For the past decade, China has been the undisputed leader in global manufacturing. China has been able to secure this leading position by consistently keeping costs low as a result of inexpensive labor. However, there is a new challenger on the horizon: India, the world’s second most populous country.
India’s Current Position
Current research shows that India is ranked fourth on the manufacturing competitiveness index behind only China, Germany, and the United States. The manufacturing landscape, however, is expected to change dramatically over the next five years. Many analysts are now predicting India to firmly entrench themselves as the second largest manufacturing country in the manufacturing competitiveness index.
What is the manufacturing competitiveness index? It is a basic indicator of the future growth of manufacturing. The index takes into account a variety of economic factors and trade policies, including:
- Access to skilled labor
- Level of trade balance
- Financial and tax systems
- Access to raw materials
The most important indicator is a country’s ability to grow or attract skilled and talented workers. This has been India’s sweet spot, and is a driving force behind India’s projected rise in manufacturing.
The Future of Indian Manufacturing
Businesses around the world use this index to help determine where and how to grow their workforce.
Spain, for example, is a country that has already capitalized on India’s projected growth. Spanish train maker Construcciones y Auxiliar de Ferrocarriles decided to manufacture their railway vehicles and equipment in India. King Juan Carlos of Spain’s Gamesa, who manufactures wind turbines, has also moved their manufacturing to India. Some Spanish companies like the Eldon Group have even gone so far as to move their headquarters to India in order to better capitalize on the value of manufacturing in India.
Today, there are more than 150 companies from Spain that have either partnered with Indian manufacturing companies or have moved their entire manufacturing operations over to India.
Today, there are more than 150 companies from Spain that have either partnered with Indian manufacturing companies or have moved their entire manufacturing operations over to India. This trend is not expected to slow down anytime soon either, especially due to the economic downturn throughout Europe.
There are some drawbacks for manufacturing in India, however:
- The infrastructure is not adequate to support the demand of manufacturing growth
- Utilities like electricity are often not reliable; many areas frequently experience rolling blackouts
- Roads and ports are shoddy in many areas
- The country also suffers from high interest rates
The influx of manufacturing in India will provide additional revenue, which will help to improve the infrastructure, and thereby, increase worldwide demand for Indian made products. The Indian government has also recognized the need to industrialize and has made strides to eliminate the drawbacks of manufacturing in India.
Over the long term, India has far more positives than negatives going for it in regard to manufacturing competitiveness. The government is stable, which is above all else key to sustained growth. They are also being proactive in having a plan for improving the manufacturing infrastructure of the country in order to support the expected growth over the next five years and beyond. The skilled workforce and other low cost advantages are already in place. Once their infrastructure improves, the world will see India take off as a world power in manufacturing.