.jpg)
The pandemic and the US-China trade war have caused global manufacturers to actively look for ways to diversify their supply chains and lessen their reliance on China. A strategy widely termed "China plus one."
Many countries are competing to be the "plus one," but India is the front-runner.
Here's what you need to know
Why is India the preferred choice?
Since China's entry into the World Trade Organisation in 2001, many organisations have flocked to China for its low-cost manufacturing and business-friendly environment.
As China became wealthier, labour costs rose, and it became unsustainable to keep up with rising manufacturing costs.
India's labour force and domestic market are comparable in size to those of China. Additionally, China was recently surpassed by India as the world's most populous nation.
How is India emerging?
After decades of disappointment, India's manufacturing is making progress. Its manufactured exports were barely a tenth of China's in 2021, but they exceeded all other emerging markets except Mexico's and Vietnam's.
The biggest gains have been in electronics, where exports have tripled since 2018 to $23 billion in the year through March. India has gone from making 9% of the world's smartphone handsets in 2016 to a projected 19% this year.
How have MNCs expanded in India?
No company better bets on India as the next China than Apple. Apple commenced assembling low-end iPhone models in India in 2017 and swiftly began producing its newest, flagship iPhone 14 here within weeks of its launch.
J.P. Morgan estimates a quarter of all Apple iPhones will be made in India by 2025. Indian officials hope Apple's presence will spur others to come.
Things working in favour of India!
The democratically-run govt of India is viewed as a natural partner by Western nations, and the govt has worked to improve the business climate and concluded numerous trade agreements with a number of countries.
India has a much younger population and growing support for its policies, including tax breaks for businesses, the creation of special economic zones, and incentive schemes to encourage investment in domestic industry.
Challenges India need to overcome!
Its infrastructure is underdeveloped, its labour force is still largely unskilled and impoverished, and its regulations can make doing business difficult.
It can take longer to obtain land and approvals for a factory to be built in India, and it takes time to obtain visas for foreign technicians, managers, and engineers.
Due to relocation issues, local officials and businesses report that labour shortages are forming in India's manufacturing areas.
As long as China dominates the production of critical electronic components, solar panels, and lithium batteries, India cannot expect to overtake China as the world's factory any time soon.
Effects on India's Manufacturing
Foreign direct investment into India averaged $42 billion annually from 2020 to 2022, a doubling in under a decade, according to central-bank figures.
Multinational firms have begun producing everything from solar panels and wind turbines to toys and footwear in India.
China has finally found a worthy rival as the world's factory floor; India.
Comments