India has a broad-based industrial sector, covering a large range of basic, intermediate and consumer goods. The industrial structure includes several large public sector undertakings (government/state promoted units), and a large private sector: |
Since liberalization, a large share of foreign direct investment has come into the manufacturing sector, including export-based activities.
Manufacturing currently represents 27% of gross domestic product (at factor cost) and 72.4% of India’s exports. In 2004-05, manufacturing exports were close to US$ 53 billion, and exports for the first six months in 2005-06 were US$ 37.8 billion, reflecting a 20.5% annualised growth over the previous period. Chemicals, machinery and equipment, food processing, textiles and apparel, transportation goods, metals and plastic products are the most important groups by output value. Major export earners are gems/jewellery, textiles, metal products, leather goods, transport equipment, and machinery.
The manufacturing sector’s resurgence in recent years is proof of India’s industrial resilience even in a progressively liberal trade climate, in which imports are allowed without any quantitative restrictions, and under steadily declining import tariffs.
A sizeable share of manufacturing output comes from government-owned Public Sector Undertakings, and Small Scale Industries, which are instruments of India’s licensing regime.
Public Sector Undertakings (PSUs)
Public sector undertakings, which are state-owned and managed, contribute actively to the industrial sector. Several PSUs are highly profitable and three of them are Fortune 500 members. Government investment in the public sector is presently Rs. 2,525 billion (Euro 43 billion), and there is a gradual disinvestment and privatisation of these.
Small Scale Industries (SSI)
India’s small-scale industries play a vital role in the economy: there are over 11 million units, with annual average growth in production at current and constant prices were 12.4% and 8.1% respectively. Small scale units cannot have an investment greater than Rs 10 million (Euro 0.17 million) in plant and machinery, and enjoy special privileges from government. The government has reserved more than 550 products for manufacture exclusively in small scale industries. Also, small scale units enjoy exemptions from excise duty and sales tax until a threshold level of ex factory revenue. As a result, the SSI sector dominates in sports goods, readymade garments, knitwear, plastic products, and leather products, many of which are reserved for SSI units. |
ICREON