Indian manufacturing sector on its way up post COVID-19, claims survey

But concerns remain about structural problems that plague the sector, besides the continuing trend of its weakening output and productivity.

Published : Feb 12, 2024 19:22 IST - 5 MINS READ

Employees work inside a manufacturing plant of blades for wind turbines owned by the Adani Group in Mundra on January 11.

Employees work inside a manufacturing plant of blades for wind turbines owned by the Adani Group in Mundra on January 11. | Photo Credit: PUNIT PARANJPE/AFP

Employment fell marginally in 2020-21 due to the pandemic but gained momentum in 2021-22 with 7 per cent year-on-year growth in the manufacturing sector, according to the Annual Survey of Industries (ASI). “In fact, the estimated number of persons engaged in this (manufacturing) sector in 2021-22 has exceeded the pre-pandemic level (that is 2018-19) by more than 9.35 lakh,” a Ministry of Statistics and Programme Implementation (MoSPI) statement said.

At the same time, it added that average emoluments also registered an increase. Average salary earned per employee in this sector had gone up by 1.7 per cent in 2020-21 and 8.3 per cent in 2021-22, in comparison to respective previous years, it explained. “Due to the Covid pandemic, there had been a marginal fall in employment in 2020-21, which was more than compensated in the subsequent year i.e. in 2021-22, with total estimated employment in the sector showing a robust growth of 7.0 per cent year-on-year (Y-o-Y),” it said.

The number of persons engaged in industries dipped from 1,66,24,291 in 2019-20 to 1,60,89,700 in 2020-21 but increased to 1,72,15,350 in 2021-22, showed the ASI.

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The MoSPI has released the results of the ASI for the reference periods April 2020 to March 2021 (that is, the Financial Year or FY 2020-21) referred to as ASI 2020-21 and for the reference period April 2021 to March 2022 (FY 2021-22) referred to as ASI 2021-22.

Unique turnaround

The ASI results for FY 2021-22 exhibit the resilience shown by the Indian manufacturing sector and tell the unique turnaround story of the Indian manufacturing sector after the adverse effect of the pandemic witnessed in 2020-21 in terms of output and input contraction and also a marginal fall in employment, it stated.

The results show that while the Gross Value Added (GVA) grew by 8.8 per cent in current prices in 2020-21 over 2019-20, mainly on account of a sharp fall in input (4.1 per cent) that more than offset an output contraction (1.9 per cent) in the sector during a year affected by COVID, it added.

The GVA has gone up significantly by 26.6 per cent in 2021-22 over 2020-21, riding on a high growth in the industrial output, which grew by more than 35 per cent in value terms during this period in current prices, it explained.

The year 2021-22 witnessed a sharp rise in level as well as in the growth of the majority of the important economic parameters like invested capital, input, output, GVA, net income and net profit registered by the sector and even surpassed the pre-pandemic level in absolute value terms, showed ASI.

Drivers of growth

The main drivers of this growth in 2021-22 were industries like the manufacturing of basic metal, coke and refined petroleum products, pharmaceutical products, motor vehicles, food products, and chemical and chemical products. These industries, taken together, contributed about 56 per cent of the total GVA of the sector and showed a growth of 34.4 per cent and output growth of 37.5 per cent in comparison to 2020-21, it stated.

Among the major States, in terms of GVA, Gujarat remained at the top in 2020-21 and in the second position in 2021-22, while Maharashtra ranked first in 2021-22 and second in 2020-21, the survey showed. These two States were followed by Tamil Nadu, Karnataka, and Uttar Pradesh in both the years. The top five States, taken together contributed about 53 per cent of the total manufacturing GVA of the country in 2020-21 as well as in 2021-22, it stated.

The top five States employing the highest number of persons in this sector were Tamil Nadu, Gujarat, Maharashtra, Uttar Pradesh, and Haryana in ASI 2020-21 as well as in ASI 2021-22, according to the survey. Taken together, these states contributed about 54 per cent of total manufacturing employment in both years, it added.

Concerns over manufacturing sector

Despite the visible uptick in GDP in the post-COVID years, concerns remain over structural problems that plague the manufacturing sector. Provisional GDP estimates for 2022-23 showed that the sector grew a paltry 1.3 per cent compared to the overall GDP growth of 7.2 per cent, which was its second worst performance in the last 25 years (the worst was in 2019-20 when the sector declined by 3 per cent).

Experts have also pointed out the drop in manufacturing productivity. Citing data from the Annual Survey of Industries, one study co-authored by Achyuta Adhvaryu, professor of economics at UC San Diego, observed “a general downward trend in productivity growth since the 1990s, accelerating in the mid-2010s and in the years leading up to the Covid-19 pandemic”. The paper further stated: “The growth rate of productivity fluctuated between 10 to 15 percent in the 1990s and 2000s; productivity growth began to stagnate after 2015, and this negative trend accelerated into the several years preceding the pandemic.”

Methodology and COVID-related delays

The fieldwork for these surveys was carried out from April 2022 to November 2022 for ASI 2020-21 and from March 2023 to September 2023 for ASI 2021-22. A considerable part of the reference period for ASI 2020-21 was affected by the first wave of the COVID-19 pandemic that witnessed lockdown and major disruption not only in India but also globally. Part of the reference period for ASI 2021-22 witnessed the second wave of the pandemic.

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The fieldwork of ASI 2020-21 started late as the filing dates for companies in respect of the financial year ended on March 31, 2021, were extended. This had a spillover effect on the fieldwork of the next survey—ASI 2021-22—which was delayed as well. The results are prepared at the State and major industry levels, it stated.

(with inputs from PTI)

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