The Hindu Business Line : `Govt must play pro-active role to spur manufacturing sector'

The Andhra Pradesh Chief Minister, Dr Y.S. Rajasekhara Reddy, with Mr Onkar S. Kanwar (right), President, Federation of Indian Chamber of Commerce and Industry (FICCI), at the National Executive Committee meet of FICCI in Hyderabad on Monday. Also seen are (from left) Mr Amit Mitra, Secretary General, FICCI, and Mr V. Govindrajan, Member Secretary of National Manufacturing Competition Council. — A. Roy Chowdhury

Hyderabad , May 2

THE Federation of Indian Chambers of Commerce and Industry (FICCI) has called for LITPIT focus to trigger growth in manufacturing sector in the country.

According to Mr Onkar S. Kanwar, President, and Mr Amit Mitra, Secretary General, LITPIT stood for flexible labour (L) issues, infrastructure (I), transaction costs (T), power (P), interest rates (I) and indirect taxes (T).

Releasing FICCI's Manufacturing Competitiveness Survey for the year 2004-05 here on Monday, they said power tariff and interest rates were among the highest in the world.

The manufacturing sector stood just at 17 per cent of country's GDP as against 43 per cent in China and 30-40 per cent in South East Asian nations," said Mr Kanwar, who is also the Chairman and Managing Director of Apollo Tyres.

The survey said the recent bullish growth trend in manufacturing had raised the level of confidence and optimistic outlook in major industry segments.

"Growth in these segments would overtake services sector growth provided that the Government takes some pro-active measures," the survey said.

The Manufacturing Competitiveness Survey covered 102 manufacturing sectors. Of these, 16 were from basic goods or core sectors, 18 belonged to capital goods, and 29 sectors represented consumer durables.

Sectors such as electrical equipment, circuit breakers, telecom cables and air-conditioners recorded a growth of more than 20 per cent. Hydroelectric power, textiles machinery and colour TVs registered a growth of more than 10 per cent.

Crude oil, petroleum refineries, aluminium, cement, steel and electric power generation achieved a moderate growth of 0-10 per cent.

Tea, natural gas, blended yarn, nuclear power and black and white TVs declined in the year, the survey said.

On the exports front, textiles machinery, automobiles and auto components recorded "excellent growth" during the year, while cement, scooters and leather products registered "high growth".

Sectors such as tea, soda ash and nylon filament yarn registered a moderate growth. Steel, caustic soda and three-wheelers declined during the period.

The rate of growth of export had exceeded the rate of growth in domestic production in respect of almost all the engineering-based items.

The survey observed that the spurt in growth of manufacturing industries had begun in the last three to four years particularly from 2002-03.

The survey felt that Government measures such as establishing National Manufacturing Competitiveness Council, Investment Commission and some measures announced in the Budget helped the manufacturing sector. The recently announced Exim (Export Import) Policy measures too encouraged the sector.

The study felt that exclusion of petroleum products in the VAT would add to rising aggregate indirect taxes on petrol and diesel at around 70 per cent.

The cement industry suffered from high incidence of central taxes, octroi and royalty in the ex-factory cost. High rail freight vis-à-vis other bulk items too bothered the segment.

With regard to steel, rise in excise duty on iron and steel from 12 per cent to 16 per cent would affect non-VATable items badly.

The cess of Rs 1.50 a litre on light diesel oil would increase generation costs by about 8 per cent for captive power plants, it said.

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