Trade Analytics

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June, 2012


The Indian manufacturing sector, being the backbone of the economy, is the main engine for growth as it gives an impetus to employment, agriculture and service industries. According to a joint report prepared by the US Council on Competitiveness and Deloitte, India ranks second in the world in context with the 2010 Global Manufacturing Competitiveness Index (GMCI) and would dominate the global manufacturing space in the years to come.

India is a resource intensive country and is rapidly emerging as a manufacturing hub for global players owing to its low-costs, skilled workforce, positive business environment and strengthening international image. Formation of clusters like special economic zones (SEZs), taxation reforms and liberal business policies implemented by the Government are further attracting manufacturing giants from all over the world to the Indian sub-continent.

The top five sub-sectors of manufacturing are food products, basic metals, rubber and petrochemicals, chemicals, and electrical machinery. They all account for over 66.0 per cent of total revenues in the manufacturing industry.

Growth Trend

The HSBC India Manufacturing Purchasing Managers' Index (PMI) - a measure of factory production - was at 54.8 in May 2012. The latest reading indicated a marked expansion of the Indian manufacturing sector which was spurred by increase in output, quantity of purchases and employment.

The Indian manufacturing sector also showed a remarkable overall business sentiment in January-March 2012 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, increased from 110.3 in October-December 2011 to 114.9 in the assessment quarter.

The index for industrial production (IIP) expanded by 0.1 per cent in April 2012 driven by growth in consumer goods that increased by 5.2 per cent. In terms of industries, 12 of the 22 industry groups in the manufacturing sector have shown positive growth during April 2012 as compared to the same month a year ago.