The government's short, medium and long term focus should be on improving road, rail and port infrastructure as the industry is suffering from bottleneck in these areas for both domestic and overseas movements, KPMG's 2014 Global Manufacturing Outlook (GMO) said.
To reviving manufacturing sector in India, KPMG recommends that "the new government may have to look at resolving issues around coal and mining as quickly as possible as this is not only affecting this sector but it has a cascading effect on other sectors and the whole economy".
Coal and mining sectors are facing multiple woes including land acquisition and getting environmental clearances.
Factory output as measured by the index of industrial production (IIP) remained almost flat in 2013-14 and declined 0.1 per cent compared to a meagre expansion of 1.1 per cent in 2012-13.
Manufacturing, which constitutes over 75 per cent of the index, sector's output contracted 0.8 per cent during 2013-14 compared with 1.3 per cent growth previously.
The study also said that boosting medium and small enterprises in manufacturing sector should assume greater priority as they are under severe stress.
It also said that innovation is becoming a key success driver for every organization worldwide and India will be no different.
"In India, for example, companies are keenly focused on collaborating with supply chain and logistics providers to improve reliability, enhance capacity and reduce costs by identifying and maximizing process and business practice innovation," said Richard Rekhy, Chief Executive Officer, KPMG in India.
Further, it said this year's GMO reveals that only 12 per cent of global manufacturers would categorize themselves as being 'very effective' at determining product profitability.
As many as 460 senior executives across six industrial sectors split equally among the Americas, Europe, Middle East and Africa, and Asia-Pacific participated in the study.
About 85 per cent of respondents said they plan to make either "moderate" to "substantial" investments into systems for product or service cost improvement over the next 12-24 months.