How manufacturing sector growth contributes towards Indian economy?

The manufacturing sector growth has undergone a roller-coaster ride for a decade now, globally. The huge developing economies around the world progressed, taking the place of first-tier global suppliers. This helped in contributing towards several developments such as subsistence agriculture, increase in per capital income and standard of living within the nation. In the meanwhile, advanced economies suffered the brunt of severe recession which in turn curtailed demand, thereby decline in employment rate. Advanced economies are then compelled to counter such downfall by paying due attention to innovation and competitiveness, research and development, exports and productivity growth in the manufacturing sector.

The dynamics of manufacturing sector is ever changing, embracing equal degrees of opportunities and challenges within its fold. To be more precise, manufacturing sector growth demands a brand new perspective,

* The manufacturing sector has become largely dependent on a number of service-oriented industries.

* Its primary focus is on innovation, productivity and trade as opposed to growth and employment in the past few decades.

* It has diversified into four distinct industry sectors like metals, automobiles, capital goods and consumer durables.

* The increase in demand among developing nations coupled with technological innovations aims to promote new opportunities in the sector.

* On the downside, volatile economic conditions across the globe has led to high levels of uncertainty in the sector.

It is evident that both, business leaders and policy makers alike are in critical need of reliable data at regular intervals to better understand and react to the positive or negative shift in the manufacturing environment.

Zyfin Research, a market research and analytics firm has come up with its proprietary index, the monthly manufacturing growth indicator. It estimates the index of industrial production about two to five months in advance. Further, the index reported 0.5% for April 2014 as compared to -1.9% in March 2014 (year-on-year), predicting a positive growth in manufacturing sector. This helps economists, industry planners and market analysts to arrive at strategic plans and reforms for improving the sector.

Key insights on manufacturing sector growth from Department of Industrial Policy and Promotion:

* India’s GDP recorded 4.9 per cent in FY 2013-2014, marginally above 4.5 per cent in FY 2012-2013. The manufacturing output showed a decline by 0.2 per cent in FY 2013-2014 as against 1.1 per cent growth in the previous year.

* On a comparative analysis, GDP growth of different sectors reveal that manufacturing sector is at its lowest ebb.

* In the Indian context, robust manufacturing sector generating higher employment rate would help the country’s economy achieve an annual growth of 10 per cent.

* The manufacturing drive of the country should be initiated through innovation led economy. Innovation at the research and development stage would greatly increase manufacturing sector growth.

* The privately-owned manufacturing sector requires better creativity and competitiveness to achieve global market leadership.

* 75 per cent of the index of industrial production (IIP) is constituted by the manufacturing sector.

* Mega industrial zones are proposed to be set up across different parts of the country in order to boost manufacturing sector growth.

* The National Manufacturing Policy has devised plans to increase the contribution of the manufacturing sector to national GDP by 25 to 26 per cent in the next decade.
Challenges: Infrastructure bottlenecks, deceleration in capital investment and weak domestic demand owing to higher interest rates are the major setbacks that amounts to poor manufacturing sector growth.

Solution: A number of government policy reforms announced in the interim budget session on February 17, 2014 includes slashing back excise duty, speeding up stalled projects and relaxing several other legislative pressures on the sector.


– A slow but steady revival in the global economy, followed by gradual rise in supply-demand chain in developing countries.

– Reducing inflation rate, strengthening value of rupee with gaining momentum of consumer confidence level post-elections in India.

ZyFin provides consumer sentiment indices, macro economic indicators, economic forecasts & macro analytics to connect the real economy to markets.

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