Annual Survey of Industries (ASI) 2023-24: Key Findings and Implications
The recently released ASI 2023-24 data presents a mixed picture of India's manufacturing sector, highlighting both growth and structural challenges.
Growth Metrics
- Gross Value Added (GVA): Increased by 11.9% at current prices in FY24.
- Overall Output Growth: Slowed to 5.8% from a robust 21% in FY23.
- Employment: Grew by 5.9%, but output per person engaged declined.
Challenges in Manufacturing
- Contribution to GDP and Employment: Manufacturing contributes only 17% to GDP and 12% to jobs, insufficient for a labor-abundant country like India.
- Geographic and Industry Concentration:
- The top five states account for nearly 54% of manufacturing GVA and 55% of jobs.
- Output is dominated by five industries: basic metals, motor vehicles, chemicals, food products, and pharmaceuticals.
Policy and Structural Issues
- Fragmentation and Scale: The sector is dominated by small firms with limited technology and finance access, resulting in low productivity.
- Labour Laws: Existing laws discourage scaling up operations due to compliance burdens and disputes, especially in labor-intensive industries.
Recommendations for Policy Action
- Move beyond tax breaks and production-linked incentives to increase scale in labor-intensive industries.
- Expand the pool of skilled labor in line with evolving technologies and encourage geographic dispersal.
- Align investments with job and wage growth, facilitating the creation of industrial clusters for competitiveness.
- Implement new labor codes and align skills with technological advancements such as digital tools and green manufacturing.
- Link investment support with employment creation to ensure balanced growth.
Long-term Focus and Reforms
India needs comprehensive reforms in land, labor, and capital to enhance manufacturing output and employment conditions. Despite current uncertainties, especially due to trade tensions with the U.S., medium- to long-term policy focus is essential to sustain growth and employment generation.
