Manufacturing Sector in India

Contribution of Manufacturing Sector in India

Though India banks heavily on its services sector for growth, the manufacturing sector too plays a significant role in the Indian economy, contributing nearly 16 per cent to the GDP (in 2006-07).

Encouraged by an increasing presence of multinationals, scaling up of operations by domestic companies and an ever expanding domestic market, the Indian manufacturing sector has been averaging a 9 per cent growth in the last four years (2004-08), with a record 12.3 per cent in 2006-07.

India is fast emerging as a global manufacturing hub. Be it automobiles or computer hardware, consumer durables or engineering products, all are being manufactured by multinationals in India.

Moreover, according to a report by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Yes Bank, India is poised to become the global manufacturing hub for luxury brands over the next five years with manufacturing of luxury items becoming a US$ 500 million industry during this period.

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.

According to a survey of the manufacturing industry, carried out by FICCI among 25 core sectors, 21 capital goods, 15 intermediate goods, 26 consumers durables, and 13 consumer non-durable sectors, the country's manufacturing sector is expected to grow by 9.5 per cent in 2008-09, up from 8.8 per cent last fiscal.

• LG is looking at making India its global manufacturing hub for its mobile handsets. The company will soon be exporting mobile phones to Europe and the Commonwealth of Independent States (CIS) from India.
• Luxury brands like Louis Vuitton and Frette are looking at India as a manufacturing base for their products.
• Skoda Auto, a part of the international Volkswagen Group based in the Czech Republic, plans to make India its regional manufacturing hub. It will start producing cars in India by 2010 with a manufacturing target of 50,000 units. Besides the domestic market, these will also be exported to neighbouring countries like Nepal, Sri Lanka, Burma and Bangladesh.
• Aircraft manufacturer Airbus is considering India as one of the key centers for design and development of its long haul A 350 plane.
• Cummins is making India its manufacturing hub for newly developed line of generator sets.
• Samsung plans to invest US $ 100 million over a period of four years in its manufacturing plant near Chennai and make it its global hub.
• Ford is making India its manufacturing hub for engine manufacturing.
• Hyundai has made India the manufacturing and export hub for its small Cars. The i10 is being manufactured only in India and exported to the world. India is Hyundai's largest base outside Korea.
• Suzuki too is making India its manufacturing hub for small cars. The A-Star is being manufactured solely in India and exported to Europe.
• Nokia is investing an additional US $ 75 million in its Sriperumbudur plant taking the total investment to US$ 285 million. Nearly 50 per cent of its production at Sriperumbudur is exported to countries across the Middle East and Africa, Asia, Australia and New Zealand.

India Advantage

India's vast domestic market and availability of low-cost workers with advanced technical skills has been instrumental in attracting an ever expanding number of multinationals who are setting up their manufacturing base in the country.

The sheer size of the Indian market has obvious appeal. The rapid growth of the Indian economy is likely to make India the fifth largest consumer market in the world by 2025 from twelfth in 2005, according to a study by McKinsey Global Institute.

Aggregate Indian consumer spending is likewise estimated to more than quadruple to approximately US $ 1.5 trillion by 2025, on the back of a ten-fold increase in middle class population and a three-fold jump in household income.

Along with this, India offers abundant engineering and technical manpower, producing annually about 400,000 graduate engineers.

Moreover, according to a study by ASSOCHAM, India will emerge as the fourth strongest economy among the G-20 countries after China, Russia and South Korea from the global crisis, given its robust forex reserves, high GDP growth rate and various fiscal and monetary measures taken to tackle the downturn.

Petroleum and Natural Gas in India

• First successful oil well was dug in India in 1889 at Digboi, Assam.
• At present a number of regions having oil reserves have been identified and oil is being extracted in these regions.
• For exploration purpose, Oil and Natural Gas Commission (ONGC) was established in 1956 at Dehradun, Uttarakhand.
• The total oil reserves in India have been estimated to be about 13 crore tonnes. Domestic production of oil in India is much less to meet the domestic demand.
India currently produces just over 32 million tonnes of crude oil against its annual demand of 105 million tonnes meeting only 30.5 percent of demand from domestic resources.

Oil Refineries in India

• At present there are 19 refineries operating in the country (17 in Public Sector and 2 in Private Sector). Mangalore Refinery and Petro chemicals Limited (MRPL), which was a joint sector company, became a PSU subsequent on acquisition of its majority shares by ONGC.
• Out of 17 Public Sector Refineries 7 are owned by IOC Ltd., two each by Chennai Petroleum Corporation Ltd. (a subsidiary of IOCL), Hindustan Petroleum Corporation Ltd. and ONGC, one each by BPCL, Kochi Refineries Ltd. (a subsidiary of BPCL), Numaligarh Refinery Ltd. (a subsidiary of BPCL) and Bongaigaon Refineries and Petrochemicals (a subsidiary of IOCL). The private Sector Refineries belong to Reliance Industries Ltd. and Essar Industries.

Marketing and Distribution of Petroleum Products

1. Indian Oil Corporation IOC : Established in 1964 by amalgamating Indian Refineries Ltd. and Indian Oil Company Ltd.
2. Bharat Petroleum Corporation Ltd BPCL : By acquisition of Burmah Shell in 1976.
3. Hindustan Petroleum Corporation Ltd (HPCL): Established in 1974 by acquiring the assets of US Company ESSO Eastern. In 1976, Government acquired Caltex Oil Refining Ltd. and merged it with HPCL.
4. Gas Authority of India Ltd GAIL : Established in 1984, for handling post-exploration activities relating to natural gas. The company was assigned the priority task of setting up the cross country HBJ (Hazira, Bijapur and Jagdishpur) pipeline. Presently GAIL is the largest company in India for marketing of natural gas.

Oil India Ltd

Oil India Limited (OIL), under the administrative set-up of the Ministry of Petroleum and Natural Gas, is a National Oil Company engaged in the exploration, production and transportation of crude oil and natural gas in the country. OIL was incorporated in 1959 as a company with two-third share of Burmah OIL Company and one-third share of Government of India. In 1961, OIL became a joint venture company with equal share of Government of India and Burmah OIL Company. On October 14, 1981, OIL became a Government of India Enterprise, a wholly-owned Public Sector Undertaking.