The Manufacturing and mining sectors with their significant contribution of 13.6 percent to the Gross Domestic Product (GDP) in fiscal year 2024, have the potential for further growth.
According to the Economic Survey 2023-24 launched on Tuesday, these sectors saw a growth of 2.4 and 4.9 percent respectively, compared to a decline of 5.3 and 3.3 percent last year, said the National Account Statistics.
The manufacturing sector is diverse, consisting of Large-Scale Manufacturing (LSM), Small-Scale Manufacturing (SSM), and Slaughtering, according to the System of National Accounts (SNA).
Historically, LSM dominates the manufacturing sector, accounting for 69.3 percent of Manufacturing and 8.2 percent of the overall GDP.
According to the Economic Survey, small-scale manufacturing and slaughtering comprise 19.5 percent and 11.3 percent of the manufacturing sector, contributing 2.3 percent and 1.3 percent to the GDP, respectively.
The performance of the LSM is a key indicator of overall industrial health, and it is assessed monthly through the Quantum Index of Large-Scale Manufacturing Industries (QIM).
During July-March FY 2024, LSM recorded a slight decline of 0.1 percent, a significant improvement from the 7.0 percent decline last year. However, it’s important to acknowledge the challenges faced by the textile sector, a major component of LSM, it added.
Rising input costs, lower export values, competition from China, and higher power tariffs led to a significant reduction in production. The discontinuation of the Export Finance Scheme and high interest rates further exacerbated the situation.
In the Food group, wheat and rice milling saw minor declines despite the better harvests, while sugar production slightly increased owing to higher sucrose recovery rates despite lower output.
Construction activities declined due to higher financial costs, reduced incomes, and lower government spending. Tight monetary conditions and political uncertainty also played a role, along with increased coal prices and decreased demand impacting cement production.
Additionally, sluggish activity in industries like automobiles and heavy machinery led to lower steel utilisation.
