CHAPTER 14

INDUSTRY

14.1 Significance of Industrial Sector: Industrial growth in the

country has, in terms of long run trend, remained aligned with the
growth rate of gross domestic product (GDP). The long-term average
annual growth of industries comprising mining, manufacturing, and
electricity, during the post-reform period between 1991-2 and 2011-12,
averaged 6.7 per cent as against GDP growth of 6.9 per cent. Inclusion
of construction in industry raises this growth to 7.0 per cent. The share
of industry, including construction, in GDP remained generally stable at
around 28 per cent in the post-reform period. Standard deviation of the
average share was very small and the coefficient of variation under 5
per cent validates this stability. The share of manufacturing, which is
the most dominant sector within industry, also remained in the 14-16
per cent range during this period. The share is modest when compared
to that of China (above 40 per cent) and some of the East Asian
countries (above 30 per cent).

14.2 Employment in the industrial sector increased from 64.6 million

persons in 1999-2000 to 100.7 million persons in 2009-10. The share
of industry in total employment increased from 16.2 per cent in 1999-
2000 to 21.9 per cent in 2009-10. However, the increase was largely on
account of expansion of employment opportunities in the construction
sector, from 17.5 million in 1999-2000 to 44.2 million in 2009-10.

----Economic Survey 2012

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Industrial Statistics in India :
14.3 Trends in performance of Industrial sector are primarily
monitored through Index of Industrial Production (IIP) (monthly) and
Annual Survey of Industries, ASI. Whereas enterprise surveys pursuant
to Economic Census provide an idea about the dynamics of unorganized
sector. Ministry of Statistics & PI, through active involvement of both
Central Statistics Office & National Sample Survey Office , is the
backbone of Industrial Statistics in India even though various
Ministries/Departments (Department of Industrial Policy & Promotion,
Ministry of Commerce & Industry , Ministry of Micro Small & Medium
Enterprises, Ministry of Corporate Affairs, Indian Bureau of Mines,
Ministry of Mines, Office of Textile Commissioner, Coffee/ Tea Boards
etc ) maintain their own statistics.

14.4 Central Statistics Office , MOSPI, besides compiling information

on Industrial Statistics in form of IIP and ASI results has also been
responsible for updation of industrial classification and development of
new classifications in harmony with the worldwide developments to
enable comparability. National Industrial Classification (NIC)-2008 is
the latest Industrial classification developed by CSO on the lines of
International Standard Industrial Classification (ISIC)Rev 4. The
structure of NIC- 2008 is identical to the structure of ISIC Rev.4 up to
4-digit level ‘class’.

14.5 Various sources of Industrial Statistics along with their limitations

and recent developments may be seen in the last section of the
chapter.

14.6 Index of Industrial Production : The index of industrial

production (IIP), released each month by CSO, MOSPI , is the key
indicator of industrial performance. The new IIP series with 2004-5 as
base was released in June 2011 replacing the earlier IIP series with
base 1993-4. Recent industrial growth, measured in terms of IIP, shows
fluctuating trends. Growth had reached 15.5 per cent in 2007-8 and
then started decelerating. Initial deceleration in industrial growth was
largely on account of the global economic meltdown. There was,
however, a recovery in industrial growth from 2.5 per cent in 2008-9 to
5.3 per cent in 2009-10 and 8.2 per cent in 2010-11. Fragile economic
recovery in the US and European countries and subdued business
sentiments at home affected the growth of the industrial sector in
2011-12. Overall growth during April-December 2011 was 3.6 per cent
compared to 8.3 per cent in the corresponding period of the previous
year. Growth of IIP in terms of its major components is indicated in the
figure below:

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14.7 There was a contraction in production in the mining sector,
particularly in the coal and natural gas segments in the current fiscal
year (April-December).Contraction in output resulted in its contribution
to growth turning negative. The electricity sector witnessed an
improvement in growth in the current year. This sector contributed 22.6
per cent to overall industrial growth, which was more than twice its
weight in the IIP . Growth also moderated in the manufacturing sector
from 9.0 percent in April-December 2010 to 3.9 per cent in April-
December 2011.

