Inter sector comparative innovation in some select sectors of factories

 

 

Yogesh Suman

 

This section describes and studies patterns in innovations in different sectors of industries at factory level. The sectors are classified as per NIC Classifications. Innovation parameters are defined in terms of  net value added per unit of  materials consumed, total emoluments, fuel consumed and number of workers, whereas materials consumed represents expenditure incurred on material consumed for producing the desired products, total emoluments represents expenditure incurred on the salaries of the manpower involved in the production process, for the entire sector; fuel consumed represents expenditure incurred on fuel consumption during the production process, for the entire sector; number of workers represents number of the workers involved in the production process for the entire sector and net value added is calculated  by deducting total input and depreciation from total output.

Innovation parameters are calculated for the period 2000-01 to 2004-05. The sectors falling under different categories of NIC are grouped under following categories on the basis of the nature of the output:

  1. Transport
  2. Machine tools
  3. Paper & leather products
  4. Electrical & electronics equipments

 

Different sub sectors falling under above mentioned categories are given as below:

  1. Transport: Following sectors of NIC were grouped under this category
    • Manufacture of bodies (coach work) for motor vehicles; manufacture of trailers and semi-trailers
    • Manufacture of railway and tramway locomotives and rolling stock
    • Manufacture of parts and accessories for motor vehicles and their engines
    • Manufacture of transport equipment
    • Building and repair of ships & boats
    • Manufacture of motor vehicles
  2. Machine tools: Following sectors of NIC were grouped under this category
    • Manufacture of special purpose machinery
    • Manufacture of general purpose machinery
  3. Paper and leather products: Following sectors of NIC were grouped under this category
    • Manufacture of paper and paper product
    • Tanning and dressing of leather, manufacture of luggage handbags, saddlery & harness
  4. Electrical and Electronics equipments: Following sectors of NIC were grouped under this category
    • Manufacture of office, accounting and computing machinery
    • Manufacture of accumulators, primary cells and primary batteries
    • Manufacture of television and radio transmitters and apparatus for line telephony and line telegraphy
    • Manufacture of electric motors, generators and transformers
    • Manufacture of electric lamps and lighting equipment
    • Manufacture of electric motors, generators and transformers
    • Manufacture of electric lamps and lighting equipment
    • Manufacture of television and radio receivers, sound or video recording or reproducing apparatus, and associated goods
    • Manufacture of electricity distribution and control apparatus
    • Manufacture of other electrical equipment

Parameters taken into considerations

Following parameters were taken into consideration for observing the trends in innovation of the above mentioned industrial sectors:

  1. Materials Consumed: This represents material consumed for producing the desired products.
  2. Total Emoluments: This represents expenditure occurred on the salaries of the manpower involved in the production process, for the entire sector.
  3. Fuel Consumed: This represents expenditure occurred on fuel consumption during the production process, for the entire sector.
  4. Number of workers: This represents number of the workers involved in the production process for the entire sector.
  5. Net Value Added: This is calculated by deducting total input and depreciation from total output.

For judging the extent of innovation, ratio of first four parameters with respect to net value added was calculated using data as collected in Annual Survey of Industries (ASI). A lower value of the ratio represents more value is added consuming less amount of resources. Therefore lower the value of the ratio for the sector, more innovating, the sector is.  Trends observed for different sectors are discussed in the following section.

 

Results and discussion:

Aggregate data: Ratio of different parameters to net value added as an aggregate for all industrial sectors has been shown in the figures-1 and 2.

 

 

Fig 1: Ratio of different parameters to net value added

 

 

Key observations (figure 1):

 

Sectorwise trends: Sectorwise trends in innovation for different sectors falling under different groups have been discussed below:

1. Trends in innovations in transport sector: Trends in different ratios for sectors falling under different groups has been shown in the figures 2-5.

 

 

Fig 2: Material consumed per unit of net value added (transport sector); for the sectors shown by dotted lines, values on vertical axis are shown on secondary axis

 

 

Key observations (figure 2):

 

 

Fig 3: Total emoluments per unit of net value added (Transport Sector); for the sectors shown by dotted lines, values on vertical axis are shown on secondary axis

 

 

Key observations (figure 3):

 

 

Fig 4: Number of workers per unit of net value added (Transport Sector); for the sectors shown by dotted lines, values on vertical axis are shown on secondary axis

 

 

Key observations (figure 4):

 

 

Fig 5: Fuel consumption per unit of net value added (Transport Sector); for the sectors shown by dotted lines, values on vertical axis are shown on secondary axis

 

 

Key observations (figure 5):

 

2. Innovations in machine tools: This section describes innovation trends in machine tools consisting of two sectors- Manufacture of special purpose machinery and Manufacture of general purpose machinery. Trends in innovation for these sectors have been shown in Tables 1.

