks
Targeted Skilled Development
Development of Public Sector
Govt Role as Economist & Strategist
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Date Author Title21
Queries ???