Despite poor industrial growth, Kerala ranks second among States in terms of manufacturing excellence, a recent study conducted by the Associated Chambers of Commerce of India (Assocham) has revealed.
The study found that Kerala was second only to Karnataka in manufacturing excellence over a five-year period from 2009. “Kerala has the second highest ratio in terms of road density, third highest ratio in terms of efficiency, and fourth highest capacity utilisation ratio,” stated the study titled ‘Manufacturing Excellence and Emergence in India: The State-level analysis’.
Besides, Kerala also has recorded the third lowest ratio in terms of employee cost and sixth highest manufacturing process ratio, though it is hobbled by high input costs, the report noted.
The Assocham Economic Research Bureau (AERB) had considered various parameters such as number of factories, output value, working capital, net fixed capital formation, fixed capital, finished goods, capital invested, total inputs, and others to ascertain States’ performance in the manufacturing sector.
Interest cost
Kerala has performed decently on parameters such as interest cost whereby there is a lower ratio between total interest paid in the current year for loans outstanding in the previous year. It has also registered a higher ratio in terms of rail route length in 2014-15 as a proportion of the total area of the State.
However, the study observed that Kerala had to improve its performance in areas like growth of industries (13th rank) and capital structure (16th rank), i.e., improving the ratio between invested and fixed capital.
The State was ranked 16th in total input cost as a proportion of value of output.
The study highlighted various challenges being faced by India’s manufacturing sector — competitive cost and technology being offered by countries such as Bangladesh, China, Indonesia, Korea, Singapore, and Taiwan and concerns about the growth model led by the services sector.
The Assocham study stressed the importance of increasing the share of the manufacturing sector in India’s gross domestic product (GDP) to absorb a young workforce.
“The Union government must address issues relating to poor product quality, infrastructural bottlenecks, and inadequate efforts at research and development from a holistic macro perspective as they have collectively taken a toll on India’s manufacturing competitiveness,” the study said.