 

 

Table 1: Trends in innovation for machine tool sectors

 

 

Key observations (Table 1):

 

3. Paper and leather products: This section shows innovation trends in paper and leather products (figure 6-9).

 

 

Fig 6: Total emoluments/net value added

 

 

Fig 7: Number of workers/net value added

 

 

Fig 8: Total emoluments/net value added 

 

 

Fig 9: Number of workers/net value added

 

 

Key observations (figure 6-9):

 

Electrical and electronics equipments:

This section shows innovation trends in different sectors grouped in Electrical and electronics equipments category (Table 2-5). There are ten sectors covered under this category.

 

 

Table 2: Material consumption per unit of net value added (Electrical and electronics equipments)

 

 

Key observations (Table 2):

 

Table 3: Emoluments per unit of net value added (Electrical and electronics equipments)

 

 

Key observations (Table 3):

Overall ranking of these sectors in terms of innovation achieved in total emoluments is given as below:

  1. Manufacture of accumulators, primary cells and primary batteries
  2. Manufacture of office, accounting and computing machinery
  3. Manufacture of electric motors, generators and transformers
  4. Manufacture of electronic valves and tubes and other electronic components
  5. Manufacture of electricity distribution and control apparatus
  6. Manufacture of other electrical equipment
  7. Manufacture of electric lamps and lighting equipment
  8. Manufacture of insulated wire and cable
  9. Manufacture of television and radio transmitters and apparatus for line telephony and line telegraphy
  10. Manufacture of television and radio receivers, sound or video recording or reproducing apparatus, and associated goods

 

Table 4:  Number of workers per unit of net value added (Electrical and electronics equipment)

 

 

Key observations (Table 4):

Overall ranking of these sectors in terms of innovation achieved in number of workers is given as below:

  1. Manufacture of television and radio receivers, sound or video recording or reproducing apparatus, and associated goods
  2. Manufacture of electric motors, generators and transformers
  3. Manufacture of office, accounting and computing machinery
  4. Manufacture of accumulators, primary cells and primary batteries
  5. Manufacture of television and radio transmitters and apparatus for line telephony and line telegraphy
  6. Manufacture of electronic valves and tubes and other electronic components
  7. Manufacture of electricity distribution and control apparatus
  8. Manufacture of insulated wire and cable
  9. Manufacture of other electrical equipment
  10. Manufacture of electric lamps and lighting equipment

 

Table 5: Fuel consumption per unit of net value added (Electrical and electronics equipment)

 

 

Key observations (Table 5):

Overall ranking of these sectors in terms of innovation achieved in fuel consumption is given as below:

  1. Manufacture of electric motors, generators and transformers
  2. Manufacture of office, accounting and computing machinery
  3. Manufacture of electricity distribution and control apparatus
  4. Manufacture of television and radio transmitters and apparatus for line telephony and line telegraphy
  5. Manufacture of television and radio receivers, sound or video recording or reproducing apparatus, and associated goods
  6. Manufacture of electronic valves and tubes and other electronic components
  7. Manufacture of accumulators, primary cells and primary batteries
  8. Manufacture of other electrical equipment
  9. Manufacture of insulated wire and cable
  10. Manufacture of electric lamps and lighting equipment

 

 

 

Annexure I: Concepts and Definitions of items used in ASI

 

Reference Year   for ASI 2004-05 is the accounting year of the factory ending on 31st March 2005 while the survey was conducted in 2005-06.

 

Factory is one that is registered under sections 2m (i) and 2m (ii) of the Factories Act, 1948. The sections 2m (i) and 2m (ii) refer to any premises including the precincts thereof (a) whereon ten or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on; or (b) whereon twenty or more workers are working or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily  so carried on.

