As per the use-based classification of the industry, the capital goods sector recorded a sharp growth of 30 per cent in August 2007, over 16.6 per cent a year ago. 

The Indian manufacturing sector has been witnessing a major revival, with a significant turnaround in performance which is reflected in the increase in its growth rate from 5 per cent in 2000-01 to an impressive growth rate of 12.5
per cent 2006-07. It has continued its growth in the new fiscal by growing at a rate of 10.3 per cent during April-August 2007-08 over the corresponding period last year.

In fact, growth in manufacturing has been instrumental in the index of industrial production (IIP) growing at a rate of 9.8
per cent during this period. As many as 15 out of the 17 industry groups have shown positive growth during the month of August 2007 as compared to the corresponding period in the previous year.

The industry group ‘Wood and Wood Products; Furniture and Fixtures’ have shown the highest growth of 62.2
per cent, followed by 21.8 per cent in ‘Other Manufacturing Industries’ and 19.1 per cent in ‘Basic Metal and Alloy Industries’.

As per the use-based classification of the industry, the capital goods sector recorded a sharp growth of 30 per cent in August 2007, over 16.6 per cent a year ago. Similarly, basic goods and intermediate goods recorded growth rates of 13.3 per cent and 12.3 per cent respectively during August 2007, as against 4.8 per cent and 8.7 per cent in the corresponding period last year.

India’s industrial production, which makes up a quarter of the economy, is being spurred by rising incomes and savings. According to a study by the McKinsey Global Institute, the aggregate Indian consumer spending could more than quadruple to US$ 1.77 trillion by 2025, from about US$ 431.69 billion in 2005 on the back of a ten-fold increase in middle-class population and three-fold jump in household income. The country’s GDP is estimated to expand at an average annual rate of 7.3 per cent. All these would propel India from the 12th to the fifth-largest consumer market, behind the United States, Japan, China and Britain, displacing Germany.

Along with this India offers abundant engineering and technical talent – every year it produces 400,000 graduate engineers. Other favourable factors include increasing availability of reliable suppliers, the chance to escape unrelenting price pressures at home and the size of the domestic market among others.

The National Strategy for Manufacturing prepared by National Manufacturing Competitiveness Council (NMCC) has identified 20 sectors as having immediate potential for growth and employment which includes textiles & garments, leather & leather goods, auto-components, drugs & pharmaceuticals, food processing, telecom equipment; gems & jewellery, handlooms & handicrafts among others.

India’s manufacturing base, which is the fourth-largest among emerging economies, is among the fastest growing and has seen more investments as a proportion of gross domestic product than any country except China.

The Government has taken several initiatives to accelerate growth in this sector and improve competitiveness of Indian industry in general and manufacturing in particular.

•   Technology upgradation schemes for various sectors such as small scale industries, textiles, food processing etc.;

•   Industrial infrastructure upgradation programmes on cluster basis;

•   Easier access to inputs at competitive prices and rationalisation and reduction in duty rates.

•   Encouragement to foreign technology collaborations and liberalisation of FDI in manufacturing activities;

To further encourage manufacturing growth, the Government plans to set up Manufacturing Investment Regions (MIRs) on the lines of Petroleum and Petrochemicals Investment Regions (PCP IR).

Indian Industry has been witnessing a rise in productivity and adherence to international quality norms along with increase in investments, exports and production levels. For example, an Economic Times survey of 200 companies (arranged in terms of value of output) finds that the incremental capital output ratio (ICOR), that measures the output generating capacity of incremental capital, has improved from 0.62 in 2005-06 to 0.59 in 2006-07.