Manufacturing in India

While China has become Asia’s manufacturing hub in the last decade, India’s growth has been focused on the services sector. The Modi government, however, intends to re-establish India as an attractive destination for manufacturing.

The Government’s ‘Make in India’ campaign is designed to attract foreign direct investment and provides a running report of positive change in the sector. India’s manufacturing sector is backed by strong technical and engineering capabilities and a high degree of expertise. However, the average skill level of the labour force is arguably lower than in some neighbouring countries. This can be a positive for small-to-medium enterprises, as a lower-skilled workforce can mean lower manufacturing costs, especially when considering the recent sharp increase in China’s minimum wage.

India’s vast population gives it the advantage of an abundant labour supply, relative to other cost-competitive markets such as Indonesia and Vietnam. Establishing your manufacturing operations in India could lead to exceptional gains in the long term.

Businesses also have the opportunity to create significant positive impacts in the communities within which they establish factories or plants, by upskilling local workers. This may even help to fulfil their corporate social responsibility (CSR) requirement, which is a condition of incorporating in India. Two per cent of a company’s annual profit must be spent on CSR initiatives.

Major manufacturing hubs in India include Mumbai and Pune in Maharashtra, Gujarat, Tamil Nadu and West Bengal. A major downside to manufacturing in India is the current lack of infrastructure. Although the Government plans to improve road and rail infrastructure, it is critical that you factor existing energy, transport and telecommunications infrastructure into deciding where you would like to set up your manufacturing operations. While a less urban location could have lower labour costs, it may end up costing you more if there is little or no access to water and power or if supplies and the supply of materials to you is delayed.

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• Made in India campaign
• Quality control

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