Report on Index of Industrial Production - Pre-Covid Era

Report on Index of Industrial Production

Industrial production is defined as the outcomes of industrial establishments, which include sectors including gas, electricity, manufacturing, mining, chemicals, machinery, and textiles. The change in volume of production output over time is used to calculate an index of industrial production. As industrial production is highly sensitive to consumer demand, it is considered an important indicator for predicting future trends and economic performance. Given to us is the Index of Industrial Production (base year 2011–12), which includes the general index and expenses of manufacturing chemicals, beverages, textiles, paper products, etc.

The time period between 2012 and 2019 witnessed changes in governments, changes in policies, and lesser imports. Small manufacturing units became the pillars supporting big industries by providing the equipment, machinery, and semi-finished goods required by big industries. They helped create a better export market and created employment opportunities to a large extent.

The production of basic metals also followed a similar trend as the general index. Basic metals saw an increase in demand over the years. Even beyond 2019, as per the Central Statistics Office’s Index of Industrial Production, the basic metals industry had the highest growth rate with the lowest production of motor vehicles.

On the other hand, the production of paper and paper products witnessed irregular behaviour over the time period. The highest production was in 2015, with the lowest production in 2019. Lagging production capacity, market fragmentation, and outdated machines are significant reasons why the paper industry hasn’t boomed in India. India has not become a dominant power in the paper industry because the ownership of industries in India is small, privately owned, and driven by the availability of raw materials.

The textile industry also saw its maximum production in 2015, followed by a cycle of ups and downs. India enjoys a comparative advantage in textile production. The country has skilled manpower and incurs a low cost of production relative to other major textile producers. The government also launched various schemes and increased its investments in the textile industry during 2015–16 and 2019–20 to encourage more private equity and provide employment opportunities.

Production of wearing apparel consists of converting fabrics into garments. The garment industry contributes substantially to its export earnings. The government has over the years understood the importance and contribution of the garment industry to the national economy and is thus taking adequate measures to attract foreign investment and encourage widespread growth in this sector.

India is the second-largest producer and third-largest exporter of tobacco in the world. It is a huge source of employment for millions of people in India. Its production was the highest during 2014–15 and 2015–16. The tobacco industry is flourishing due to its economic importance despite the severe health risks and complications associated with its consumption.

India has witnessed remarkable growth in the refining sector over the years. India has achieved self-sufficiency in petroleum product manufacturing and is a major exporter of high-quality petroleum products around the world.

India accounts for a huge proportion of the global outsourcing market for computers and electronics. The growth of the computer and electronic industries has been impressive in the previous decade. With the introduction of new schemes by the government to offset infrastructural inefficiencies and increase market share, the computer manufacturing industry is going to achieve new heights in the coming years.

The electrical equipment industry incurred huge revenue in 2015-16 and 2017-18 due to increased manufacturing across the country. The domestic electrical equipment sector is vital for GDP growth and related employment growth. The sector has shown irregular growth in the previous decade but is increasing its preparedness and enhancing its global competitiveness to meet the future demands of the power sector.

The fabricated metal products industry had an irregular growth pattern with exceptional growth during 2014-15 and 2018-19.

India’s food industry offers enormous employment opportunities and is regarded as the world’s largest producer of spices, milk, and pulses. It is also the world’s largest processor, producer, and consumer of cashew nuts. It is also the world’s largest producer of food grains, fruits, and vegetables.

The furniture industry in India is a tremendously profitable business with impressive margins and huge profits. India is a hub of skilled workers with amazing craftsmanship. The furniture produced in India is of optimum quality and is in high demand across the globe. Despite slow growth in 2013–14 and 2014–15, the furniture industry incurred huge profits by the end of the decade.

The leather and machinery industries have seen a rise in 2016–17 and 2018–19. India also has one of the highest rates of plastic recycling in the world.

India is the world’s largest two- and three-wheeler manufacturer and is the third largest heavy truck manufacturer in the world. The production of vehicles, trailers, and semi-trailers was remarkable during 2018–19. As a result, the Indian automotive sector is a critical driver of GDP growth.

Non-metallic mineral products incurred huge revenue in 2018–19. The non-metallic minerals sector is known for the production of glass, ceramics, cement, and lime products. The growth of the mining industry is crucial for the overall industrial development of the country.

The massive growth of the chemical and medicinal sectors can be attributed to the domestic producers’ leadership in providing generic formulations to different markets across the globe. India is known for producing affordable vaccines and generic medications. As India produces low-cost, high-quality medicines, it is rightfully known as the "pharmacy of the world."

Over the years, the production of rubber and plastics has substantially increased, with phenomenal performance during 2015–16. The graph above illustrates the growth from 2012–19, with a consistent increase in exports of plastics from India over the previous decade. The amount and type of plastic produced in India have consistently increased with the rise in discussion on the harm caused by plastics and ways to reduce the pollution caused by their increasing production.

Other manufacturing sectors saw an irregular growth pattern from 2012 to 2019.

Print media have the power to influence people and drive change in society. Print media continues to dominate Indian households as it offers credibility in the era of fake news. In the previous decade there has been tremendous growth in the number of readers from rural markets, which has become a major reason why India seems to dominate the global trends. In 2018-19 there has been a downfall in the reproduction of print and recorded media due to the upsurge in digital media.

The above chart compares the production of beverages and chemical products, with a clear indication of rising levels of chemical production along with stagnant growth in the production of beverages.

The previous decade witnessed growth in various manufacturing units despite the weak demand for exports from the developed western nations due to the Global Financial Crisis. Due to weak returns on investments, the private sector refrained from investing in the manufacturing sector. The European debt crisis and uncertain global recovery negatively affected the growth of industries in India. The failure of past projects in the private sector led to considerable fluctuations. Regardless of the government's efforts, there is a need to improve the secondary sector through appropriate industrial policies and infrastructure improvements.