The Manufacturing Opportunity in India

India has long been associated as a services destination with the phenomenal success of the IT/ITES sector. However, manufacturing companies across the world are beginning to consider investments in India as an alternate destination to China. So why should a foreign company consider setting up a manufacturing facility in India?

Large domestic market

India’s growth story has been driven to a large extend by robust domestic demand and to a limited extent exports. This growing domestic market has enabled India to recover more quickly from the economic slowdown compared to other countries. Whether it is automobiles, electronic goods or steel, the Indian market is emerging as one the top five in the globe. So it becomes imperative for original equipment makers and their suppliers to have a presence in the country to benefit from the robust demand for items like cars, electronics and capital goods. Recently, S&T Motors from Korea entered into a joint-venture with the Garware Group in India to manufacture motorcycles. Similarly electronic majors like LG and Samsung have consistently enhanced their manufacturing capacity in India not just to meet domestic demand but also for exporting to regions such as West Asia and Africa.

Availability of Skilled Manpower

With the large number of skilled engineers that graduate from colleges all over India, foreign companies have a ready pool of personnel to recruit for their manufacturing plants. The government has tied up with the private sector to improve skills and ensure employability of engineers and technical manpower. An example of this is the National Skill Development Corporation that aims to narrow the existing gap between the demand and supply of skilled manpower. It aims to promote skill development by catalyzing creation of large, quality, for-profit vocational institutions. A recognition of India’s growing profile as a global manufacturing hub was the decision of Siemens to make India its center for manufacturing steel plant equipment.

Supportive Policy Environment

The government of India has realized the importance of the manufacturing sector and taken numerous initiatives to spur industrial production. These include simplification of legal formalities, relaxing restrictions on capital investment and repatriation and providing financial and fiscal incentives. The SEZ policy of the government has facilitated the growth of industrial clusters across the country with world-class infrastructure. These policies make it easier for companies from abroad to enter the Indian market, set-up manufacturing plants and profit from the domestic market. States across the country compete with each other to attract foreign investment and create jobs for the local area.

Strategic Location

India is strategically located to serve as a source for supplying goods across the Asian region, to Australia and Africa. India’s large coastline and large ports make it easier for local manufacturers to export goods to other destinations. Liberalization of export norms also incentivizes efforts to increase local production for export purposes. Automobile majors such as Hyundai and Suzuki have been successful in increasing production in India for supplying cars to markets across the globe.

India is slowly but surely becoming an important spoke in the wheel of manufacturing companies across the world. The robust domestic market and supportive environment makes India an ideal destination for companies looking at expanding operations and increasing their bottom lines.

Hyung-joo Lee, simji42@kidd.co.kr

Copyrightⓒ KID (The Korea Industry Daily, www.kidd.co.kr) http://zine.daara.co.kr/plan/139505

(This article is part of IBI Consulting’s monthly column contribution to the The Korea Industry Daily-www.kidd.co.kr)

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