Trade Analytics

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December, 2011

The industrial sector of India with its future opportunities and high employment potential embraces the path to the economic development of the country. India has attained a realisticallysufficient level of self-sufficiency in manufacturing a range of basic and capital goods. Progress in the manufacturing sector has the prospective to the standard of living of the general public of India above poverty line. In order to do this, it is very importantto avert bulk of the workforce out of low-wage agriculture sector. This will in turn create a steady and flourishingeconomy and, in turn, invite more business opportunities. The country is well on its way to becoming the foremost manufacturing location for companies around the world.

Liberalisation, Privatisation and Globalisationare the major promoters that have been the cause of the transition in the Indian economy and the manufacturing sector. The last decade following the liberalisation has seen revolutionary changes in the scenario of manufacturing in India. This fresh spurt in progress is pushed by fundamentalrestructurings such as the elimination of limitations on foreign investment and industrial de-licensing. Modifying the Export and Import Policy (EXIM) policy to endorse exports and supporting the import duties to meet WTO commitments further contributed to this development. Further favored by efficient business policy environment, tax deductions, and reduced interest rates have assisted in the growth of the manufacturing sector in India.

Growth trend

The Indian manufacturing sector which accounts for nearly 80 per cent of the Index of Industrial Promotion (IIP), witnessed a growth of 7.9 per cent in March 2011, which was relatively higher than the 3.6 per cent growth that was recorded for the months of January and February 2011. Out of the total 17 sub sectors in the sector, 13 sub sectors recorded an expansion during march 2011, the first five sub sectors accounted for 7.2 per cent of the 7.9 per cent growth in manufacturing in that month.

Machinery & Equipment (other than transport equipment), with a weight of nearly 10 per cent in the IIP index, expanded by 11.1 per cent, Transport Equipment & Parts recorded a robust growth of 16.3 per cent, Automobile production remained soundat 21 per cent, Food products displayed a growth of 18.4 per cent, and other Manufacturing Industries moderated, albeit to a robust 25.6 per cent. Growth in the output of Rubber, Plastic, Petroleum and Coal Products was sizeableat 16 per cent.


The Spanish company, Kider SAU, a store fittings provider, has built up the first non-European manufacturing facility near Pune, with an investment of US$ 10 million. The company already has 5 facilities in Europe, 4 in Spain and one in France. The company deals in manufacturing ready to install store fittings for super- and hyper markets.

The Gujarat-based Meghmani Organics Ltd (MOL) will enter into a joint venture with Japan's Mitsui & Company Ltd and Kaneka Corporation for manufacture of chlorinated polyvinyl chloride (CPVC) at Dahej in Bharuch district. The joint venture is expected at an investment of US$ 120 million and plans to manufacture 20,000 tonnes of CPVC per year.

Toto, a leading global sanitary ware brand from Japan, is planning to set up a manufacturing facility in India with an investment of around US$ 100 million. The company may set up its facility either in the western or northern part of the country. Though Toto products are available in the Indian market for several years now, the company set up its wholly owned marketing company, Toto India in April, 2011.

The State Government of Rajasthan, has already set up a heavy industrialization base in the plains, and lately, it has shifted its focus to the hills, amending the existing policy to attract small manufacturing units there. A total of 11 new industrial hubs will be developed, with the government promising modern infrastructure complete with a slew of sops under the 2008 hill industrial policy. Besides, the government has also decided to bring four new areas – Sahaspur and Raipur in Dehradun district and Ramnagar and Haldwani in Nainital district – under the policy, despite their locations in the plains.

Manufacturing - Government Initiatives

The Indian Government has cleared a new manufacturing policy in October 2011, which aims to create 100 million jobs and augment the share of manufacturing in India's gross domestic product from the existing 16 per centto 25 per cent by 2022. The policy stresses on setting up more manufacturing zones, industrial townships, and industrial hubs across the country. Units in these zones will enjoy single-window clearance, a liberal exit policy, incentives including exemptions from capital gains tax, and incentives for green manufacturing and technology acquisitions. Also, the proposed manufacturing policy intends to bridge the vast skills gap in India through public-private partnerships.

Salient features of the first national manufacturing policy:

  • Creation of 100 million additional jobs in the next 10 years.
  • Increasing the share of manufacturing from current GDPof around 16 per cent to 25 percent by 2022.
  • Liberalisation in labour and environment regulations.
  • Single window clearance for all issues related to industrial units.
  • Setting up of national investment and manufacturing zones.
  • Mega Industrial Township equipped with world-class infrastructure proposes to be autonomous and self-regulated.
  • Special purpose vehicle created to develop infrastructure on public-private-partnership mode.
  • Incentives to states for the purpose of infrastructure development.
  • Incentives to the promotion of green technology.
  • Financial and tax incentives to small and medium enterprises.

Manufacturing - Road Ahead

The manufacturing sector in the country has achieved a significant competitive edge as a result of increasing demands, and positive market conditions and government policies. The country has been self-sufficient in the sector and promotes itself as one of the industry leaders. The forthcomingperiod is highly promising for the Indian manufacturing sector.