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7/28/2019 Status of Manufacturing in India Present Scenario
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Status of manufacturing in India
present scenario
Presented by
Manan Kothari 11120
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Manufacturing
Definition
Set of activities leading to and including transformation of materialsinto physical products needed by end-users or intermediaries, usingproductivity-enhancing tools, machines and methods.
Importance
Fulfills basic needs, comforts, luxuries; strategic importance
Creates productive employment opportunities for the labour force
Engine of growth for agricultural and service sectors also
Value added in manufacturing is US$ 5 trillion/year
Represents 70% of world trade and 22% of world economy.
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Manufacturing in Past - World
First wave: 18th century Dominated by Europe (Great Britain, Germany, France)
Innovations in textile, steam power and printing
From home to workshop to factory towards lower cost.
Second wave: 19th century
Dominated by North America
Steel, automobile, railroads and telephone
Industrial engineering towards higher productivity.
Third wave: 20th century
Dominated by Japan
Electronics: robots, NC machines, communication, computers
Lower defects, better features: towards higher quality.
Common factors
Starts in a country ripe for the wave (physical, intellectual, economic)
First caters to local need, then leads to export of surplus
Immigration: rural to urban, and from less developed countries. 3
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Manufacturing in India post
independence
Post-Independence
Massive investments in industry (23% ofoutlay in 1956-79)
Strategy: extreme import substitution (others:export led growth)
Small sector industry reservations
(disincentive for growth)Infrastructure gap and quality (power,
transport, communication)
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% Composition (sector-wise) of GDP of India from
1952-53 to 2010-11
SOURCE:- Statistics on the Indian Economy, September 2011, Reserve Bank of India
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Manufacturing Sector in IndiaGDP Growth rate in %
Source: CSO & FICCI Research
Industry2011-12
2012-13
Q1 Q2 Q3 Q4 Q1
Agriculture 3.7 3.1 2.8 1.7 2.9
Services 10 8.8 8.9 7.9 6.9
Industry 5.6 3.7 2.5 1.9 3.6
Mining & quarrying -0.2 -5 -3 4.3 0.1Manufacturing 7.3 2.9 0.6 -0 0.2Electricity, gas & water supply 7.9 9.8 9 4.9 6.3Construction 3.5 6.3 6.6 4.8 10.9GDP at factor cost 8 6.7 6.1 5.3 5.5
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Manufacturing Sector employed nearly 53.5 Millionpeople in 2005
Industrial growth rate: India < 6% (China almostdouble)
World Competitiveness rank ~ 40 (USA, Germany,Singapore among top)
India's share in exports witnessed a constant rise, from0.8 percent in 2003 and 2004 and 1.0 percent in 2005
to 1.1 percent in 2006 and 2007. Exports: $44 b - Agri/Min:25%, Low-tech: 64%, High-
tech: 11%
Trade deficit: 3% of GDP in 1990-91; 2.6% in 2001-02.
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Sectoral GrowthSector Growth
Cement LowPaper Low
Steel Low
Textile Low
Mics. Low
Chemical Moderate
Forging Moderate
Tyre Moderate
Machine Tool Strong
Automobile Strong
Consumer Durables Strong
Leather and Footwear Strong
Capital Goods Strong
Note : Strong > 10%; 5% < Moderate < 10%; Low < 5%Source: FICCI SurveyMarch 2011
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Textile
Average capacity utilization is hovering around84% in the textiles sector
Problems in Textile:
High real estate cost making business unavailableLabor Issues
Shortage in power
Raw material prices of cottonRising cost of capital
Restriction on cotton yarn exports
Source: FICCI SurveyMarch 2011 9
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Forging Industry
Forging industry is operating at an averagecapacity utilization of 50%-70%.
Plans to increase their capacity further in the next6 months
The forging industry is very confident of growthof Indian manufacturing sector in coming months
Problems
PowerHigh price of raw material
lack of skilled manpower
Source: FICCI SurveyMarch 2011 10
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Machine Tool Industry
The machine tools industry is operating at acapacity of 90% and above
Plans to add further capacity in next six months
by around 50% Problems
Bottlenecks in the supply chain.
Shortage of working capital finance,
Competition faced from imports
Lack of skilled manpower
Source: FICCI SurveyMarch 2011 11
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Consumer Electronics
On an average the capacity utilization in thissector stands at around 90% and above
most of the firms are not planning any further
increase in capacity in next 6 months Problems
For electronic industry prices of raw material hasbeen identified as the most significant problem
Power
Competition faced from imports.
Source: FICCI SurveyMarch 2011 12
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Lack of Infrastructure
India is still lagging behind in providing properinfra in terms of Roads , Power andTechnology
Many of the industry has stagnation due tounavailability of Power
The Transportation Facilities in India are still
not well developed as of other Countries Still India has to import technology from
foreign countries
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Lack of Skilled Labour
Studies conducted on the manufacturing industryhas concluded that India has a workingpopulation of 75%. Out of this, only 600 million
have acquired education till middle school. Due to this reason, the manufacturing industry in
India has less skilled labour
Due to which the productivity of India is
approximately 1/5 of USA and of south Koreaand Taiwan
Brain Drain problems in Research and IT Field
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Lack of Return on Investment
India today faces the key question whether it shouldin effect vacate the large manufacturing spaces toChina, given their strong competitive strengths andconcentrate its resources in building a lead in the
services sector and small niche of complex technologyand design intensive manufacturing products.
India can not afford to move away from the entire lightengineering and simple manufacturing, simply becauseif it does so, it will be unable to generate the required
number of employment opportunities for the growingworking population, including workers moving out ofagriculture.
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Low Investment in Research and
Development
Cross-country Comparison of Research and
Development (2005)
Country Spending on R&D as a
percentage of GDP
Amount Spent on Royalties and
License Fees as a % of GDP
India 0.77 0.05
China 1.30 0.14
South Korea 2.5 0.57
Source: Human Development Report 2005 and IMF Balance of Payment Statistics 2006
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Future drivers and enablers
Economic Drivers
Globalization - WTO
Intellectual Property RightsNeed to generate and protect indigenous IPR (eg.
turmeric and neem)
Technological Drivers
Artificial Intelligence - capability of a device to perform tasks associated with humans
Green materials
Direct manufacturing - Material removal & Molding and forming
Future Enablers
Bionics and Reverse Engineering - Goal: duplication and eventually improvement
Knowledge Management - Creation (Brahma), maintenance (Vishnu), recycling (Shiva) Product Lifecycle Engineering - Consider all aspects early, to evolve an optimal design
Will lead to
New materials, processes and applications (products)
New paradigms of manufacturing and trade. 17
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