Manufacturing industry refers to those industries which involve in the manufacturing and processing of items and indulge in either creation of new commodities or in value addition. The manufacturing industry accounts for a significant share of the industrial sector in developed countries. The final products can either serve as a finished good for sale to customers or as intermediate goods used in the production process. 2. 2. 1 Working of manufacturing industry: Manufacturing industries are the chief wealth producing sectors of an economy.
These industries use various technologies and methods widely known as manufacturing process management. Manufacturing industries are broadly categorized into engineering industries, construction industries, electronics industries, chemical industries, energy industries, textile industries, food and beverage industries, metalworking industries, plastic industries, transport and telecommunication industries. Manufacturing industries are important for an economy as they employ a huge share of the labour force and produce materials required by sectors of strategic importance such as national infrastructure and defence.
However, not all manufacturing industries are beneficial to the nation as some of them generate negative externalities with huge social costs. The cost of letting such industries flourish may even exceed the benefits generated by them. Owing to the emerging technologies world wide, the world manufacturing industry has geared up and has incorporated several new technologies within it’s purview. Economists consider the World manufacturing industry as a sector which generates a lot of wealth. Generating employment, introducing latest techniques, real earnings from shipments etc., have put the world manufacturing industry in a favorable position.
With the implementation of the concept of eco friendly environment, world manufacturing industry has taken several measures to ensure that the manufacturing industries worldwide abide by the eco friendly norms. World manufacturing industry also plays an important role in the defense of a country. By manufacturing aircrafts which play a vital role in the country’s defense, the aerospace manufacturing industry acts as a shield. Other industries in the manufacturing sector manufactures products which are indispensable in our daily lives.
With regard to the GDP or gross domestic product, world manufacturing industry contributes to the global economy as well as the global GDP. 2. 2. 2 Manufacturing Industry in India The manufacturing industry in India, has all the qualities which enhance economic development, increase the productivity of the manufacturing industry and face competition from the global markets. The Manufacturing industry in India is believed to have the potential of improving the economic condition of India. Indian economy has made significant progress over the last few years, with the gross domestic product (GDP) growing at an average rate of 5.
3 per cent. The country is the world’s third largest economy in terms of the purchasing power parity (PPP) and has investments amounting to nearly a trillion dollars lined up in partnership with the private sector in the coming years. Manufacturing, as an industry segment, is a crucial cog in the wheel of progress and has largely insulated the Indian economy from a future global turmoil; thanks to its innovation-driven orientation. The Government has also ensured a suitable manufacturing eco-system for domestic and international majors by strengthening the sector in every possible way.
India’s manufacturing sector is poised for immense growth in future owing to its eminent talent pool in science, technology and research. Deloitte’s global index, 2013, for 38 nations, has ranked India the fourth most competitive manufacturing nation, behind China, the US and Germany. Not only this, but even the Global Manufacturing Competitiveness Index, 2013, based on a survey of CEOs, executives and other officials of 550 global manufacturing companies, has positioned India as second five years down the line, next only to China.
2. 2. 3 Industry Evolution
At the time of attaining independence in 1947, India primarily had an agrarian economy with poor manufacturing capabilities. Thus, the task at hand for the government was to kick-start a stagnant economy. India’s strategy for the manufacturing sector came to the fore in the second five-year plan, which laid emphasis on the heavy industries and sought a greater role of the public sector in industralisation. The result was that areas of high investment, such as arms and ammunition, transport, energy, coal, iron and steel and oil came under the government’s control.
The real thrust to the manufacturing sector came in the last decade of the 20th century. Facing huge trade deficits and an over valued currency, the government decided to liberalise the economy. Subsequently, a new industrial policy was unveiled on July 24, 1991 that promised elimination of entry barriers; removal of restrictions of Monopolies and Restrictive Trade Practices Act on the domestic industry to facilitate its expansion; promotion of foreign direct investment in manufacturing facilities; and integration of the country’s economy with the global economy.
While these measures gave a push to the manufacturing sector, physical infrastructure failed to grow at the same pace, thereby keeping the Indian manufacturers at a disadvantage as against their global counterparts. Thus, those micro-verticals within manufacturing that did not rely too much on the physical infrastructure (such as garments, leather, gems and jewellery) displayed international competitiveness.
As the physical infrastructure began to improve in the first decade of the 21st century (with the government allowing 100 percent FDI in 2006 in several sectors such as airports, roads and ports), so did the other areas of the manufacturing vertical such as complex components, automobiles, petroleum refining, capital goods and engineering products and services. The government continued to support the manufacturing sector through its policies and initiatives.
Some of the initiatives adopted by the government included a five year tax holiday in such areas as power projects, export firms and units in electronic hardware and software parks; enabling access to inputs at competitive prices; reduction and rationalisation of duty rates; execution of technology upgradation schemes in several sectors like food processing and textiles; implementation of the SEZ (Special Economic Zone) Act; and the initiation of the Delhi-Mumbai Industrial Corridor in collaboration with the Japan External Trade Organisation (JETRO).
Such steps were complemented by similar measures from the states and Union Territories like the Single Window Clearance mechanism and customized packages for capital- intensive projects. The Indian manufacturers lapped up these sops extended by the government, and scripted some amazing success stories. For instance, Bharat Forge today ranks as the world’s second largest producer of crankshafts, axle beams and other forged auto components. Likewise, Tata Steel, post the acquisition of Corus, has come to be the fifth largest producer of steel worldwide.