14.8 In terms of use-based classification of the IIP, in the current year

(April-December) basic goods with a growth of 6.1 per cent and
consumer nondurables with a growth of 6.1 per cent had relatively
better growth compared to the corresponding period of the previous
year. There was moderation in growth in other segments of the IIP and
negative growth was observed in the capital goods and intermediates
segments. The highest contribution to growth in the current year was
from the basic goods segment, which at 65.7 per cent exceeded its
weight in the IIP. The contribution of consumer non-durables at 28.1
per cent also exceeded its weight in the IIP. Volatility in growth was
seen across all broad sectors of IIP.

14.9 Annual Survey of Industries: The Annual Survey of Industries

(ASI) is the principal source of organized manufacturing statistics in
India. It provides statistical information to assess and evaluate,
objectively and realistically, the changes in the growth, composition and
structure of organised manufacturing sector comprising activities
related to manufacturing processes, repair services, gas and water
supply and cold storage. The Survey is conducted annually under the
statutory provisions of the Collection of Statistics Act 1953, and the
Rules framed there-under in 1959, except in the State of Jammu &

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Kashmir where it is conducted under the State Collection of Statistics
Act, 1961 and the rules framed there-under in 1964. The ASI extends to the
entire country except the States of Arunachal Pradesh, Mizoram, Sikkim and
Union Territory of Lakshadweep. It covers all factories registered under
sections 2m (i) and 2m (ii) of the Factory Act, 1948. The survey also covers
bidi and cigar manufacturing establishments registered under Bidi and Cigar
Workers (Condition of Employment) Act, 1966 and employing 10 or more
workers using power and 20 or more workers not using power. Although the
scope of the ASI was extended to all registered manufacturing establishments
in the country, establishments under the control of the Defence Ministry, oil
storage and distribution units, restaurants and cafes and technical training
institutions not producing anything for sale or exchange were kept outside the
coverage of the ASI. The latest available results of ASI pertains to year 2009-
10 , field work for which was carried out during 2010-11.

14.10 Considering all economic activities, estimated total number of factories

in operation, as per ASI 2009-10 , was 158,877 . the factories engaged
about 117.92 lakh persons in its various operations. Total value of
output as per ASI results was worth Rs. 37.33 lakh crores during 2009-10
and total Gross Value Added (GVA) was worth Rs. 6.97 lakh crores.
So far as manufacturing sector is concerned, an estimated number of
149,130 factories were under operation in this sector. The sector
engaged nearly 114.09 lakh persons and it had contributed worth Rs.
35.66 lakh crores of output to the Indian economy and Rs. 6.60 lakh crores
as GVA.

14.11 Statewise Comparison : Employment & GVA : The top five

States in terms of employing persons in the factory setor were Tamil
Nadu, Maharashtra, Gujarat, Andhra Pradesh and Karnataka respectively
engaging about 18.9 lakh, 15.1 lakh, 11.6 lakh , 11.3 lakh and 8.9
lakh persons. These five States together
had engaged more than half (55.8%) of total manpower engaged by the
factory sector of the country. The same five States were also
the major ones in terms of their percentage shares in aggregate GVA –
although their relative positions were different. Maharashtra topped in
terms of its percentage share (19.4%) in aggregate GVA, which was
followed by Gujarat (15.5%), Tamil Nadu (10.3%), Andhra Pradesh (7.1%)
, and Karnataka(6.2%)

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Industry Wise Comparison : Employment & GVA

14.12 Out of 28 industries in terms of National Industrial Classification (NIC) 2-digit codes
under the coverage of the survey, major employment providing industries in terms of percent share
in overall employment in factory sector were Food products (12%), Textiles (12%), Basic Metals
(8%), Wearing Apparel (7%), Other Non-Metallic Mineral Products (7%), Motor Vehicles, Trailers
& Semi-Trailers (5%), Chemicals & chemical Products (5%), Machinery & Equipment Not
Elsewhere Classified (5%), Fabricated Metal Products Except Machinery & Equipment (5%),
Rubber & Plastic Products (4%), Electrical Equipment (4%), and Tobacco Products (3%) .

