Manufacturing Industry

Market Size

Rs. 14.5 Lakh Crores in FY12

Share of GDP

15.4% of Real GDP

Annual Growth Rate

2.7% for FY11-FY12

SME Share

95% of total industrial units

Indian Manufacturing Productivity

1/5th of US

1/2th of South Korea

1/2th of Taiwan

Indian Manufacturing Industry 2013

It is widely believed that India has not fully leveraged its strength in the Manufacturing sector in the last decade, but is expected to emerge stronger in next decade as companies innovate and adopt new business models with worldwide capabilities and scale. To support this growth, the government needs to play its role in providing better infrastructure and support in terms of policies, regulations, duties and taxes.

Manufacturing sector contributed 15.4% of the real GDP in FY12 and stood at Rs.14.5 lakh crores and grew at a rate of 2.7% annually as per estimates from Central Statistical Organization (CSO).

SMEs form 95% of the total industrial units in the country and manufacture around 8,000 quality products for domestic and international markets. As per estimates from SME Chamber of India, 21 Million SMEs in the manufacturing sector contribute 45% of the nation’s industrial output and 40% of the total exports.

Productivity of the Indian manufacturing industry is 1/5th of the manufacturing industry in US and 1/2th of the manufacturing industry in South Korea as well as Taiwan.

Manufacturing Industry Segments:

The Manufacturing industry is broadly divided into the following 17 segments. The weights assigned in the Indian Industrial Production (IIP) index and expected growths have been provided below.

Sub-sector

Weight

Growth Expectation

Non-Metallic Mineral Products

43.97

Strong

Food Products

90.83

Moderate

Cotton Textiles

55.18

Moderate

Textile Products (including Wearing Apparel)

25.37

Moderate

Beverages, Tobacco and related Products

23.82

Moderate

Wool, Silk and man-made fibre textiles

22.58

Moderate

Leather and Leather & Fur Products

11.39

Moderate

Jute and other vegetable fibre Textiles (except cotton)

5.9

Moderate

Basic Chemicals & Chemical Products (except products of Petroleum & Coal)

140.02

Low

Machinery and Equipment other than Transport equipment

95.65

Low

Basic Metal and Alloy Industries

74.53

Low

Rubber, Plastic, Petroleum and Coal Products

57.28

Low

Transport Equipment and Parts

39.84

Low

Metal Products and Parts, except Machinery and Equipment

28.1

Low

Wood and Wood Products; Furniture and Fixtures

27.01

Low

Paper & Paper Products and Printing, Publishing & Allied Industries

26.52

Low

Other Manufacturing Industries

25.59

Low

Legend: Strong > 10%; 5% < Moderate < 10%; Low < 5%

Source: FICCI, Central Statistics Office, SMERGERS Research

Growth Drivers of the Manufacturing Industry:

  • Growth in worldwide distribution systems and opening up of trade barriers 
  • Education system which is churns out a large pool of skilled labor
  • Large and rapidly growing domestic market
  • Requisite skills in product, process and capital engineering
  • Established raw material base

Manufacturing Industry Inhibitors:

  • Poor infrastructure and facilities
  • Widespread use of primitive technology
  • Dependence on manual processes instead of automation
  • Expensive financing
  • Government bureaucracy

Major segments within Manufacturing

Industry

FY12 Market Size

(INR Lakh Crore)

Growth Rate

(Annual)

Automobile

3.0

14%

Auto Components

2.2

9%

Electronics

1.6

15%

Pharmaceuticals

0.8

13%

Food Processing

0.7

9%

Cement

1.4

10%

Textiles & Apparels

5

10%

End Notes

FY: Financial Year Ending March

All multiples are as on Dec 31st 2012

ttm: trailing twelve months, or last twelve months

EBITDA: Earnings Before Interest, Taxes, Depreciation & Amortization, a measure of company’s profitability

EV: Enterprise Value, a measure of company’s worth