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India pips China as next best manufacturing hub
By: Bikky Khosla

Recently Capgemini, the global consulting, technology and outsourcing services major, in its latest report has said that global manufacturers in their quest for newer places to carry out their operations, may find India as a favourite destination. The report even said that India can emerge as the ‘number one outsourced manufacturing destination due to its competitive cost advantages over China‘.

The report also rightly noted that India is now diversifying from its stronghold in the IT and BPO segment to the manufacturing segment, which is currently dominated by its neighbour, China.

If we base our assumptions on the findings of this report, I see an early stirring of a manufacturing-based economic growth in the country.

And why not? I agree that for decades, manufacturing in India has been plagued by draconian labour laws, bad infrastructure and extensive paperwork. But the authorities have, of late, been burning the midnight oil to do away with these bottlenecks and have considerably succeeded. And this is being noticed by global manufacturing giants.

Take for instance, India‘s Special Economic Zones (SEZs); these zones can spearhead its export-led industrialization providing tax holidays and other incentives. SEZs also will have more control over infrastructure like water and power and less regulation. They can create an appetite for worldwide giants to come to India.

India‘s emergence as a manufacturing hub has, and will continue as multinationals are looking for alternatives to China. A talent shortage is lifting wages in China, which has already led to Chinese goods becoming costlier and reducing its advantages over India.

Above that, the West is threatening to impose anti-dumping duties on several Chinese products which has become a matter of worry for multinationals with operations in China. This will be another strong factor that will keep multinational manufacturers interested in India. Without doubt China‘s low-cost tag is not without risks. India scores a point here!

Although critics are of the opinion that certain Southeast Asian nations, including Thailand, Vietnam and Cambodia, can attract global players, I strongly feel that India‘s advantage lies in the fact that it has a big domestic market of more than one billion people. This is where the other Southeast Asian countries lose out. Add to that the low Indian wages as compared to an average daily wages in Thailand or China.

I agree with the Capgemini report that India has to make significant investments for improving its infrastructure to cater to the increased demand of manufacturing and supply chain operations. Indeed the Indian government is eager to attract foreign manufacturing activities, but it will need to make significant investments to harvest this potential....there is no doubt about that.

Even the best reasoning and rationale will only tell us all that the next great manufacturing story can be that of India. Let‘s all work towards this!