Introduction

Manufacturing sector is regarded as the prime driver of economic growth and development for a country. Presence of a strong manufacturing sector is quintessential in generating adequate employment opportunity in an economy. With a gradual opening up of the Indian economy since mid-80s, the opportunity for growth for the Indian manufacturing firms has multiplied on one hand. On the other hand, the firms have to face the externalities emanating from the exposure to the industry-specific and macroeconomic factors. In a liberalized economic environment, the competition becomes fierce. In the wake of such enormously competitive environment, the firms belonging to the Indian manufacturing sector has to operate efficiently and more importantly profitably to sustain in the long run. Therefore, it is of utmost importance to understand the diversified factors which are capable of affecting the level of efficiency and the financial performance of the firms. The various factors which affect a firm normally get classified into three broad categories such as microeconomic, industry-specific and macroeconomic factors. Irrespective of the policy regime, these three factors have remained at the core of the financial performance analysis of the firms belonging to the Indian manufacturing sector. But with the opening up of the economy, the industry-specific and macroeconomic factors became even more important. Thus, the formulation of the business strategies in the post-liberalized business environment requires special consideration of all these factors together. In this introductory chapter the need of the manufacturing sector and the various microeconomic, industry-specific and macroeconomic determinants of the financial performance of the firm pertaining to the diverse manufacturing sector have been emphasized. This chapter also underscores the innovativeness of the book at the end of this chapter.