Annual Survey of Industries Report 2022-23

For Prelims: Annual Survey of Industries, Gross Value Added, Gross Domestic Product (GDP),
Net Value Added, National Statistical Office (NSO)

For Mains: Gross Value Added and its significance in assessing economic growth, Annual Survey of
Industries (ASI), Growth & Development

Source: IE

Why in News?

Recently, the Ministry of Statistics and Programme Implementation (MoSPI) released the Annual
Survey of Industries (ASI) for 2022-23 which presents significant insights into the recovery and
growth of the manufacturing sector in India.

The survey fieldwork was conducted from November 2023 to June 2024 for ASI 2022-23.

What are the Key Highlights of the ASI Report 2022-23?

Employment Growth in Manufacturing:

The ASI indicates that employment in manufacturing grew by 7.5% from 1.72 crore in
2021-22 to 1.84 crore in 2022-23, the highest rate of growth in the last 12 years.
In 2022-23, the manufacturing sector created 13 lakh jobs, an increase from 11 lakh in
FY22.

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Gross Value Added (GVA) and Output Growth:
The manufacturing GVA grew robustly by 7.3%, reaching Rs 21.97 lakh crore in
2022-23, up from Rs 20.47 lakh crore in 2021-22.
The total industrial input increased by 24.4%, while the output grew by 21.5% in
the sector in 2022-23 compared to 2021-22, reflecting a significant rebound in
manufacturing activities.
Main Drivers of Manufacturing Growth:
The primary drivers of manufacturing growth in 2022-23 were basic metals, coke and
refined petroleum products, food products, chemicals, and motor vehicles.
Together, these industries accounted for about 58% of total output.
Regional Performance:
Top 5 states in terms of employment were Tamil Nadu, Maharashtra, Gujarat, Uttar
Pradesh, and Karnataka.
Increase in Number of Factories:
The number of factories increased from 2.49 lakh in 2021-22 to 2.53 lakh in 2022-23,
marking the first full recovery phase after Covid-19 disruptions.
Informal Sector Decline:
The informal sector saw a 1.5% decline in employment, dropping by 16.45 lakh to 10.96
crore in 2022-23, indicating a shift towards formal employment in manufacturing as per
the Annual Survey of Unincorporated Enterprises (ASUSE) 2022-23 report released
in July 2024.
Average Salaries:
Average emolument per person rose by 6.3%, reaching Rs 3.46 lakh in 2022-23 compared
to 2021-22.
Capital Investment Surge:
Gross fixed capital formation (GFCF) surged by over 77% to Rs 5.85 lakh crore in
2022-23, while net fixed capital formation saw 781.6% rise to Rs 2.68 lakh crore,
supporting sustained manufacturing growth.
Gross fixed capital formation (GFCF), or "investment," refers to the acquisition
of produced assets, including second-hand purchases, as well as the production of
assets by producers for their own use, minus disposals.
Net fixed capital formation is the amount of Gross fixed capital formation
 (GFCF) minus the amount of consumption of fixed capital.
Profits in the manufacturing sector increased by 2.7% to Rs 9.76 lakh crore.

Note

Workers encompass all individuals employed directly or through an agency, including paid
and unpaid workers involved in manufacturing processes or cleaning machinery and premises.
Employees include all workers receiving wages, as well as those in clerical, supervisory, or
managerial roles, and those involved in purchasing raw materials or fixed assets, along with watch
and ward staff.

Gross Value Added (GVA)

GVA represents the value that producers add to goods and services throughout the
production process.
It's calculated by subtracting the cost of inputs (intermediate consumption) from
total output.
It's a key component of Gross Domestic Product (GDP), reflecting economic growth. GVA
growth rates provide insights into sectoral performance, aiding economic analysis and
policymaking.
GVA = GDP + subsidies on products - taxes on products.
Net Value Added (NVA) is obtained by deducting depreciation from Gross Value Added (GVA).
It represents the value of output after subtracting both intermediate consumption and the
consumption of fixed capital.

What is the Annual Survey of Industries (ASI)?

About:
The Annual Survey of Industries (ASI) is the primary source of industrial
statistics in India.
It began in 1960, using 1959 as the base year, and has been conducted
annually since then, with the exception of 1972, in accordance with the Collection of
Statistics Act of 1953.
Since ASI 2010-11, the survey has been conducted under the Collection of Statistics
Act, 2008, which was amended in 2017 to extend its coverage to All India.
Implementing Agency:
The National Statistical Office (NSO), a part of the Ministry of Statistics and
Programme Implementation (MoSPI), conducts the ASI.
The MoSPI is responsible for ensuring the coverage and quality of the released
statistics.
Scope and Coverage of ASI:
The ASI extends to the entire country. It covers all factories registered under Sections
2(m)(i) and 2(m)(ii) of the Factories Act, 1948.
Bidi and cigar manufacturing establishments, registered under the Beedi and Cigar
Workers (Conditions of Employment) Act, 1966.
Electricity undertakings engaged in the generation, transmission, and distribution of
electricity, are not registered with the Central Electricity Authority (CEA).
Units with 100 or more employees registered in the Business Register of
Establishments (BRE) maintained by State Governments, as shared by the respective
states.
Data Collection Mechanism:
Data for the ASI are collected from selected factories in accordance with the Collection of
Statistics Act, 2008, as amended in 2017, and the rules established under it in 2011.