14.13 Top six industries in terms of their percentage share in aggregate GVA were Basic Metals,
Coke and Refined Petroleum Products, Chemicals and Chemical Products, Other Non-Metallic
Mineral Products, Machinery and Equipment Not Elsewhere Classified, and Food Products. They
respectively had share of about 13.0%, 10.1%, 9.2%, 6.6%, 6.4% and 6.2% in aggregate GVA .
Percentage share of major industries in total number of Percentage share of major industries in aggregate GVA by
persons engaged the Factory sector
In Factory sector

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14.14 Size of Factories: More than one-thirds (36.6%) of the
factories had employed 14 or less persons although their share
in aggregate GVA was very nominal (1.9%). On the contrary,
there were some factories with employment of 5,000 and above
(0.2% of total number of factories) with a substantial share
(13.9%) in aggregate GVA. Employment range wise characterstics
are summarised below:

Percentage shares of a few broad employment ranges of factories in overall

aggregate for three selected characteristics

Percentage Distribution of Factories by Employment Range

Distribution of Factories by Employment Range

(Number of factories)

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14.15 Growth during last five years : During 2009-10, total
number of factories grew by 2.3% with the increase resulting in
growth rates of 4.1% in total number of persons engaged,
14.1% in total value of output, and 14.1% in aggregate GVA.
Following figure indicates the growth of the indicators over last five
years.

Annual Growth rates (%) of various indicators of Annual Survey

of Industries

Technology & Energy Efficiency in Manufacturing :

14.16 Technological depth of organized manufacturing, defined in

terms of increase in share of value added, indicates a worsening trend
in organized manufacturing during the post-reform period. The share of
inputs as per cent to output actually increased from 77.2 per cent
during 1981-91 to 77.3 per cent during 1991-2001 and further to over
80 per cent in the last decade. This indicates that the growth of Indian
industry in general, particularly the organized manufacturing sector,
was largely driven by increase in use of inputs. There has, however,
been significant improvement in use of energy. The ratio of expenditure
on fuel to output declined from 8.2 per cent during 1981-91 to 7.0 per
cent during 1991-2001 and further to 4.3 per cent in 2009-10. Industry
is becoming increasingly conscious of energy efficiency.

14.17 There has been an increase in profitability in organized

manufacturing, with the ratio of profit to output increasing from 3.52
per cent in 1981-91 to 10.72 per cent in 2007-8. However, thereafter
there has been a moderation in the ratio of profit to output to 8.67 per
cent in 2009-10. Profitability of organized manufacturing seems to be

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considerably dependent on the rate of interest on its outstanding credit
and emoluments paid to workers. A trend of moderating interest rate
from 1998-9 until 2007-8 resulted in the ratio of profit to output
increasing from 6 per cent to 10.7 per cent. Hardening of interest rates
in 2008-9 substantially reduced the ratio of profit to output. The decline
in rate of interest, however, did not result in any improvement in
profit/output ratio in 2009-10

Micro, Small, and Medium Enterprises (MSMEs)

14.18 Worldwide, the micro small and medium enterprises (MSMEs)

have been accepted as the engine of economic growth and for
promoting equitable development. The major advantage of the sector is
its employment potential at low capital cost. The labour intensity of the
MSME sector is much higher than that of the large enterprises. The
MSMEs constitute over 90% of total enterprises in most of the
economies and are credited with generating the highest rates of
employment growth and account for a major share of industrial
production and exports. In India too, the MSMEs play a pivotal role in
the overall industrial economy of the country. In recent years the MSME
sector has consistently registered higher growth rate compared to the
overall industrial sector. With its agility and dynamism, the sector has
shown admirable innovativeness and adaptability to survive the recent
economic downturn and recession. The MSME sector in India constitutes
enterprises with investment in Plant & Machinery less than Rs ten
Crore in case of manufacturing & less than Rs five Crore in case
of services sector.

