Making India a Global Manufacturing Hub

2020-07-02

Cashing in on global backlash against China over coronavirus, India is promoting itself as a preferred destination for manufacturing.

With its continued focus on improving ‘Ease of Doing Business’, the Indian government is leaving no stone unturned to attract global investors. It has been reported that the country is developing a land pool of around 461,589 hectares, which is nearly double the size of Luxembourg, to attract businesses moving out of China.

Many organisations have their manufacturing setups in several manufacturing hubs across the globe, which not only helps boost local economy, ensures reliability, promotes opportunities among locals but also keeps manufacturing and operational costs low for the organisation. In such scenarios, the local government holds a significant role in building trust and guaranteeing ease of doing business amongst various stakeholders in an organisation.

Over the years, India has risen among the ranks and today is regarded as a preferred destination for various manufacturing setups making it an emerging manufacturing hub. According to Jhankar Dutta, Managing Director, B&R Industrial Automation Pvt. Ltd., “India has a plethora of skilled labours and enhanced minds, which serve as a platform for attracting foreign industries. As per reports, some of the global manufacturers have initiated talks with Indian government for exploring possibilities of shifting a part of their supply chains from other countries as they seek to diversify and enhance their operations. Primarily, we could see that much of the supply chain of various machine builders is a mix from India, China, Europe and America. The percentage share each region contributes varies based on the industry, availability of raw materials and customer bases amongst various other factors. Moreover, cost along with ease of doing business played a vital role in such selection.”

Today, many companies are in discussions with the Indian government and majority are actively pursuing production plans in sectors such as mobiles, electronics, medical devices, pharmaceutical, textiles and synthetic fabric, according to various reports. Definitely, it will be a huge boost to our economy and huge potential for job creation in India, comments Dutta. Moreover, he said, “It will boost the plan for manufacturing and assembling in India as envisioned in our Budget 2020. Some of the Indian states have already made advancement and proposals for enabling foreign manufacturing setups to easily migrate in India and setup their manufacturing shops. However, it is only for time to tell if we were successful in this activity.”

He further anticipates: “With recent developments and focused initiatives by our government, we imagine the process to be not too difficult and surely aims at boosting our economy enormously. India has many hopes for future advancement in manufacturing and making India a true manufacturing hub of the world. Industrialists will play a huge role in uplifting situation and analysing labour laws to provide good employment thus, uplifting the entire market sentiments.”

Explaining the market potential, Dinesh Aggarwal, Joint Managing Director, Panasonic Life Solutions India, said, “India has a very low per capita consumption across categories, products, and services. The growth in consumption will galvanise the growth of the entire supply chain including allied services. All companies across the world are looking for markets that can offer steady growth and good returns. While these manufacturers will need to invest in sales and distribution infrastructure, brand building, etc.; local product development and local manufacturing will ensure their sustained success.”

Appreciating the current leadership’s approach, he adds, “The political leadership in India, especially for past 7 years particularly has displayed an unwavering will to improve the infrastructure, enhance skill level, ease labour laws, eliminate corruption, ease the approval process for FDI and ease the establishment of new businesses which has given a lot of confidence to the global political and industrial leaders. The banking system in India, though getting repeatedly battered in terms of bad debts, has shown an overall resilience and controls therefore financial stability, which is not seen in many countries across the world; including some of the developed nations.”

Another very strong factor in favour of India as a manufacturing destination is the fact that we have a very highly evolved pool of Engineers who can not only manufacture high-quality products but are also able to modify product design, reverse engineer and do value engineering, observed Aggarwal. “This differentiates us from many countries including China. The international companies have understood that they can design products in India at a considerably lower cost and a much faster pace since they can hire a larger team (who are trained with latest CAD and CAM tools) vis-à-vis their home country.

The geographical location of India also gives it a strong advantage of becoming a design and manufacturing hub for South Asia, the Middle East, and Africa which are the emerging markets for the future.”

Niraj Seth, President, Amada (India) Pvt. Ltd. also predicts that many foreign companies will consider shifting their base to India from China. He said, “This is a great opportunity for India. The government has to work a great deal to make this possible. Apart from making infrastructure available there are other areas where we need to commit to foreign companies. Continuity of policies, making compliance easy and simple, and improve ease of doing business at micro level are a few areas where India needs to improve.”

Talking about the steps to be taken by the Indian government, Rajesh Nath, Managing Director, VDMA India said, “As more foreign companies are seeking to move their manufacturing base to India, the agenda of the Indian government should be to attract investment, to accelerate reforms, and to be more transparent in the process and engage more.”

He observed: “If India is to come closer to the level of China’s operations in supply chains, there is a need for a massive push for creating a robust infrastructure. This calls for investments in steady power supplies, efficient port and road operations, and greater ease in custom clearance. Hence, there is scope for India to take pre-emptive action — driving companies towards India. In this regard, the first step would be to acknowledge that having a large population is not a necessary precursor to attract foreign investment, instead a better environment, lower administrative bottlenecks, more incentives would. India needs to move away from an input base system to a more support base system (manufacturing of parts and components) that would promote participation in the supply chains. Further the labour laws have to be modified to enhance productivity and flexibility.”

Highlighting the advantages the country offers to companies willing to invest and start manufacturing, Sriram Ramakrishnan, MD, Fuji Electric India & Fuji Electric Consul Neowatt said, “The government had already initiated the right steps in 2019 to encourage manufacturing by reducing corporate taxes for new manufacturing set-ups and making India competitive compared to ASEAN countries.”

He suggest: “Further attractive export benefits must be given to encourage companies to consider India as a global manufacturing hub and not just for serving the domestic market. In addition, the government should also identify targeted manufacturing segments like electronics and ensure the complete eco-system of suppliers is developed to improve self-reliance and localisation of the supply chain in India.”

Conclusion
It is known that unpredictable events produce unforeseen outcomes, thus rebuilding takes efforts. Many developing countries that lacked contingency plans are facing challenges to rebuild their economies. “The vision of our government together with various schemes in place for making businesses thrive, we witness many world leaders of manufacturing rethinking their strategy and shifting their bases to India. We look forward to a manufacturing evolution in India which in turn helps our economy,” concludes Dutta.

As more foreign companies are seeking to move their manufacturing base to India, the agenda of the Indian government should be to attract investment, to accelerate reforms, and to be more transparent in the process and engage more.
Rajesh Nath, Managing Director, VDMA India

The international companies have understood that they can design products in India at a considerably lower cost and a much faster pace since they can hire a larger team vis-à-vis their home country.
Dinesh Aggarwal, Joint Managing Director, Panasonic Life Solutions India

Some of the Indian states have already made advancement and proposals for enabling foreign manufacturing setups to easily migrate in India and setup their manufacturing shops.
Jhankar Dutta, Managing Director, B&R Industrial Automation Pvt. Ltd.

Continuity of policies, making compliance easy and simple, and improve ease of doing business at micro level are a few areas where India needs to improve.
Niraj Seth, President, Amada (India) Pvt. Ltd.

The government had already initiated the right steps in 2019 to encourage manufacturing by reducing corporate taxes for new manufacturing set-ups and making India competitive compared to ASEAN countries.
Sriram Ramakrishnan, MD, Fuji Electric India & Fuji Electric Consul Neowatt

Reference: OEM Update