Manufacturing sector share in GDP stagnates at average of 14%

New Delhi, Mar 6 (UNI) The average contribution of the Indian manufacturing sector to the Gross Domestic Product (GDP) has remained stagnant at 14 per cent for nearly four decades till 2004, an Associated Chambers of Commerce and Industry study said today.

The sector's share to the Indian GDP, as on January 2006, stood at 16 per cent against its contribution in countries like China, Korea, Malaysia and Thailand, estimated at 35 per cent, 29 per cent, 31 per cent and 34 per cent respectivey, a paper brought out by ASSOCHAM on 'Can India Become A Global Sourcing Centre In Manufactured Exports? What The Government Needs To Do?' said.

In 1965, the share of manufacturing in the overall GDP of China, Korea, Malaysia and Thailand was less than 15 per cent, 18 per cent, 9 per cent and 14 per cent respectively which by January 2006 increased to the level of 35 per cent, 29 per cent, 31 per cent and 34 per cent respectively.

The paper, which will be submitted to the Finance Ministry shortly, highlights that the focus of the Indian government in the past, has not been adequate either on agriculture or manufacturing, as a result of which India continues to lag behind its neighbouring countries.

''Policy makers should give top priority to the agriculture and manufacturing sectors, so that these sectors grow at a double digit level in a sustained manner, to help India compete with the economies of not only the ASEAN countries but elsewhere also,'' the paper said.

Manufacturing constitutes around 74 per cent of India's merchandise exports, which have risen from 27,323 crore in 2000-01 to more than Rs 1 lakh crore in the first 10 months of the current fiscal.

''This growth has been measured at a CAGR rate of 30 per cent which is a good indicator,'' ASSOCHAM President Anil K Agarwal said.

Keeping in mind the potential of the manufacturing sector, the ASSOCHAM paper says that ''other sectors which need urgent attention in terms of fiscal incentives and for technological upgradation will include Small and Medium size Enterprises (SMEs), textiles, steel, auto ancillary, engineering and capital goods, logistics and even Special Economic Zones created for higher export potential.'' Trade policy reforms should be focused and also aim at reducing the transaction costs, which at present erode our export competitiveness and are estimated within the range of 18-20 per cent, the Paper added.

The chamber is of the view that since SMEs cover a wide spectrum of items that contribute substantially in the overall economic growth of the country, they need government support in terms of fiscal assistance comprising marine products, woollen garments and knitwear, finished leather, leather products and semi-finished leather.

Sectors like steel, auto ancillaries, engineering and capital goods will have to be given excise waivers, and excessive rationalisation on customs fund should be avoided to help the domestic industry grow faster, it felt.

India's top 500 manufacturers in the auto-ancillary sector, account for nearly Rs 31,000 crore or 85 per cent of total output.

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