Transcript INDIAN MANUFACTURING SECTOR

Indian Manufacturing Sector
Anubhav Agarwal
FIRST & SECOND
GENERATION REFORMS
Market liberalization and economic policy reforms aimed at rapid
and sustained economic growth with integration into global
economy
Elimination of industrial licensing except for certain select
sectors
Removal of restrictions on foreign investment and expansion –
well defined equity limits for Foreign Direct Investment
Simplification and streamlining of procedures for investment
approvals
Establishment of independent regulators for key industries such
as telecom, power and roadways
Areas previously reserved for public sector being opened for
private sector participation
Rationalization of tax structure
INDIAN MANUFACTURING SECTOR
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7.1
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6.1
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4.2
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3.4
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2.7
2
1
0
1998-99
1999-00
2000-01
2001-02
Growth of manufacturing(%)
Source: National Accounts
2002-03
Contributes one-fourth of
total GDP
Employs 30% of nonagricultural workforce
Industrial output valued
at US$ 65 billion
Rise in growth from
2.7% in 1998-99 to 6.1%
in 2002-03
Significant rise in index
of growth for the
manufacturing sector
from 6.5 % in February
2003 as compared to
2.9% in February 2002
With manufacturing showing a growth
of 9.3% during the quarter, the overall
growth of the industrial sector has been
as much as 8.02%, slightly lower than
the growth in service sector - 8.25%.
LABOUR COSTS
25000
India is among
the lowest
labour costs
per worker in
Asia
21317
20000
15000
10743
10000
5000
3429
2705
2450
729
1192
1008
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Labour cost per worker ($ per year)
MANUFACTURING SECTOR EXPORTS
20.0
15.4
15.6
1999-00
2000-01
14.8
15.0
10.0
5.0
0.0
-5.0
1998-99
-3.0
2001-02
-2.6
Growth of manufactured exports (%)
2002-03
Manufacturing sector
exports have grown from –
3.0 % in 1998-99 to
14.8% in 2002-03
Transition from largely
agro-based raw materials
to processed items
Need to increase high
value-added component
India's exports of
manufactured products
currently stand at close to
$35 billion.
The ratio of manufacturing exports to GDP
from the manufacturing sector has gone up
from 20.5 per cent in 1987-88 to 52.7 per
cent in 2000-01.
India's contribution to world trade remains
minuscule.
In 1999, total world exports of manufactured
products was $4,224 billion of which India
had a share of just 0.7 per cent.
Select Illustrations:
Chemicals
Indian Chemical industry ranked 12th in the world production of
chemicals
Rate of Chemical industry growth over last 5 years has been double
that of Asia’s growth & 5 times the world growth rate for the sector
Indian chemical industry valued at Rs. 1200 billion(US$ 28 billion)
Accounts for 1.5% of global chemicals market
Indian trade is 1.3% of total chemicals trade worldwide
India is becoming the laboratory to the world for the global chemical
industry
 Leading global players like Dow Chemicals, Dupont, General
Electric have set up their own laboratory or using national
laboratories in India
Pharmaceuticals
World’s 4th largest pharmaceuticals producer with share of 8% of
global production by volume and 1.5% by value
Production of drugs at 1/20th the cost incurred by developed
countries
India is the largest producer of Sulfamethoxole and Ethambutol(anti
TB)
GlaxoSmithKline India is to become the hub of clinical research in
South Asia
Discovery research has begun in a major way by Indian companies
with Dr. Reddy’s Labarotories and Ranbaxy pioneering this effort
Steel
World’s 8th largest producer of steel
World’s largest producer of sponge iron
Export of steel (Apr – Dec 2002): 2.75 million
tonnes, increase of 21.6% over previous year
Increasing role of private sector in production
– increase in share from 51.4% in 1991-92 to
67% in 1998-99
Indian steel sector has the capability to
produce a variety of grades of steel
conforming to international quality standards
Poor labour productivity, high energy and
transportation costs and financial pressures
are eroding India's core advantages of cheap
raw materials and labour.
On a positive side, however, many steel
companies have begun a series of initiatives
to streamline operations and propel
productivity, even while no major new projects
have been planned.
Auto Sector
Extensive backward and forward linkages –
strongly interwoven with machine tools and
metals sectors
Provides employment to 0.45 million directly
and 10 million indirectly
High quality of auto components used as
original components for vehicles by leading
international companies
Distinct cost advantage: labour cost 8-9 per
cent of sales as against 30-35 per cent of
sales in developed economies
Suzuki Motors expects the Indian car
market to grow from 1 million a year to 2
million by 2008. So Maruti Udyog Ltd,
which has a 55%-plus share in the
passenger-car market, has decided to
double its own capacity to 1 million over
the next four to five years.
Oil & Natural Gas
Current annual crude oil production: 32 million tonnes, Current
demand: 110 million tonnes
Reliance Petroleum Refinery at Jamnagar is the world’s largest
single stream refinery
Strong retail infrastructure comprising over 17,000 petrol stations;
6,500 kerosene depots and over 5,500 domestic LPG dealers
World’s largest gas find in 2002 at Krishna-Godavari basin
Tremendous opportunities for synergies in:
- supply of crude oil and gas
- LNG import and transportation
- setting up refineries, setting up petroleum infrastructure:
storage facilities, pipelines etc
- marketing petroleum products incl. LPG
- retail marketing of transportation fuels
- production sharing contracts for oil & gas exploration under
New Exploration Licensing Policy (NELP)
Textiles
accounts for 5.7 per cent of the production value of
world manufacturing output (in US$), 8.3 per cent of
traded manufactured goods and more than 14 per
cent of world employment.
Sector accounts for 14 % of India’s industrial
production and 27% of export earnings
India accounts for 15% of world’s total cotton crop
production, largest producer of silk
Large pool of skilled low-cost technologically
experienced workers
Major segment: Manmade fibres accounting for 40%
share in Indian textile industry
2005 will bring to an end the regimen of
quotas which have determined world
trade in textiles and clothing so far. This
will increase competition among
developing countries trying to capture a
bigger share of the export market.
Others…
Dairy Products: In spite of being the world’s
largest producer of milk, India figures
nowhere on the international export scene for
dairy products.
Gems & Jewellery: In 1966-67, the export
turnover of the G&J industry was just Rs 220
m representing a mere 3 per cent of total
merchandise exports. However, it has now
grown to an export turnover of around Rs 335
bn during 2000-01 and contributing 16.7 per
cent of total merchandise exports.
FUTURE OF INDIAN
MANUFACTURING SECTOR
Base for export to third countries - Hyundai Motors using India
as export base for foreign markets, currently exporting to 8
countries and looking at expanding exports to markets in the
European Union and Latin America. The company has also set
up an R & D center at its Chennai plant
World class R & D facilities
Emergence as global manufacturing hub with presence of MNCs
such as LG, Samsung, Hyundai, Pepsi, GE, General Motors, Ford,
Suzuki etc
Increased implementation of state-of-the-art IT technologies –
current IT usage of 15%
Segments showing high potential: automobiles, steel,
aluminium, cement, auto ancillaries, forging and
pharmaceuticals
Finally…
The share of manufacturing sector accounts
for only 17% in our GDP which is very low
compared to China, Malaysia and Thailand
where manufacturing contributes to 1/3rd or
more in their GDP.
Kapil Sibbal asks NRIs to Invest more in the
manufacturing sector to create more job
opportunities.
Thank You!!!