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CRISIL has analysed the sales and employee cost as compared to the total employee strength of 9,200 micro, small, and medium enterprises (MSMEs) in the manufacturing and service sectors for 2011-12 (refers to financial year, April 1 to March 31).
The analysis reveals that MSMEs in the manufacturing sector utilised their manpower in a more productive manner than their counterparts in the service sector, despite the fact that cost per employee was almost the same in both sectors.
The average output per employee in the manufacturing sector was Rs 27.52 lakh, as against manpower cost of Rs 1.04 lakh per employee. In comparison, the average output per employee in the service sector was Rs 19.10 lakh, as against manpower cost of Rs 1.05 lakh per employee.
This trend in employee output arises from the fact that manufacturing enterprises generally have much higher investment in production assets than service enterprises with a similar-sized workforce. Production assets build scale and the ability to deliver higher employee output, whereas service enterprises need to perforce depend on the skills and size of their workforce to increase their output.
Manufacturing enterprises have already succeeded in enhancing their efficiency through the adoption of modern technology and IT-based systems like enterprise resource planning. They can deliver even higher output with infrastructure improvements and the availability of round-the-clock electricity.
Manufacturing thus seems to bode well for overall economic growth, especially as India's large unskilled workforce can be easily absorbed into the sector with short courses in industrial training.
Note: The analysis is based on the latest audited financial statements of CRISIL-rated MSMEs. Most enterprises finalise their audited financials by the end of the second quarter, after the closure of the financial year. CRISIL rates over 45,000 MSMEs in India.
This fortnightly tracker presents to our readers insights on MSMEs, a key element of the Indian economy.
