The International Yearbook of Industrial Statistics 2011, brought out by the Unido, has ranked India in 9th place in 2010 far below the US and China, which occupied the first two rungs. But what is more significant is that the India?s share of the global manufacturing value added (MVA) at 1.8%, was lower than its share of global GDP, which was marginally higher at 2.3%.
But on the positive side, an industry-wise investigation shows that India?s share of MVA and its global ranking was much higher in many important industries. The manufactured products where India had the highest global ranking of 4 was in textiles, where it had a 4.3% share of the global MVA. India?s ranking was also high, in the 5th position, in electrical engineering where it had a global share of 4.1%. The other important manufactured products where India had a sizable share of global MVA and impressive rankings included high technology areas, like transport equipment, chemical products, basic metals, motor vehicles, machinery and equipment, and labour intensive products like leather products.
Though the list of products where India had carved out some space in the global output may look impressive, the overall trends show that not only has China outmatched India in the growth of manufacturing in the last decade but that the gap between the two nations has increased over the years, with Chinese growth rates touching double that of India in the latter half of the decade.
More interesting are the numbers on the efficiency of production. The numbers from ten important industries that we have investigated indicates that the labour productivity in India matched that of China, or came fairly close to it in as many as four important industries, namely machinery, iron and steel, basic chemicals, and motor vehicles. However, in other industries like textile, wearing apparel, paper and metal products, labour productivity in China was double that of India and in still others like dairy and ship building it was three times higher that of India. The picture was more complicated when it came to labour costs. Here, the numbers show that while average wages and salaries earned by workers in India were lower than that of the Chinese workers in seven important industries Indian workers earned higher than Chinese workers in the other three.
But the real reason for worry is the high input costs of Indian industry, namely that of raw materials and labour, which pushed down the operating surplus, calculated as the value added minus wages and salaries paid to employees, and is a crude indicator of the profit potential. The numbers from the 10 different industries investigated here show us that while the operating surplus was very low, at 4-22%, in India, it was in a substantially higher range of 20-25% in China, which makes manufacturing all the more lucrative and pushes up the Chinese share of MVA in GDP to almost 35%, while its share is less than half in India at just 14%.