How India can replace China as a global manufacturing hub post-COVID including auto sector

India as the next global manufacturing hub: Several industries have realized the drawbacks of being excessively dependent on manufacturing on a single country and are looking to expand the geographic spread of their facilities.

By:Updated: May 07, 2020 6:27 PM
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In 2010, China overtook the US to emerge as the world’s largest manufacturing sector. However, the rise of China as the world’s factory began way back in the 1980s initially as a producer of low-end products which gradually rose to become a manufacturing hub of everything under the sun – from drugs to electronic gadgets. According to estimates of the UN Statistics Division, China accounted for 28 percent of global manufacturing output in 2018[1]. Yet, the Coronavirus epidemic is beginning to change this in many ways. The supply shock created by a Chinese shutdown has prompted global firms to look for new manufacturing centres as a part of a risk hedging strategy for the future. Several industries have realized the drawbacks of being excessively dependent on manufacturing on a single country and are looking to expand the geographic spread of their facilities.

This presents a moment of opportunity for India which can reap rich dividends by creating a manufacturing-friendly environment and offering lucrative deals to global players for setting up units in India. Reports have indicated that a large number of companies have already initiated talks with Indian authorities seeking to pursue production plans in this country in sectors such as electronics, medical devices and textiles, among others[2]. India needs to capitalize on this opportunity and present itself as a viable alternative manufacturing destination.

Creating a world-class manufacturing ecosystem

Interestingly the prolonged China-US tariff battle had already made global companies jittery about keeping a bulk of their manufacturing centres in China. The COVID 19 pandemic has further emboldened and accelerated their plans to diversify their manufacturing capacity beyond China. A number of countries emerge as viable manufacturing options in this situation. Vietnam, Indonesia, Cambodia and Singapore apart from India are prominent options that global companies are considering.

India needs to act proactively to create an environment that is favorable to global manufacturing so that once the COVID 19 crisis blows off, international organizations can look at us as a trusted supply chain partner. This needs creation of a best in class manufacturing ecosystem that offers efficient and highly trained manpower, encourages innovation, allows ease of doing businesses and protects intellectual property.

India would do well to go back 30 years in history and learn what the Chinese did back then to become a global manufacturing powerhouse. What prompted China’s success were factors such as world-class infrastructure, logistics, complete policy support to the sector as well as low labor wages. If India learns from that experience and creates a favorable ecosystem with a cluster of buyers, sellers, technology and skilled labor, it can become the next global manufacturing hub.

Fostering Innovation and Skill

To facilitate greater foreign investment we need to foster innovation and boost manufacturing infrastructure to create greater mechanization skills in the country. There are different levels of manufacturing capabilities. First is the set of manufacturing activities such as mining, producing raw materials and agriculture-related goods which require a very low level of skill set.

On the other hand are activities such as textile, apparel and electronics manufacturing which require a low level yet specialized skill set. However, the manufacturing of high-end complex products such as top-end machinery and chemical products requires highly sophisticated capabilities of development. As a country that wishes to become a manufacturing hub, India must work to bolster its capabilities in all kinds of production ends by fostering innovation.

The government has already placed a decisive focus on leveraging the manufacturing sector to create jobs for millions of Indians with initiatives such as ‘Make in India’ & ‘Skill in India’. Enhancing skill development to create a large pool of skilled human resources is also an important element of preparation. When the world looked out to outsource its services sector work two decades back, India had a ready pool of IT experts and English speaking graduates who could lap up that opportunity and made India a services hub.

Also read: How car rental could be your new safety move against COVID-19 after lockdown

Similarly, for us to become the most preferred manufacturing hub, we need a ready pool of skilled human resources in the field. With greater automation becoming the norm in every sector, the nature of jobs has also changed. The emergence of IT-enabled technology in every sector has created a demand for specialist workers such as 3D printing specialists, automobile analytics engineers, apparel data analysts, E-textiles specialists, etc. India must boost the skill of its workforce with an eye on these futuristic needs.

Indian manufacturing sector must also rise to the occasion and plan with a futuristic approach at how to grab a major pie of the shifting manufacturing business. We hope in future the evolution of the Indian market and manufacturing sector can allow us to scale up manufacturing hotspots to feed multiple manufacturing requirements of global industries.

Author: Pankaj M Munjal, Chairman & MD, HMC, a Hero Motors Company

Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or its employees.

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