What are the Opportunities and Challenges to the Manufacturing Sector in

India?

Opportunities:
Broad Domestic Market and Demand: The Indian manufacturing sector has
witnessed robust demand for its products from both domestic and international
clients.
The Purchasing Managers' Index (PMI) recorded at 58.8 in May 2024 indicates
expansion within India's manufacturing landscape.
Sectoral Advantage: Key manufacturing sectors, including chemicals,
pharmaceuticals, automotive, electronics, industrial machinery, and textiles,
have shown significant growth in recent years.
Pharmaceutical manufacturing costs in India are approximately 30%–35%
lower than those in the US and Europe.
Outreach to the Global South Market: Indian manufacturing is shifting from European
to Asian Global Value Chains (GVC), with foreign value-added (FVA) from Global
Southern partners increasing from 27% to 45% in 2005-2015.
This offers Indian firms a chance to establish their own GVCs and position India as a
regional growth hub.
Rise of MSMEs: Micro, Small, and Medium Enterprises (MSMEs) contribute around
30% to India’s GDP and play a vital role in driving economic growth, accounting for
nearly 45% of the country’s total exports.
As of March 2024, over 4 crores MSMEs were registered on the Udyam portal,
with 67% identified as manufacturing MSMEs.
Potential for Growth: The Indian manufacturing sector has the potential to reach USD 1
trillion by 2025 highlighting its critical role in the economy.
Challenges:
Outdated Technology and Infrastructure: Reliance on outdated technology and
insufficient infrastructure hampers Indian manufacturers' ability to compete globally and
meet international quality standards.
Shortage of Skilled Workforce: According to the World Bank, only 24% of India's
workforce possesses the skills needed for complex manufacturing jobs, compared to 52%
in the US and 96% in South Korea.
High Input Costs: The Reserve Bank of India (2022) reported that logistics costs in
India are 14% higher than the global average, affecting the overall competitiveness of
the manufacturing sector.
Also the land acquisition process is complex in India.
Competition from China and Import Dependence: In 2023-24, China accounted for
nearly 42% of India's textiles and clothing imports, 40% of machinery, and 38.4% of
electronics imports.

What are the Government Initiatives in the Manufacturing Sector in India?

Production-Linked Incentive (PLI)

PM Gati Shakti- National Master Plan
Bharatmala and Sagarmala Project
Start-up India
Make in India 2.0
Atmanirbhar Bharat Campaign
Special Economic Zones
Liberalised foreign direct investment (FDI)
MSME Innovative Scheme
Ease of Doing Business
Goods and Services Tax (GST) and Reduction in Corporate tax

Way Forward
 Investment in Infrastructure: Enhancing infrastructure quality and
accessibility while reducing logistics costs can attract more investment in manufacturing.
Need for Industry 4.0: Industry 4.0 adoption can help the manufacturing sector contribute 25%
to GDP by FY26. Indian manufacturers are investing 35% of their operating budgets in digital
transformation, and this amount should be increased.
Promoting Export-Oriented Manufacturing: Supporting the development of export-oriented
manufacturing can help Indian businesses enter new markets and improve
competitiveness through targeted policies.
Financial Assistance: Many MSMEs face challenges in securing credit for exports, making
enhanced financial support for SMEs crucial for their growth.
Enabling Regulations: Streamlining regulations can reduce burdens on businesses and
promote investment in manufacturing.
Skill Development: Increasing training programs can address the skilled labour
shortage and enhance the sector’s competitiveness, as demonstrated by Vietnam’s success
in becoming a global manufacturing hub.

Drishti Mains Question:

Discuss the key opportunities and challenges facing the manufacturing sector in India and suggest
measures to enhance its competitiveness in the global market.

UPSC Civil Services Examination, Previous Year Questions (PYQs)

Prelims

Q1. In the ‘Index of Eight Core Industries’, which one of the following is given the highest
weight? (2015)

(a) Coal production

(b) Electricity generation
(c) Fertiliser production
(d) Steel production

Ans: (b)

Q2. With reference to Indian economy, consider the following statements: (2015)

1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade.
2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Ans: (b)

Mains

Q.1 “Industrial growth rate has lagged behind in the overall growth of Gross-Domestic-Product(GDP) in the
post-reform period” Give reasons. How far are the recent changes in Industrial Policy capable of increasing
the industrial growth rate? (2017)

Q.2 Normally countries shift from agriculture to industry and then later to services, but India shifted
directly from agriculture to services. What are the reasons for the huge growth of services vis-a-vis the
industry in the country? Can India become a developed country without a strong industrial base? (2014)
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