The manufacturing sector, an engine of growth in many economies, has not grown as vibrantly in India as the services sector. The share of the manufacturing sector in India’s GDP has been more or less stagnant; it rose from around eight per cent in 1950-51 to remain in the 14 to 16 per cent range over the last two decades. Even as the first 10 years of economic planning recorded high annual growth of 6.12 per cent, in the subsequent two decades growth slowed to four to five per cent a year. Definite signs of positive growth came only with the eighties when liberalisation reforms pushed growth above the five per cent level.
According to the latest national income series data at 2004-05 prices, growth in the manufacturing sector in the last six years since 2005-06 has averaged an impressive 9.43 per cent a year, despite a hard knock in 2008-09.
Like other indicators the manufacturing sector, too, has not developed uniformly across India. Some states have achieved a much higher level of industrialisation, whereas others are lagging. Maharashtra, Gujarat and Tamil Nadu together account for more than a third of India’s manufacturing GDP, making them the leading industrial states of the country. When it comes to the sectoral share of the gross state domestic product (GSDP), states where manufacturing accounts for more than a fifth of the state income are Puducherry, Goa, Gujarat, Jharkhand, Tamil Nadu and Chhattisgarh. At the other end, manufacturing accounts for 10 per cent or less of state income in all the north-eastern states, among the larger states West Bengal, Kerala, Jammu and Kashmir, and Bihar share this characteristic. (Click here for graph)
| ON THE SLOW TRACK Compound annual growth rate of manufacturing GSDP | |
| Period | at 1999-00 prices% |
| 1950-51 to 1959-60 | 6.12 |
| 1960-61 to 1969-70 | 4.74 |
| 1970-71 to 1979-80 | 4.89 |
| 1980-81 to 1989-90 | 5.95 |
| 1990-91 to 1999-00 | 6.91 |
| 2000-01 to 2008-09 | 7.98 |
| Source: CSO | |
According to the latest period for which data from the Central Statistical Organisation (CSO) are available for all states, 2000-01 to 2007-08, growth in manufacturing at 1999-2000 prices ranges from 26.67 per cent to 1.8 per cent a year, with the national average standing at 7.76 per cent. Meghalaya ranks at the top mainly due to the large-scale cement factories set up in recent years, while Madhya Pradesh holds the lowest rank. Other top performers include Orissa, Jharkhand and Chhattisgarh, with annual manufacturing growth exceeding 15 per cent.
Interestingly, manufacturing activities in these states have centred on the large natural resource base. There are six states with double-digit growth in the manufacturing sector during this period — Jammu and Kashmir, Gujarat, Uttarakhand, Puducherry, Karnataka and Assam. And four states where manufacturing growth has been less than five per cent a year — Tripura, Bihar, Arunachal Pradesh and Madhya Pradesh.
Even as these growth estimates are provisional and subject to change, it is clear that although India’s manufacturing sector is currently recording fast rates of growth, large parts of the country continue to lag due to many constraints — availability of infrastructure and land, bureaucratic procedures, access to capital, and so on. Meanwhile, a National Manufacturing Policy aimed at increasing the share of manufacturing in GDP to 25-26 per cent by 2020 is on the anvil; for states that are competing with each other for industrial investment, this will call for proactive state-level policies that will ensure strong manufacturing growth across the country.
Indian States Development Scorecard, a weekly feature by Indicus Analytics, focuses on the progress in India and across the states across various socio-economic parameters.
sumita@indicus.net