Suzlon enjoys the distinction of being the world’s largest wind turbine generator manufacturer. Over the years, several key sectors in the manufacturing vertical have exhibited strong growth. For instance, the chemical industry is worth $30 billion, while the size of the electronic industry is $11 billion. The food processing and engineering industries are $70 billion and $20 billion in size respectively. According to a report by McKinsey Global Institute, the fast growth in India’s economy would see the country emerging as the fifth largest consumer market worldwide by 2025.
Similarly, it is expected that by 2025, the consumer spending will quadruple to $1. 5 trillion riding piggyback on the three-fold rise in household income and a ten-fold jump in the middle class population. 2. 2. 4 Growth Trend Driven by a robust pick in domestic orders and strengthening of international demand, India’s manufacturing sector registered remarkable growth in February 2013. The HSBC India Manufacturing Purchasing Managers’ Index (PMI) – a measure of factory production – stood at 54. 2 in February 2013, up from 53.
2 in the previous month, indicating an improvement in the overall health of the Indian manufacturing sector. The volume of incoming new orders at manufacturing firms in India rose during the month with around 29 per cent of monitored companies reporting higher levels of new work. 2. 2. 5 Manufacturing: Key Developments and Investments * Parker Hannifin India, a part of the US-based Parker Hannifin Corporation, has established a Rs 100-crore (US$ 18. 32 million) – factory near Chennai to manufacture components for a wide range of industries.
The company has invested over US$ 34 million in Chennai in the last couple of years and considers India as an important component to propel its growth in the Asia-Pacific region. India accounts for a revenue of about US$ 130 million. The company acknowledges industries like automotive (including on-road and off-road), telecom, oil and gas, mining and primary metals sector * Switzerland-headquartered Starrag Group has set up a machining plant in Bangalore via its subsidiary Starrag India. The new plant, a green-field facility built with an investment of Rs 60 crore (US$ 10.99 million), would focus on building WMW machining centres in India.
The factory was approved by Karnataka Udyog Mitra and is expected to rollout four popular models of WMW Horizontal Machining Centres from July 2013 to December 2014. A cost reduction programme through a local supply chain is also in an advanced stage of implementation * Home appliances brand Godrej Appliances has announced a technology-collaboration with Bosch and Siemens (BSH) to develop an entire new range of energy-efficient refrigerators for Indian, Asia-Pacific, West Asian and African markets.
The company currently manufactures refrigerators, air-conditioners and other home appliances for the Indian market. This range of highly energy-efficient refrigerators will be manufactured at Godrej’s manufacturing plant at Shirwal near Pune. The refrigerator range manufactured under this partnership will be marketed by Godrej and BSH under their respective brand name in India, Asia-Pacific, West Asia and Africa * Shanghai Hitachi Electricity Appliances Company, a joint venture (JV) company of China-based Shanghai Highly Group and Hitachi Appliances of Japan, has decided to invest Rs 500 crore (US$ 91.58 million) over 2013-15 in Gujarat to manufacture air-conditioning compressors and relevant refrigeration products to focus on India and West Asian markets.
The company has already acquired land for the facility, which would offer employment to nearly 1,000 people, and also provide job work to many small and medium enterprises (SMEs). The Phase I work of the project is projected to be completed by October 2013 and second and last phase would finish by the end of 2014 * US-based specialty glass major Corning Inc has decided to infuse about Rs 588 crore (US$ 107.7 million) for setting up an optical cable manufacturing facility at Chakan near Pune.
The investment would be done through its Indian arm Corning Technologies India Pvt Ltd and the Maharashtra Government has facilitated a window of five years for making the investment. A senior Industries Department official has revealed that the State Government would enter into a memorandum of understanding (MoU) with the company, which will enable the company to avail a number of sops under the ‘Mega Projects Scheme’ 2. 2. 6 Manufacturing: Government Initiatives Various surveys have pointed that Industrial growth, particularly manufacturing, and services segments, would be critical to steer India on the high-growth path.
The Government had devised the National Manufacturing Policy (NMP) in 2011 in this light, with an aim to enhance the share of manufacturing in India’s GDP to 25 per cent and add at least 100 million jobs by 2025. Moreover, in a bid to encourage local manufacturing, the Government has been increasing the concessions for domestic production. It is endorsing ecosystems like manufacturing hubs and tertiary units to encourage local manufacturing.
For instance, P Chidambaram, the Finance Minister of India, has announced a policy initiative to boost setting up of manufacturing facilities (for set-top boxes) instead of importing those electrical devices. Import duty on them has been doubled to 10 per cent. Meanwhile, he has allowed companies investing Rs 100 crore (US$ 18. 32 million) or more in plant and machinery between April 2013 and March 2015 to deduct an investment allowance of 15 per cent over and above current rates of depreciation.
2. 2. 7 Road Ahead India is poised to become the second largest economy in manufacturing by 2017, followed by Brazil as the third ranked country, according to consulting major Deloitte. Also, manufacturing exports from India could increase from US$ 40 billion in 2002 to about US$ 300 billion in 2015, according to a report titled ‘Made in India-the Next Big Manufacturing Export Story’, jointly prepared by industry body CII and McKinsey. The report assesses that such an expansion would make India grab a share of approximately 3. 5 per cent in the world manufacturing trade.