India: The Next Manufacturing Powerhouse
Updated: Nov 17
With a growing population of 1.2 billion people and an emerging middle class, international companies are seeking to establish manufacturing bases there, and it is predicted that they will soon rival China as such.
India has the potential to be the next manufacturing powerhouse, and it is predicted that it will soon rival China as such. This growth has been due in large part to India’s recent economic growth. With a population of 1.2 billion people and an emerging middle class, companies are starting to manufacture their products there, driving down costs for everyone involved, including buyers and sellers both domestically and internationally.
Companies like Apple have already begun production in India with plans on expanding more; this could mean big things for Indian workers who can finally see themselves earning good wages while also having access to some of the best technology in the world. For those looking into purchasing any sort of product from abroad or domestically, this means that it is now cheaper to do so as the prices have been more evenly distributed with this new manufacturing power.
India’s Economic Growth Upwards and Onwards
Since opening up its economy to foreign direct investment, there has been increased interest from companies looking into manufacturing their products in India. In fact, Apple is one such company that plans on expanding the production of iPhones and other products there. There are already many electronics manufacturers in Bangalore, including Dell and Samsung It isn’t just electronics companies either.
After making its India debut at Auto Expo 2020, Chinese automaker Great Wall Motors, announced that it had signed a Memorandum of Understanding (MoU) with the Maharashtra government for a phased $1 billion investment in the automotive manufacturing facility in Talegaon, Maharashtra, acquired earlier from General Motors in January that year.
Looking to leverage India's manufacturing potential? Get in touch
Shifting Manufacturing to India
The picture of manufacturing in India is rapidly changing, however. According to the U.S Census Bureau, India’s share of global exports of computer and electronics products has grown from 1% in 2000 to an estimated 12% in 2012. This is due to high wage rates in China, which are pushing companies like Foxconn, Nokia and Microsoft to relocate their business operations there. As a result, even Chinese factories are moving across the border where wages are less than half as much. The Indian government has also promoted ‘Make in India’ with initiatives such as “Digital India” and “Skill India” which aim to support local manufacturers. These policies have encouraged foreign investment resulting in $ 55 billion worth of investments in 2014 and $ 275 billion projected by 2020.
As a consequence of all this, manufacturing employment has grown at an average annual rate of 1.1% from 1998-2000 to 2011-2013, compared to China’s 6%. The number of people employed in the manufacturing sector is also increasing rapidly with an 8.6% increase in female employment along with a 9.5% increase in male employment. This means in the next ten years, 300 million jobs will be available in the manufacturing sector. India is also predicted to overtake China as the world’s largest outsourcing destination for IT services by 2020, according to reports by Nasscom.
Challenges to an Emerging Powerhouse Economy
There are a few challenges that might come with this transition to an emerging powerhouse economy. Some of those challenges include the following:
India may experience difficulty in integrating and assimilating all 1.2 billion people within its borders. There is still a significant gap between the rich and poor, and providing access to opportunities for lower-class citizens will be crucial for continued economic growth. This will require a redistribution of resources, some social changes that will be difficult to manage, as well as an education overhaul to better handle the population. There are many people in India who have not experienced economic prosperity before, and this may pose some challenges for them at first as they grow accustomed to their newfound wealth. These changes make sense, but they will take time to implement properly
India must also be careful in its approach toward foreign investment. There is a fine line between making sure that companies are welcomed with open arms and allowing them to take advantage of the country. The idea here is not just for India to attract money from these companies, but rather that they too will invest in Indian society as well, which means training local workers and giving back where possible
India has a history of lack of property rights, contract enforcement and a complex bureaucracy. This may be a deterrent for companies looking into doing business there because it means a lot more risk-taking on by the companies. These issues also may hurt India in the long run because it reflects poorly on their economy overall. Corruption is still a major problem but on a relative scale it does not look as bad as it did before as these issues get addressed and steps are being made to improve them
These challenges are surmountable and necessary if India is going to continue this transition successfully. However, with the right leadership and infrastructure in place, they will not pose such large issues that cannot be overcome in the long term.
Geopolitical Factors with India’s Neighbors
India has a long history of disputes with Pakistan, with many wars fought between them. This includes the Indo-Pakistani Wars of 1947 and 1965, as well as the Kargil War of 1999. Pakistan’s military is relatively stronger than India’s due to increased funding coming from China.
Kashmir is one of the most sensitive issues in the entire region. It is split between Pakistan and India, which has led to ongoing tensions between both countries. It intensifies even more because of the fight for independence by some Kashmiris, who want to secede from both India and Pakistan.
China and India share a long border, which has resulted in tensions and conflict due to competing claims over certain areas of the Himalayan region.
India has a growing population of 1.2 billion people and an emerging middle class. But with these economic upheavals come challenges. With strong leadership and infrastructure in place and deep consideration for how best to handle and manage all encountered difficulties, these challenges are surmountable.
As India continues this transition successfully, and with predictions to soon rival China as the next manufacturing powerhouse, it’s crucial to find expertise in design, assembly, packaging and global supply chain management, as India going forward has only bright future possibilities.
Looking to leverage India's manufacturing potential? Get in touch