Mumbai:
A recent study by the Centre for Monitoring Indian Economy
(CMIE) says that the Indian economy is slowly shifting
its focus from a traditional manufacturing to a trading
or outsourcing economy.
CMIE's
study of the financial performance of Indian companies,
covering the period 1991-92 to 2002-03 shows that the
Indian corporate sector has made huge savings on power,
wage and administrative costs. However, these savings
have been offset by the higher costs of finished goods
(as inputs).
"The
share of purchase of finished goods has increased from
13 per cent in 1991-92 to 20 percent in 2002-03. This
reflects a shift in the business, from manufacturing to
trading or outsourcing. This shift is partly responsible
for the drop in the share of wages and power costs,"
the CMIE study says.
The
study further says that the rise in purchase costs of
finished goods is a lot more than the fall in other costs.
"As a net result of these shifts in the cost structure,
the overall cost of production of manufacturing companies
has increased during the period since 1991-92 when it
was 80.4 percent of the net sales to 82.2 per cent in
2002-03. This is disturbing, given that fact that labour
has become more mobile, its costs have come down and infrastructure
has also improved," the CMIE report says.
The
total cost (including production, selling and administration)
has also increased from 93 percent in 1991-92 to 94 per
cent in 2001-02. In 2002-03, the total cost dropped sharply
to 92 percent of sales. This was essentially because of
an increase in the stock of finished goods, which account
for one per cent of net sales. This alone led to the two
percent rise in the operating profit of the manufacturing
sector during 2002-03.
Data
for the period 1991-92 to 2002-03 shows that the manufacturing
sector has saved on its wage and power bill and administrative
costs. The share of wages in the total costs has declined
from 6.1 per cent in 1991-92 to 4.4 per cent by 2002-03.
The textile and automobile sectors were the biggest gainers
in this respect. The share of power and fuel costs has
declined from six per cent in 1991-92 to 5.2 per cent
in 2002-03.
Further,
the savings on administrative overheads is quite significant.
It has come down from 7.3 per cent in 1991-92 to 5.3 per
cent in 2002-03, the CMIE study says.
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