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