Manufacturing segment of MSMEs score over services: CRISIL | SupportBiz

In Brief

Manufacturing segment of MSMEs score over services: CRISIL

Capital investment of manufacturing segment is the game changer.

Crisil analysed the sales and employee cost as compared to the total strength of 9,200 micro, small and medium enterprises in the manufacturing and services sector and found out that the former sector utilised its manpower more productively. The analysis is for the financial year April 1 to march 31.

A significant point in the analysis is that the cost per employee for both the sectors is almost the same. The average output per employee in the manufacturing sector was Rs 27.52 lakh, as against manpower cost of Rs 1.04 lakh per employee. In comparison, the average output per employee in the service sector was Rs 19.10 lakh, as against manpower cost of Rs 1.05 lakh per employee.

The pivotal difference arises due to the capital investments in each of the sector. When a manufacturing sector makes capital investment, they overshadow the investments being made by the service sector. Now the output of the manufacturing sector is directly proportional to its investment. Product asset build scale and the ability to deliver higher employee output, whereas service enterprises need to depend on the skills and size of their workforce to increase output.

Manufacturing enterprises have already succeeded in enhancing their efficiency through the adoption of modern technology and IT-based systems like enterprise resource planning. They can deliver even higher output with infrastructure improvements and the availability of round-the-clock electricity.

Manufacturing thus seems to bode well for overall economic growth, especially as India's large unskilled workforce can be easily absorbed into the sector with short courses in industrial training.