Outlook: industry & manufacturing

Listing rigidities in labour laws and distortions in indirect tax structure as major obstacles to faster growth, the Survey asked government to take suitable policy initiatives for attaining a challenging 10% industrial growth. â€œOne of the most important challenges in Indian economic policy consists of devising strategies for obtaining industrial growth in excess of 10%,â€� the Survey said. Regretting that industrial growth has been below 10% for several years now, it said the outlook for Indian industry is bright if â€œfive major constraintsâ€� â€” labour law rigidities, distortions in indirect tax structure, high customs tariffs, reservation for small sector and frictions in creation and closure of firms are addressed. It, however, said belying considerable gloom that was about the outlook for Indian manufacturing in a globalised era the best firms of India have succeeded in realising rapid growth rates in exports. The Survey said growth for the industrial sector in 2003-04 continued to be healthy. The index for industrial production (IIP) grew by 6.9%. Manufacturing, which has a weight of 80% in IIP grew 7.1% while mining grew by 5.1% and electricity by 5%. At a two digit level classification as many as 12 out of the 17 industry groups have showed positive growth during 2003-04. In manufacturing, growth recovery has been sustained in the current year also for a number of sub-sectors. Transport equipment and parts grew at 17%, followed by paper and paper products, printing publishing and allied industries. Machinery and equipment other than transport equipment grew at 15%, beverages, tobacco and related products grew 9.4% and basic metals and alloy industries grew at 9.1%. Basic chemicals and chemical products except products of petroleum and coal grew 8.2% in 2003-04, wood and wood products and fixtures grew 6.8%. Leather and leather and fur products showed a negative growth of 4.3%. Other sub-sectors in manufacturing that showed negative growth were jute and other vegetable fibre textiles (-4.2%), textile products including apparel (-3.8%) and cotton textiles (-3.3%). However, the key industries of construction sector â€” steel and cement â€” showed a growth of 6.9% and 6.1% respectively in 2003-04. The growth in capital goods sector was healthy with production increasing by 12.7% in 2003-04. Basic goods and intermediate goods industries grew 5.4% and 6.2% respectively. The consumer durables sector witnessed a growth of 11.6% in 2003-04 as against the decline of 6.3% in the previous year due to good monsoon and availability of retail finance. The growth in consumer non-durables fell 5.7% in 2003-04 as against growth of 12% in 2002-03 as price wars cut into profit margins. Competition from local brands and inadequate coverage of IIP may be a part of the explanation for the poor performance of the sector, the Survey said. On industrial investment, the Survey said after peaking at Rs 1,28,892 crore in 1999 the proposed investment declined in next few years. However, investment intentions increased to Rs 57,806 crore dating January-April 2004 compared to 15,931 crore during corresponding period of 2003.

Outlook: industry & manufacturing

Listing rigidities in labour laws and distortions in indirect tax structure as major obstacles to faster growth, the Survey asked government to take suitable policy initiatives for attaining a challenging 10% industrial growth.

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