Towards a Competitive Manufacturing Sector

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Towards a Competitive Manufacturing Sector
ByRajiv 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
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Cross Country Comparison
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Composition of Manufacturing Sector Across
Countries
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Growth of Indian Industry
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Growth of Components of Manufacturing Sector
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Performance of the Manufacturing Sector
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Comparison of the Manufacturing with Other Core
Sectors
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Comparison of the Manufacturing with Other Core
Sectors
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Change in Composition of the Manufacturing Output
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• Regional Disparities in India

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Statewise Decomposition of Manufacturing Output
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Contribution of States to Output and Employment
in Manufacturing
Decomposition of Output
Decomposition of Employment
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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) Workers (Percent) Gross Value Added (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 75.24
Source 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) 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 VAlt10 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 2003-04 Source Annual Survey of
Industries and NSS reports, various years
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Employment in Organized Manufacturing Sector
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Change in Labor Intensity in Top 5 Labour
Intensive Goods
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Export Performance of Labor Intensive Industries
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• Export Performance

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Share of Manufacturing Exports to India's Total
Merchandise Exports
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Manufacturing Exports Cross Country Comparison
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Levels of Manufactured Exports Across Countries
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High Technology Exports
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Change in Composition of Indian Manufactured
Exports
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• Transition to Mass Manufacturing

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Value Added by the Manufacturing Sector in Some
Major Developing Countries (2004)
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Per Capita Value Added by the Manufacturing
Sector in Some Major Developing Countries (2004)
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Scale of Production of Major Commodities Across
Countries
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Scale of Production of Major Commodities Across
Countries
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Scale of Production of Major Commodities Across
Countries
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Scale of Production of Major Commodities Across
Countries
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Size of Labor Force in Manufacturing Sector
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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)
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Researchers Involved in RD (2003)
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Use of Foreign Technology (2004)
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Number of Resident Patent Filed (2004)
Patent Filings per Million Population Patent Filings per Billion GDP Patent Filings per Million RD 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