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June, 2011

Witnessing a wave of growth, the Indian manufacturing sector is touted to be much more promising in the future. The sector is poised to get more skill-intensive according to industry leaders who foresee India map new heights of progress in every aspect. The country is increasingly getting recognised for high value goods requiring a fair amount of engineering precision and quality. The sector is diversifying due to conditions on the ground that global players are using to their advantage.

As German engineering technology major, Siemens, plans to make India the global hub for manufacturing its key steel plant equipment, it joins the growing ranks of firms looking at the country as a launching pad for supplies to Asian markets.

India ranked second in terms of manufacturing competence, according to report '2010 Global Manufacturing Competitiveness Index', by Deloitte Touche Tohmatsu and the US Council on Competitiveness. The report states that the country's talent pool of scientists, researchers, and engineers, together with its English-speaking workforce and democratic regime make it an attractive destination for manufacturers.

Growth of the Indian manufacturing sector during the quarter ended March 31, 2011 was 5.1 per cent, according to the report on "World Manufacturing Production Quarter I, 2011" by the United Nations Industrial Development Organization (UNIDO). The manufacturing sector, which accounts for almost 80 per cent of the index, saw its annual growth at 8.1 per cent in 2010-11.

The industrial output registered a growth of 7.8 per cent in 2010-11. Among the three major constituents of the Index of Industrial Production (IIP), mining and manufacturing recorded growth rates of 5.9 per cent and 8.1 per cent, respectively, during the period. The third constituent, electricity index, registered a growth rate of 5.6 per cent in 2010-11.

Factory output and capital goods segment grew by 7.3 per cent and 12.9 per cent in March 2011, respectively.Production in the consumer non-durables and consumer durables segments went up by 2.2 per cent and 20.9 per cent respectively during the 2010-11 fiscal.

Overall, 13 out of 17 industry groups achieved positive growth in March 2011.

Manufacturing - Growth Trends

The Indian manufacturing sector showed moderate overall business sentiment in January-March 2011 quarter, as per the Industrial Outlook Survey conducted by the Reserve Bank of India (RBI) for the quarter. The Business Expectation Index (BEI), which acts as a barometer of the overall health of the manufacturing sector, stood at 122 for the assessment quarter.

The seasonally adjusted HSBC Purchasing Managers' Index (PMI) – a headline index designed to measure the overall health of the manufacturing sector – posted 57.5 in May 2011, to indicate marked growth of theIndian manufacturing sector.The report further stated that new orders reported during the month were substantially supported by ongoing improvements in general economic conditions both at home and abroad.