 

Fixed Capital   represents the depreciated value of fixed assets owned by the factory as on the closing day of the accounting year. Fixed assets are those that have a normal productive life of more than one year. Fixed capital includes land including lease- hold land, buildings, plant & machinery, furniture and fixtures, transport equipment, water system and roadways and other fixed assets such as hospitals, schools, etc. used for the benefit of the factory personnel.

 

Physical Working Capital   is the total inventories comprising of raw materials and components, fuels and lubricants, spares, stores and others, semi-finished goods and finished goods as on the closing day of the accounting year. However, it does not include the stock of the materials, fuels, stores, etc. supplied by others to the factory for processing and finished goods processed by the factory from raw materials supplied by others.

 

Working Capital    is the sum total of the physical working capital as already defined above and the cash deposits in hand and at bank and the net balance receivable over amounts payable at the end of the accounting year. Working capital, however, excludes unused overdraft facility, fixed deposits (irrespective of duration), advances for acquisition of fixed assets, loans and advances by proprietors and partners (irrespective of their purpose and duration), long-term loans (including interest thereon) and investments.

 

Productive Capital     is the total of fixed capital and working capital as defined above

 

Invested Capital   is the total of fixed capital and physical working capital as defined above.

 

Gross Value of Plant and Machinery   represents the total original (un-depreciated) value of installed plant and machinery at the end of the accounting year. It includes the book value of the newly installed plants and machinery and the approximate value of rented in plants and machinery at the time of renting-in but excludes the value of rented-out plants and machinery.  Total value of all the plants and machinery acquired on hire - purchase basis is also included.

 

Outstanding Loans   represent all loans (whether short term or long term, interest bearing or not) outstanding according to the books of the factory as on the closing day of the accounting year.

 

Workers  are defined to include all persons employed directly or through any agency whether for  wages or not and engaged in any manufacturing process or in cleaning any part of the machinery or premises used for manufacturing process or in any other kind of work incidental to or connected with the manufacturing process or the subject of the  manufacturing process. Labour engaged in the repair & maintenance, or production of fixed assets for factory's own use, or employed for generating electricity, or producing coal, gas etc. are included.

 

Employees  include all workers defined  above and persons receiving wages and holding clerical or supervisory or managerial positions engaged in administrative office, store keeping section and welfare section, sales department as also those engaged in purchase of raw materials etc. or purchase of fixed assets for the factory as well as watch and ward staff. 

 

Total Persons Engaged  include the employees as defined above and all working proprietors and their family members who are actively engaged in the work of the factory even without any pay, and the unpaid members of the co-operative societies who worked in or for the factory in any direct and productive capacity. The number of workers or employees is an average number obtained by dividing mandays worked by the number of days the factory had worked during the reference year.

 

Wages and Salaries  includes (a) direct wages and salary (i.e., basic wages/salaries, payment of overtime, dearness, compensatory allowance, house rent and other allowances), (b) remuneration for the period not worked (i.e., basic wages, salaries and allowances payable for leave period, paid holiday, lay-off payments and compensation for unemployment, if not paid from sources other than employers), (c) bonuses and ex-gratia payment paid both at regular and less frequent intervals (i.e., incentive bonuses, good attendance bonuses, productive bonuses, profit sharing bonuses, festival or year-end bonuses, etc.). It also excludes imputed value of benefits in kind, employer's contribution to old age benefits and other social security charges, direct expenditure on maternity benefits and crèches and other group benefits. Travelling and other expenditure incurred for business purposes and reimbursed by the employer are excluded. The wages are expressed in terms of gross value i.e., before deduction for fines, damages, taxes, provident fund, employee's state insurance contribution, etc.

 

Contribution To Provident Fund And Other Funds  includes old age benefits like provident fund, pension, gratuity, etc. and  employers contribution towards other social security charges  such as employees state insurance, compensation for work injuries and occupational diseases, provident fund-linked insurance, retrenchment and lay- off benefits.

 

Workmen and Staff Welfare Expenses include group benefits like direct expenditure on maternity, crèches, canteen facilities, educational, cultural and recreational facilities; and grants to trade unions, co-operative stores, etc. meant for employees.

 

Total Emoluments   is defined as the sum of wages and salaries, employers’ contribution as provident fund and other funds and workmen and staff welfare expenses as defined above. 

