India: The Next Manufacturing Mecca

Introduction

Even as it progresses toward becoming the world’s third largest economy within a generation, supply chain manufacturing in India remains an enigma to many companies and business leaders. It has already surpassed China in population with 1.4 billion people and will probably have more English speakers than the US by the year 2040. There is a growing consensus that India’s evolving relationship with the US (and China) will set the narrative globally for the 21^st century.

India’s Rapid Rise

In recent years, India has seen a surge in industrial production with the manufacturing industry rapidly becoming one of the most important and largest contributors to the economy. The Indian government has implemented several policies to help encourage growth in the manufacturing sector, which have made India an attractive destination for foreign investors with many large-scale multinational companies setting up factories in the country. This, in turn, has led to an increase in job opportunities and wages, resulting in an increase in the country’s GDP.

Government Initiatives

The Indian government’s ‘Make in India’ initiative, which seeks to promote the development of Indian manufacturing industries to create jobs and boost the economy, is a primary driver of this upward trajectory. Other similar initiatives such as “Digital India” (which is heavily focused on the electronics manufacturing sector) and the Production-Linked Incentive (PLI) and favorable Foreign Direct Investment (FDI) policies incentivize companies to invest in manufacturing facilities in India through streamlined procedures.

Improved Infrastructure

Additionally, India’s infrastructure has improved significantly in recent years, making it easier for companies to set up and operate factories. The country has invested heavily in improving logistics, such as roads, ports, and airports, which has helped to reduce the cost of production and transportation. This has been a major boost for the manufacturing industry, allowing companies to cut down on their production costs and maximize profits.

Engineering Talent

Furthermore, India has a large pool of talented and educated workers. It has been estimated that India produces ten times more engineering students than the US in a year, delivering some of the best Engineering and Computer Science graduates in the world. The country’s large population of talented and educated workers makes it a rich talent pool for companies to recruit from, and it has become a major hub for outsourced technology and software services.

What does this all mean for business prospects in India?

India’s success in software and what could be called complex or “sophisticated manufacturing” have propelled the country towards major economic power status, making it the third-most (some would say second-most based on cost competitiveness) sought after manufacturing destination in the world after the US and China. This skilled and lower-cost talent pool combined with strong government policy support has triggered heightened M&A activity and a growing inflow of PE/VC investment in the manufacturing sector.

Key Indicators

Specific indicators supporting India’s capabilities and narrative include the fact that India:

1) Is the second largest manufacturer of mobile phones in the world.

2) Could become the fifth largest consumer of electronic products by 2026.

3) Has strong R&D and design capabilities in the automobile electronics sector.

4) Is strong in electronics repair in general, representing a $20 Billion opportunity by some estimates.

5) Has considerable talent for embedded software and electronic chip design.

Wide array of ESDM capabilities

India’s Electronics Systems Design and Manufacturing (ESDM) industry covers components and hardware products spanning a very wide spectrum: Office Automation, Aviation, Defense Sector, Medical Electronics, Telecom, Consumer Electronics, Information Technology, Nano Electronics, Solar Technology, among others. The ESDM industry specifically includes design capabilities including Very Large-Scale Designing (VLSI), board designing, product designing, chip designing, as well as embedded systems.

Tech Titans Making Moves

Technology titans such as Apple, Dell, HP, Netflix, Tesla, Intel, and Amazon among many others, have been investing heavily in India.  Amazon has stated that it expects to invest as much as $15 Billion in its India operations over the next decade.

“The likely emergence of China and India as new major global players — similar to the rise of Germany in the 19^th century and America in the 20^th century – will transform the geopolitical landscape, with impacts potentially as dramatic as those of the previous two centuries”. (Mapping the Global Future, the 2005 report of the US National Intelligence Council).

Conclusion

All in all, India’s moment seems to have arrived as it is quickly becoming the next manufacturing mecca. With its rapidly growing economy, improved infrastructure, and talented workforce, the country is well-positioned to take advantage of the opportunities in the global manufacturing sector. As a result, India is likely to remain an attractive destination for foreign investment and further growth in the years to come. But as the saying goes, the proof of the pudding is in the eating!