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| IIITA's e-Magazine |
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 Oct-Dec 2007 Vol 4 Issue 15 |
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Volteface |
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| INDIA- NEXT BIG MANUFACTURING GIANT? |
Backdrop
While China has always been considered to be a manufacturing hub and India a services hub, a survey titled 'Off shoring Evolution -- Changing trend in India and China across industries' by Paris-based IT company Capgemini and ProLogis states that India could challenge China's position as the manufacturing centre of the world….
Yes
India is in the making of becoming a new big manufacturing giant. India's annual growth in manufacturing output, at 9 percent and accelerating, is close to catching growth in services, at 10 percent. Exports of manufactured goods to the United States are now rising faster in percentage terms than China's, although from a much smaller base. Also industrial production jumped by 12.5% in the year ended in March, the highest rate in years. With its huge market, productive workers, and finally a government becoming proactive starting to help rather than hinder investment, India is becoming an attractive alternative to China for making everything from sneakers to SUVs. More than two-thirds of foreign investment in the last year has gone into manufacturing in India, not services.
India is having Hyundai Motor's car factory in Chennai producing more than 350,000 Accent sedans and other vehicles a year, at world-class quality levels. Heavyweight cell-phone producers like Nokia and Motorola, German über-carmaker BMW, Hewlett Packard and other multinationals also have their well established factories. Many big multinationals are on the pipeline to establishing their factories in India. Korean steelmaker Posco is planning a $12 billion plant in the eastern state of Orissa, while Luxembourg-based ArcelorMittal (MT) plans to invest $20 billion in two steel mills in Orissa and neighbouring Jharkhand are few examples of big players looking to start up their manufacturing plants.
The main factor driving India's new manufacturing popularity is price. There is a high rise in price at some of the main manufacturing sites in China. Chinese manufacturing wages are between US$250 (US$1 = RM3.41) to US$350 a month whereas they average between US$100 to US$200 per month or lower in Thailand Philippines, Indonesia and other parts of Asia. In India factory jobs start at US$60 a month. Moreover India is having educated elites with good engineering and English skills which forms a competitive workforce for a wide range of industries. Government’s steps to promote an export-led manufacturing boom by setting up special economic zones or SEZs with 10 years tax free and import duty is a positive sign towards building up infrastructure. The demographic squeeze China is facing is looked upon seriously by a number of global manufactures and is a reason for India developing into the world’s next big industrial power. Also India's huge domestic market of 1.1 billion people is one factor companies eyeing on.
I’m inclined to think that India may end up making a niche for itself poised to becoming an end to end design and manufacturing hub for hi-end manufacturing.
No
It may sound argumentative to say “no, India can’t become a new big manufacturing giant” in the near future of around 3-5 years. No doubt, this sector is growing but very slowly. It is far behind the pace of growth of other manufacturing countries in the neighbouring Asian countries.
There is a total lack of manufacturing and supply chain infrastructure. As a result 43 per cent of the companies that off-shored manufacturing activities to India have not achieved their initial objectives. Ports here are struggling to handle rising exports, blackouts are frequent and dirty and potholed roads are common even in Bangalore, the centre of the country's sophisticated computer programming industry. Power supply is erratic. Also red-tapes are very much prevalent. Significant investments towards infrastructure are not made by the government. Setting up of SEZs is also controversial. And pervasive corruption has slowed many efforts to fix these problems. Moreover workmanship is shoddy and lacks finishing and style. Indian products rank very low and are not in the line of comparison with Chinese goods in finishing and style.
I could say unless if we don’t improve our workmanship and don’t have a political set up to back up the existing state of manufacturing with proper investment in infrastructures we won’t be in a position to equal what other big manufacturers are today. It’s could be pretty early to ascertain India to be the next big manufacturing giant from now with the pathetic condition.
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