 

Total Input  comprises total value of fuels and materials consumed as well as expenditures such as cost of contract  and commission work done by others on materials supplied by the factory, cost of materials consumed for repair and maintenance of factory's fixed assets including cost of repairs and maintenance work done by others to the factory's fixed assets, inward freight and transport charges, rates and taxes (excluding income tax), postage, telephone and telex expenses, insurance charges, banking charges, cost of printing and stationery and purchase value of goods sold in the same condition as purchased .   

Total Output comprises total ex-factory value of products and by-products manufactured as well as other receipts such as receipts from non-industrial services rendered to others, work done for others on material supplied by them, value of electricity produced and sold, sale value of goods sold in the same condition as purchased, addition in stock of semi- finished goods and own construction. 

 

Depreciation is consumption of fixed capital due to wear & tear and obsolescence during the accounting year and is taken as provided by the factory owner or is estimated on the basis of cost of installation and working life of the fixed assets. 

 

Net Value Added is arrived by deducting total input and depreciation from total output.

 

Nature of ASI data

The Annual Survey of Industries (ASI) was started by the Government of India in the year 1960 with 1959 as the reference year for collection and compilation of data relating to the industrial sector of the country. This survey was designed so as to overcome and replace the earlier surveys like Census of Manufacturing Industries (CMI) of 1946 and the Sample survey of Manufacturing Industries (SSMI) of 1949. The ASI refers to the factories defined in accordance with the Factories Act 1948, and thus has coverage wider than that of the CMI and SSMI put together. The survey provides the most comprehensive and realistic statistical data regarding the changes in the growth, composition and structure of organised manufacturing sector industries in the country.

Geographically, the survey covers the whole country except Arunachal Pradesh, Mizoram, Sikkim and Lakshadweep. It covers all factories registered under Sections 2m(i) and 2m(ii) of the Factories Act, 1948 i.e. those factories employing 10 or more workers using power; and those employing 20 or more workers without using power. The ASI frame is based on the lists of registered factories/units maintained by the Chief Inspector of Factories (CIF) in each State/UT and those maintained by licensing authorities in respect of bidi and cigar establishments and electricity undertakings. Data for the period 1989-90 to 1997-98 were arranged as per NIC 1987 while those for the period 1998-99 to 2003-04 are as per NIC 1998 and the latest classification, NIC 2004 has been followed for ASI data beginning 2004-05.

This data from ASI provides statistical information to assess and evaluate, objectively and realistically, the changes in the growth, composition and structure of organised manufacturing sector comprising activities related to different industrial sectors in India. Since industrial sector occupies an important position in the Indian economy, ASI data can really give a reflection of industrial performance of the Indian economy. The data is collected under following heads for different sectors of Indian industry:

  1. Number of Factories
  2. Fixed Capital
  3. Working Capital
  4. Invested Capital
  5. Outstanding Loans
  6. Number of Workers
  7. Total Persons Engaged
  8. Wages to Workers
  9. Total Emoluments
  10. Prov. Fund and Other Welfare Exp.
  11. Fuels Consumed
  12. Materials Consumed
  13. Total Inputs
  14. Products & By-products
  15. Value of Output
  16. Depreciation
  17. Net Value Added
  18. Rent Paid
  19. Interest Paid
  20. Rent Received
  21. Interest Received
  22. Net Income
  23. Net Fixed Capital Formation
  24. Gross Fixed Capital Formation
  25. Addition in Stock of
    1. Materials, Fuels etc.
    2. Semi-Finished Goods
    3. Finished Goods

One thing to be noted here is that there is no head which could give information about R&D investments done in different sectors, however the element of innovation can be estimated by observing the growth trends under heads like fuel and material consumed, wages and emolument paid to the manpower and the number of workers involved in achieving a particular value of output or value.

 

Classification of industry under different sectors

The sectors in the Indian industry are classified on the basis of the UN International Standard Industrial Classification (UNISIC) of all Economic Activities 1958 (Rev. 1). This classification known as National Industrial Classification (NIC) has developed gradually on the basis of UNISIC 1968(Rev.2). The NIC-1987 that strictly followed UNISIC 1968 was adapted for ASI surveys in 1989-90 to 1997-98.  The NIC-1998, developed on the basis of UNISIC, 1990 (Rev. 3) was used from 1998-99 to 2003-04. The latest classification, i.e. NIC-2004, developed on the basis of UNISIC 2002 (Rev. 3.1) has been adopted since 2004-05.

 

 

 

 

 

 

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