Sector/Market size

India is fast emerging as a global manufacturing hub. India has all the requisite skills in product, process and capital engineering, thanks to its long manufacturing history and higher education system. India's cheap, skilled manpower is attracting a number of companies, spanning diverse industries, making India a global manufacturing powerhouse. India with its vast design skills has attracted a lot of outsourcing technological orders.

According to a United Nations Industrial Development Organization (UNIDO) analysis based on 2007 figures mentioned in the International Yearbook of Industrial Statistics 2009, India ranks among the top 12 producers of manufacturing value added (MVA). In textiles, the country is ranked fourth after China, USA and Italy, while in electrical machinery and apparatus, it is ranked fifth. It holds sixth position in the basic metals category; seventh in chemicals and chemical products; 10th in leather, leather products, refined petroleum products and nuclear fuel; twelfth in machinery and equipment and motor vehicles.

India's manufacturing sector is on an uptrend with the majority of sectors recording positive trends in the first half of fiscal year 2009-10, as compared with the corresponding period in 2008-09, according to a Confederation of Indian Industry (CII) survey. The buoyant manufacturing growth in the first half is led by a rise in production of basic goods, intermediate goods and consumer durables.

Quarterly estimate of GDP for July-September (Q2) 2009-10, according to data released by the Central Statistical Organisation (CSO), for manufacturing stood at US$ 46.42 billion at current prices, 9.4 per cent higher than during the same period in 2008-09.

The Indian economy clocked a robust 7.9 per cent growth in the second quarter (Q2) ended September 2009, catapulted by a stimulus packages-powered strong industrial growth. Manufacturing sector grew by 9.2 per cent in Q2 of 2009-10 against 4.9 per cent in Q2 of 2008-09, according to the latest CSO estimates available on the Index of Industrial Production (IIP).

Growth Trends

Major indicators Nomura's Composite Leading Index (CLI), UBS' Lead Economic Indicator (LEI) and ABN Amro' Purchasing Managers' Index (PMI), variety of indices that track activity in vital economic sectors, indicate an upward trend in economy owing to growth in the manufacturing sector.

The HSBC Markit Purchasing Managers' Index (PMI), the most reliable indicator of manufacturing activity in the country based on a survey of 500 companies, climbed to its highest level in one-and-half years to 57.6 in January, 2010. The index had stood at 55.6 in December 2009.

Companies reaped the benefit of increasing new orders which led them to step up their production levels. According to the HSBC Markit report, Indian manufacturers sharply raised their output levels during the month in line with the increase in new orders and the latest gains have been above the pre downturn averages.

"The pick-up in exports is extremely heartening and it does point towards a sustainable trend of growth in manufacturing. Growth in industrial output will stay in double digits till the end of this financial year (2009-10) and the encouraging bit is that the composition of lead indicators of the economy are now becoming more and more broad- based," said Jyotinder Kaur an economist with HDFC.