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14.19 As per available statistics (4th Census of MSME Sector 2006-07 ),
this sector employs an estimated 59.7 million persons spread over 26.1
million enterprises. It is estimated that in terms of value, MSME sector
accounts for about 45% of the manufacturing output and around 40%
of the total export of the country.

14.20 With respect to MSMEs have been collected/compiled for the first
time in 2006-07 and hence include both the manufacturing and service
sectors. Till the year 2005-06, data in the Table 14.8 refers to small
scale industry only. Following graphs indicate the trends in MSME sector
both in terms of employment and production( fig 2009 onwards are
based on projections)

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14.21 Sources of Industrial Statistics:
• Economic Census, carried out by Central Statistics Office,
Ministry of Statistics & PI , provides frame for all
enterprises once in five years. High volatility ( rise & deaths of
units ) in the unorganized sector, however, necessitates more
frequent updation of the frame . Efforts towards preparation of
Business Register to provide a frame on real time basis is a
step in this direction.
• Annual Survey of Industries conducted by National Sample
Survey Office, Ministry of Statistics & PI, Government of
India, is the chief source of information for the organized
manufacturing . It covers units registered under Section 2m (i)
& (ii) of Factories Act i.e. Units using power with 10 or more
workers or those having 20 or more workers without using
power. The survey also covers bidi and cigar manufacturing
establishments registered under Bidi and Cigar Workers
(Condition of Employment) Act, 1966. The frame of units under
Factories Act is maintained by Registrar of Factories, which
may not be always very updated. Directorate of Economics &
Statistics(DES)/State Statistical Bureaus (SSBs) also conduct
their own Annual Surveys .
• Enterprise surveys carried out by National Sample Survey
Office, Ministry of Statistics & PI in various NSS rounds
provide information regarding the unorganized sector.
• Index of Industrial Production (IIP) , compiled by Central
Statistics Office , Ministry of Statistics & PI , provides
monthly information on the movement in production. Besides
manufacturing , mining & electricity are also covered in IIP. The

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 information, for most of the items included in IIP is provided
Department of Industrial Policy & Promotion (DIPP),
Ministry of Commerce . However Indian Bureau of Mines
(IBM) provides information wrt Mining Sector , Central
Electricity Authority provides information wrt Electricity and
various Boards viz Coffe Board, Tea Board, Office of Textile
Commissioner etc provide information wrt some of the items.
• Ministry of Corporate Affairs maintains information wrt units
registered under Companies Act 1956, Government Companies &
Indian subsidiaries of foreign Companies .Information on a few
selected parameters is collected online after implementation of
MCA21 whereas Registrar of Companies , spread all across India
provide information wrt newly registered companies on monthly
basis. In order to capture extended information on economic
performance of companies , the Ministry is trying to implement
reporting through XBRL.
• Ministry of Small Micro & Medium Enterprises(MSME)
provides information wrt smaller units. Office of DC (MSME)
provides annual estimates wrt various parameters. The Ministry
also conducts Census and Final Report of the Fourth All India
Census of Micro, Small & Medium Enterprises 2006-2007 for the
Registered Sector has been brought out. In order to estimate
unregistered MSMEs in the country, a sample of 10,312 villages
and 568 towns at All-India level were selected for data collection
of enterprises. The data processing work of the Fourth All India
Census of MSMEs, unregistered sector is under progress.

.
References:
• Annual Survey of Industries 2009-10 , Vol I, Ministry of Statistics
& PI.
• MSME Annual Report 2011-12, Ministry of Micro Small & Medium
Enterprises
• Economic Survey 2012 , Ministry of Finance

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