Manufacturing is once again poised to come to the limelight with the government preparing a road map to increase the share of manufacturing in the GDP from the current nearly 15% to 25%, and create an additional 100 mn new jobs. While the National Manufacturing Competitiveness Council (NMCC) is finalising the National Manufacturing Policy, the Planning Commission is coming up with a comprehensive National Manufacturing Plan as a part of its 12th Plan exercise. But one important aspect that both agencies would have to focus on is the sparse presence of manufacturing in most parts of the country, with the production concentrated in a handful of states. The numbers from the Annual Survey of Industries show that the top five states in the country account for 57% of the factories, 55% of the employment and 56% of the output in the organised manufacturing sector. Which means that only the remaining 45% of the manufacturing sector is distributed across 26 states and union territories. At the top end are states like Maharashtra, Gujarat and Tamil Nadu who have a disproportionately large share of the sector. Maharashtra, which has 9% of the total population, accounts for 18% of the total manufacturing sector output and 13% each of the factories and the workforce employed. Similarly, the share of manufacturing sector output in Gujarat is more than three times its share in population, with the numbers being 16% and 5%, respectively. The worst case scenario is of Bihar, which accounts for 9% of the population but just 1% of the factories, employment and output of the manufacturing sector. West Bengal is another pathetic case. While the state accounts for 8% of the population, its share of manufacturing sector output is just 2%, although it accounts for 4% each of the factories and manufacturing employment.
One reason for the skewed spread of the manufacturing sector is the concentration of different industries in a few states. For instance, in the case of traditional industries with the maximum employment potential, like food products and textiles, 40-50% of the output is concentrated in three leading states. In the case chemicals?another major industrial segment?the top three states account for 56% of the production. And the trend continues in sunrise sectors like computers & electronic products and motor vehicles. While the top three states account for 53% of the total output of the former, the share is a still more substantial 74% in the latter. Agglomeration economies and logistic chains almost always ensure manufacturing industries flourish in a few chosen locations. Extending the presence of the manufacturing sector into the less developed states would require innovative strategies to attract new investments into the regions.
