India on its way to become manufacturing hub

Topics: Industry, India, Automobile industry in India Pages: 7 (1707 words) Published: August 21, 2014
India as World’s Manufacturing Hub

For long, Taiwan and China have been at the outsourcing manufacturing boom in Asia. So much so, that 80% of toys sold in the US are made in China. But things are slowly working in favour of India. India is on its way to become a major contract manufacturing hub. There is a huge opportunity in manufacturing waiting to be tapped. A new India is transiting from a third world country status to a league of developed nations. It is the world’s third-largest repository for foreign direct investment (FDI), after China and America. Goldman Sach’s Report (Brazil, Russia, India, and China – BRIC major players), projects India as a potential winner ahead of China and would overtake U.S.A. and China by 2025 in terms of Real GDP.

India- Past & Present

The 70’s, 80’s and early 90’s:
There was dominance of Public Sector across industry. The market was mainly governed by sellers with limited competition. There existed closed Economy with negligible presence of multinationals. GDP growth was below 4% (Hindu rate of growth) and primarily agriculture based.

India post 1991 and counting:
100% FDI in most sectors has seen Pepsi, Coke, Shell, Ford, GM, Suzuki., Toyota, Amex, Citibank, GE, Microsoft, Pfizer, Novartis, GSK, Merck operation in India (availability of world class products). A new India is transiting from a third world country status to a league of developed nations.

Current Scenario:
India's manufacturing sector is gaining momentum and has been ranked fourth in terms of textiles, tenth in leather and leather products etc. Government of India, to promote exports and make India a manufacturing hub, has taken various initiatives including the development of Special Economic Zones. Major global companies have already invested in India to name a few like Samsung, LG, Suzuki, Skoda Auto, Philips are among the some who have already invested and most of the global giants have stated the process to enter in India


The country has become a manufacturing outsourcing destination because of cheap labour, talented and knowledgeable workforce, supportive governmental policies, improved quality control measures, world-class technology and consistent economic growth. The most promising sectors for India are auto components, pharmaceuticals, electronic hardware, apparel, foot ware, toys and specially chemicals. Cost of employing engineers – essential to manufacturing services – is one-third to one-fifth lower in India than in industrialized nations such as the UK and the US There is adequate availability of manpower and skills.

India is growing by leaps and bounds but there is a major problem of unemployment. There is an immediate need to generate 10 million jobs per year. And above all, due to multi party rule, India need to accommodate political ideology with economic reality (reservation, labour law reforms).Growth has been urban centric. Rigidity in labour laws is also contributing to higher capital intensive. Population increase of about 100 million in last 5 years, which has seen about 50 million new jobs, is largely in the unorganized sector. Transaction costs are high due to capacity constraints at ports resulting in delays.

India has become a growth destination for several global companies. Organizations are becoming increasingly competitive on the efficiency and flexibility of their supply chains and not merely on their product features and quality. They have realized that being technology driven and updated is the key to compete in the global market.

Fastest growing sectors:
The Indian automobile sector currently generates revenues of $34 billion a year; Auto sector could grow to $145 billion by 2016. India has gradually become a sourcing hub for auto companies worldwide. Among the companies outsourcing from India are General Motors, Ford, Daimler Chrysler, Hyundai, Fiat, Toyota,...
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