New Delhi. In recent years, India has undergone a remarkable transformation in its manufacturing landscape, evolving from an outsourcing-dependent country to a potential global manufacturing powerhouse. These changes have happened due to various factors, during the Modi government, India is moving towards all-round development not only in the field of service but also in the field of manufacturing. Let us know in detail about the journey of India’s manufacturing sector and the challenges ahead..
China’s dominance and India’s initial challenges
In the past, India faced challenges in finding cost-effective manufacturing solutions locally, leading to outsourcing efforts to platforms such as Alibaba. However, China emerged as a manufacturing giant between 1995 and 2018, outpacing India’s industrial growth by six times and dominating global exports.
India’s turnaround
India has become the world’s second largest smartphone producer, signaling a change in the manufacturing landscape. The global scenario, including the US-China trade war, disruption caused by the pandemic, and political movements such as Make in India and Make America Great Again, created opportunities for India. Companies like Tata, Boeing and Tesla are considering India as a manufacturing hub.
China’s challenges
China faced a setback during the pandemic, with 57.7% of manufacturing companies reporting a decline in demand. The ongoing US-China trade war has further strained export relations, hurting China’s industrial production and retail sales.
Boost in Indian markets due to huge fall in China
The manufacturing sector in India has boomed as a result of disruptions in China’s manufacturing sector. The focus is on India as a potential manufacturing partner, especially in electronics, with companies like Foxconn and Samsung setting up production units.
How China became the world’s factory
China’s transformation began in 1978 when Deng Xiaoping introduced the Open Door Policy, attracting foreign investment.
Special Economic Zones (SEZs) were established to encourage more foreign investment, which boosted the manufacturing sector. China’s share in global exports increased from 1% in 1978 to 2.2% in 1991.
After independence, economic liberalization was delayed due to India’s closed-door policy influenced by the Soviet Union. The country adopted a more open approach in 1991, allowing foreign investment and beginning economic reforms. Make in India, Self-reliant India and production-linked incentive (PLI) schemes have been important in promoting manufacturing. The PLI scheme launched in 2020 has seen significant growth in sectors such as pharmaceuticals, chemicals, automotive and electronics.
success stories
India has become the world’s second largest smartphone manufacturer, with major global players investing in the country. Export restrictions on laptops and PCs led to agreements with companies like Dell, HP and Asus for manufacturing in India, creating employment opportunities. The government’s focus on increasing import duties on toys has led to a decline in imports by more than 70%, providing a window of opportunity for local manufacturers. The plan for a toy park in Uttar Pradesh aims to make India globally competitive in the toy industry.
Vaccine manufacturing and soft power
India’s role as the “pharmacy of the world” during the pandemic showcased its vaccine manufacturing capabilities. Success in vaccine production enhanced India’s soft power on the global stage. Low worker productivity is a challenge, with Indian workers being four to five times less productive than their counterparts in other countries. There is a need to improve logistics infrastructure with a focus on increasing railway connectivity to reduce transportation costs. There is a need to increase research and development expenditure in India in line with global innovation standards.