Interestingly, China may be dislodged by the US from the number one position

Suparna Goswami Bhattacharya

May 23, 2016: That India is known for its information technology services globally is widely accepted. But the country is also ready for the next phase of growth in manufacturing. According to a report by Deloitte, India is projected to be one of the leading destinations for manufacturing by 2020.

The report states that India, which is currently ranked 11th most competitive manufacturing destination in the world, is expected to jump to five by 2020 beating the likes of South Korea, United Kingdom and Singapore.

Interestingly, China may be dislodged by the US as the numero uno manufacturing nation.

Not many experts though are surprised by India’s projected ranking. The ‘Make in India’ campaign started by the Narendra Modi government to boost the manufacturing industry has rekindled interest among global players.

K Kumar, Senior Director, Deloitte in India, says, “The Make in India campaign by and large gives clarity on what needs to be done. There are a number of areas where the government processes have been improved – be it interface with the government, approvals or certification.”

A number of large projects that have taken time to implement have been taken up to clear the way for faster implementation. Some of the politically sensitive issues like labour reform and land acquisition are being taken up for implementation at the level of states through the provincial legislatures. Most importantly, demand is being created through government spending on infrastructure, which was a huge problem a couple of years ago.

Anwar Shirpurwala from Manufacturers’ Association for Information Technology (MAIT), an association empowering the ICT industry in India, says that proactiveness of the current government clearly shows there is a political mood to turn around the country into a manufacturing hub. “We always had a large domestic market but never the right attitude to tap it. For instance, Indian IT manufacturing sector has the potential to generate 4,00,000 jobs over the next five years, and can help achieve the Vision of Net Zero Imports by 2020,” remarks Shirpurwala.

“It looks like the Make in India campaign has started well. Since it is a flagship programme of the government, it gets all the attention it requires. The investment cycle looks like kicking in,” says Kumar. Additionally, programmes like Start-up India aspire to create entrepreneurs in the underprivileged strata of society.

According to Tarun Mishra, founder, Covacsis, there are many factors which will make India an attractive destination for manufacturing in the next five years. “The percentage of GDP contribution from agriculture is shrinking and will continue to do so in the next 10-15 years due to an aspirational middle class young population. The service industry alone will not be able to absorb the young population. Hence, industrial growth is the only option to provide employment,” he explains. Covacsis Technologies is a state-of-the-art platform that provides 360° visibility of the manufacturing floor in real time.

Mishra goes on to add that manufacturing will not be a blue collar job anymore. Profound adoption of mainstream technology like IoT, big data, stream, video, machine learning and artificial intelligence will make manufacturing look completely different and glamorous. And India has a natural supply of those kind of skills.

Though India will have an advantage thanks to its low cost of labour, this alone will not be the main factor. “Certain sectors and product space will emerge, which won’t be price sensitive. India will require to champion agile manufacturing, which will be the new reality,” says Mishra.

That said, there are a number of things to be done in quick time – rolling out of GST, for example. The pace at which reforms in land acquisition and labour laws will be taken to all the key manufacturing states will be critical. “There are sectors wherein government policy is crucial. For example, defence. While the legal systems are in place, it is still a time-consuming process. The extent of academic and fundamental research has to pick up for companies to manufacture innovative products in the country,” says Kumar.

Focus on scientific research and development is the fundamental driver for sustained and long term manufacturing economy.

Current Rank             Country

1                                  China

2                                  United States

3                                  Germany

4                                  Japan

5                                  South Korea

6                                  United Kingdom

7                                  Taiwan

8                                  Mexico

9                                  Canada

10                                Singapore

Source: Deloitte Touche Tohmatsu Limited and US Council on Competitiveness, 2016 Global Manufacturing Competitiveness Index

Projected Rank (2020)                       Country

1                                              United States

2                                              China

3                                              Germany

4                                              Japan

5                                              India

6                                              South Korea

7                                              Mexico

8                                              United Kingdom

9                                              Taiwan

10                                            Canada

Source: Deloitte Touche Tohmatsu Limited and US Council on Competitiveness, 2016 Global Manufacturing Competitiveness Index