Manufacturing sector growth falls to 15.38%

India’s manufacturing sector witnessed a decline between April 2007 and March 2008, says a survey conducted by a leading industry chamber.

While 21.73 per cent of all units in the manufacturing sector recorded over 20 per cent growth in 2006-07, the figure declined to 15.38 per cent in 2007-08, according to the Confederation of Indian Industry (CII)-Association of Council (ASCON) Survey.

The study says 30.77 per cent units in the sector recorded 10 to 20 per cent growth in 2007-08 against 36.73 per cent in the previous year.

The manufacturing units that recorded over 20 per cent growth were in the following categories – sponge iron, power cables, electric motors, power transformers, personal computer, groundnut oil, and transmission line towers.

The manufacturing units that witnessed a moderate growth of up to 10 per cent increased to 37.5 per cent during 2007-08 against 30.61 per cent, while 16.35 per cent recorded less than zero per cent growth against 11.22 per cent in the previous fiscal.

Negative growth categories

The categories recording negative growth included fertilisers, machine tools, tractors, the vehicle industry, including three-wheelers and motorcycles.

The survey says the segments like asbestos, cement, ball and roller bearings and vanaspati were all in the moderate growth category.

“It is a cause of concern that there is a clear shift of sectors from excellent and high growth category to moderate and negative growth category,” said Surinder Kapur, chairman, CII Manufacturing Council, while releasing the survey on Monday.

He, however, said that the results should not cause panic as the latest quarter of 2007-08 showed that the number of sectors recording over 20 per cent growth was almost the same as the last quarter of 2006-07.

Rupee rise

“The results of the latest survey show that the manufacturing industry is trying to stabilise, absorb and adjust its growth to issues of high interest rates, reduced credit availability and rupee appreciation,” said Sarita Nagpal, deputy director general, CII.

Though growing very fast, the manufacturing sector’s contribution to India’s GDP is only around 17 per cent, against 25 to 35 per cent in some East Asian economies.

Since manufacturing has been recognised as the main engine of growth for the economy, the CII has prepared an action plan to increase its contribution to the GDP to 25 per cent.

The government’s National Manufacturing Competitiveness Council (NMCC) has also prepared a national strategy for manufacturing to increase its share in the GDP.

“After the boom in IT sector, there is a continuous growth in the manufacturing sector. Its average growth during 2004-08 has been 9 per cent, with a record 12.3 per cent in 2006-07,” an official in the ministry of commerce and industry said