Indicus Analytics: Where are all the factories?

There is a sharp regional disparity in the number of factories across India with scanty presence in smaller states

The Annual Survey of Industries (ASI) conducted by the Central Statistical Organisation (CSO) covers all factories registered under Sections 2m(i) and 2m(ii) of the Factories Act, 1948, that is, those factories employing 10 or more workers using power and those employing 20 or more workers without using power. The latest report reveals that between 2005-06 and 2008-09, the number of registered factories have increased by 3.5 per cent a year with a 7.1 per cent annual growth in the number of workers. A characteristic of registered factories is the skewed distribution when it comes to the size of employment, number and contribution to value addition in the manufacturing sector. The ASI report notes that though the class of factories with the lowest employment of less than 50 workers comprises the largest share of factories (72.04 per cent), it utilises only 8.45 per cent of the fixed capital, provides employment to 17.23 per cent of total employees, produces 11.63 per cent of the total output and generates 8 per cent of the national income in the form of net value added by manufacture. On the other hand, factories that employ 200 or more employees comprise 8.39 per cent of all factories, utilise 77.37 per cent of the fixed capital and contribute to 57.99 per cent of employment, 69.60 per cent of the total output and 76.35 per cent of net value added in manufacturing.

There is, of course, a sharp regional disparity in the number of factories across states. Almost 30 per cent of the total factories in India are in Tamil Nadu and Maharashtra, but there is barely any presence of factories in small states like Manipur, Nagaland and Meghalaya.

Ranking the states in terms of net value added, Maharashtra leads with the highest — at least 46 per cent higher than Gujarat. Despite having the highest number of factories, Tamil Nadu comes in fourth in total net value added, lower than Karnataka. (Click here for chart)
 

MAN AND MACHINE Growth in number of factories & workers
Period	No. of factories	No. of workers
1981-82	105,037	1,686,248
1991-92	112,286	6,269,039
2001-02	128,549	5,957,848
2008-09	155,321	8,776,745
Source: Annual Survey of Industries, 2008-09

Looking at the net value added per factory, however, Uttarakhand is at the top with Rs 1,490 lakh added per factory followed by Himachal Pradesh, Goa, Chhattisgarh and Orissa, making up the top five. At the other end, among the large states are Tamil Nadu, Assam, Kerala and Punjab with the lowest net value added per factory. Rajasthan, West Bengal, Uttar Pradesh, Andhra Pradesh and Bihar are the other large states with lower than average net value added per factory. The case of Tamil Nadu is particularly striking because it has the highest number of factories and highest employment but net value added per factory is only half than that of the all-India average.

The latest ASI report for 2008-09 covers the recent boom period; the number of factories, fixed capital, number of workers and wages to workers grew the most in 2008-09 compared to the previous five years. The impact of the financial crisis and the resultant slowdown would, of course, be revealed only in subsequent reports. However, what stand out as issues to be addressed for balanced growth are the skewed contribution to income and employment in the organised manufacturing sector and the level of heterogeneity across states.

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