Trend in Manufacturing
Maharashtra and Gujarat ranked among top states in terms of manufacturing emergence in mainstream states across India, noted a recent study conducted by apex industry body ASSOCHAM.
"While Maharashtra has topped with highest growth in en trepreneurs memo rand um (EM) part-II filed by micro, small and medium enterprises (MSMEs),Gujarat has performed very well on parameters like change in capacity utilisation, operational ratio, value addition and input cost," stated the ASSOCHAM study titled 'Manufacturing Excellence and Emergence in India: The state level analysis.'
The ASSOCHAM Economic Research Bureau (AERB) has considered various parameters like number of factories, output value, working capital, net fixed capital formation, fixed capital, finished goods, capital invested, total inputs and others to ascertain the states' performance in terms of manufacturing sector.
Highlighting the methodology, the study stated that all states were divided into three major categories according to geographical conditions, viz., north-eastern, Himalayan and mainstream states. Mainstream states were further divided into two sub-categories, namely, excellence and emergence.
Further, the data was taken for each state from sources like Annual Survey of Industries, Ministry of Statistics and Programme Implementation, Government of India website for a five year period between FYlO and FY15.
The study also highlighted various challenges being faced by India's manufacturing sectorcompetitive cost and technology being offered by countries like Bangladesh, China, Indonesia, Korea, Singapore and Taiwan.
While development process in other countries follows a transition from agriculture to manufacturing and then towards services sector, however India's growth has been services sector-led as such there have always been concernsabout sustainability of such a growth.
The ASSOCHAM study also stressed upon the importance of increasing share of manufacturing sector in India's gross domestic product (GDP) to absorb a young workforce as bulk of population relies on agriculture for employment.
"The Union Government must address issues relating to poor product quality, infrastructural bottlenecks and inadequate efforts at research and development from a holistic macro perspective as they have collectively taken a toll on India's manufacturing competitiveness," said Mr. D. S. Rawat, Secretary General, ASSOCHAMwhile releasing the findings of the study.
"Considering that majority of investment projects in the manufacturing sector are stuck in different stages of implementation, we at ASSOCHAM have time and again suggested the Union Government to develop a strong plan to prioritise speedingup the process by creating a target-oriented roadmap," said Mr. Rawat.
"At the same time private investors must also be held accountable and be penalised
if projects get delayed or stuck due to improper planning, change of ownership, lack of finance, absence of co-ordination with contractors and other related issues," he added.
With a ratio of 1.29, Maharashtra has emerged on top with growth in terms of EM part-II filed by MSMEs at District Industrial Centres in FY15over FY13.
The state has also performed decently well on various parameters with third highest ratio in terms of change in return on capital, operational ratio, value addition and input cost.
Besides it is ranked fifth in terms of change in total factor productivity, fixed capital income ratio and in terms of growth in manufacturing gross value addition (GVA) in FY15 over FY13.
However, Maharashtra must focus more towards improving capacity utilisation (8th rank) and efficiency (11th rank).
Gujarat is ranked second among top states in India in terms of change in capacity utilisation, operational ratio, value addition and input cost.
State has also performed decently with fourth and fifth position in terms of change in return on capital and efficiency respectively.
It must focus on improving growth in manufacturing GVA (8th rank) and in filing of memorandum by entrepreneurs (14th rank). Besides, improvement is also needed on fronts like factor productivity (15th rank) and fixed capital income ratio (16th rank).
The aforementioned parameters are explained as follows: • EM-II-Growth rate in EMIl filed by MSMEs at District Industrial Centres in 2014-15 over 2012-13; high ratio is better.
• Return on capital-Profit as a proportion ofinvested capital; high ratio is better.
• Operation ratio-How much of the value of output has transformed into net income; high ratio is better.
• Value addition-How much of the value of output is net value added in current year; high ratio is better.
• Total factor productivityValueofoutput asaproportion of the total of invested capital and total person engaged; high ratio is better.
• Fixed capital income ratioHow much of the invested fixed capital is transformed into output value; high ratio is better
• Manufacturing GVA-Growth rate in manufacturing GVAin 2014-15 over 2012-13; high ratio is better.
• Capacity utilisation-How much of the invested fixed capital has transformed into fixed capital formation; high ratio is better.
• Efficiency-How much of the working capital is being converted into value of output; high ratio is better.
• Input cost-Total input cost as a proportion of value of output; low ratio is better.