The Economic Survey has painted a bleak picture of the manufacturing sector and sought “an enabling business environment” to boost industrial growth.
“Manufacturing and industry can be helped by improving the infrastructure and reducing the need for interfacing with the administration. This is a sector strong enough to take off on its own; what is needed is simply an enabling business environment,” the survey said.
According to the advanced estimates, manufacturing growth in 2011-12, pegged at 3.9 per cent, has been the slowest in many years. Even during global economic slowdown (2008-09), the growth in manufacturing stood at 4.3 per cent.
Volatility in the sector has been attributed to extreme fluctuations in growth in the capital goods and intermediates segments.
However, the National Manufacturing Policy, the first dedicated policy in the sector , is expected to provide a major impetus to the sector, the survey said.
While the growth in sales for companies in the manufacturing sector showed robust growth of 20-25 per cent in 2011-12, the net profit margin of manufacturing companies, measured by the ratio of net profit to sales, decelerated from 8.1 per cent in the second quarter of 2010-11 to 5.4 per cent in the corresponding period of 2011-12. This was also the lowest net profit margin in 12 quarters.
The sector grew 2.7 per cent and 0.4 per cent in the second and third quarters of 2011-12, respectively. “Growth in the manufacturing sector moderated from nine per cent in April-December 2010 to 3.9 per cent in April-December 2011, which, given its large share in the IIP, led to a slowdown in the industry sector,” the survey said.
The sector also fared poorly in terms of employment. Overall employment opportunities in the sector declined in 2009-10, compared to 2004-05.