Need R&D revival to promote manufacturing

Survey also calls for enhanced public investment.

The Economic Survey said neglecting research and development (R&D) in new technology and skill development had shackled the growth of the manufacturing sector, specially in the last two quarters of the current financial year.

“China has been the most successful in building the world’s largest manufacturing base by giving special attention to technology development and by gearing FDI (foreign direct investment) policy to promote technology transfer,” the survey mentioned.

The survey also stressed the need to enhance public investment and building public-private partnership (PPP) in R&D in skill and technology development.

The survey noted that India’s share in the world manufacturing is less than 1.4 per cent. Manufacturing output growth slipped from a peak of 18 per cent in April 2010 to just 1 per cent in December 2010. “The manufacturing sector, despite being the driver of the industry, has not grown significantly over time in terms of its share in GDP,” the economic survey said.

Capital goods, too, have been a major disappointment, the survey points out. After registering 31.9 per cent growth in the first quarter of the current financial year, it slipped to 3.8 per cent in the third quarter.

However, on an average, capital goods have been the biggest growth driver for the sector.

According to the survey, the growth of manufacturing is crucial for employment generation, augmentation of domestic supply, utilisation of resources, value addition and for sustainable growth of exports.

For the listed manufacturing companies, the profitability margin contracted in the recent months due to a faster increase in total expenditure in relation to sales.

The survey estimates manufacturing to remain at the same levels as last year, thereby maintaining the growth in the industry at same levels of 8 per cent obtained last year.

Within manufacturing, three industrial groups, including tobacco, wood products and wool, silk and man made textiles, have seen a negative cumulative growth rate during April-December 2010-11.