As economies around the world work relentlessly towards restructuring the global manufacturing order dominated by China, relocation has become an important consideration for business. The focus of most organisations is now on employees & their wellbeing, understanding business risks and managing the supply chain disruptions caused by the spread of COVID-19. Logistics & supply chain decisions have suffered intensely, thus becoming increasingly complex. The selection of a location to set up or expand business is now a key issue for a majority of global players. Very often, the strategic direction to select a country is driven by broader issues such as ease of doing business, tax regimes, labor reforms and strength of supply chain, which drive the favorability of a country as the manufacturing destination of choice. However in the current climate, geopolitical issues have also emerged as an uncompromisable consideration for global companies to make such decisions. Existing trade concerns have further catalysed the market sentiment of coming up with an ‘exit strategy’ from China, and looking for alternative destinations for reduced dependency ony. the countr
Global Outlook for India
Meanwhile, the latest call for Make in India 2.0 is being championed by several countries that have expressed great interest in India. As one of the fastest growing economies in the world, India presents a ripe opportunity for overseas investors with access to its vast, demographically charged and active market. Many global players from almost all sectors are already present in the country like Hyundai, Whirlpool, Magna International Inc, Hewlett Packard, Knorr-Bremse, Nisshinbo, KraftHeinz, BASF, Astrazeneca, Reckitt Benckiser among others. There has been a series of initiatives and policy reforms undertaken by the Indian government to establish the country as a manufacturing hub for the world. These include, but are not limited to corporate tax reduction in 2019, Make in India, Skill India and many more. Recently, the Central Government and various state governments have made robust announcements to attract foreign firms to start manufacturing in India by further easing land acquisition and labor laws. The Indian Prime Minister Narendra Modi recently announced a stimulus package of US$ 260 billion for India, titled as the ‘Atma Nirbhar Bharat’ (Self-reliant India) programme. Sector specific initiatives are also catalysing India’s journey, like the Production Linked Incentive Scheme, Component Manufacturing Scheme, and Modified Electronics Manufacturing Clusters Scheme that were announced last month for the development of the electronics manufacturing sector in India. The Indian government is focusing on creating a conducive ecosystem and working towards making India a trusted supply chain partner and a world leading manufacturing hub. As of late April, more than a thousand global companies were engaged in active discussions with the Indian government regarding electronics, healthcare, textile, and other consumer manufacturing production outlays.
The Business Reality Check
The cost, time and effort of starting a business in India are mammoth, and the entire gamut can be disconcerting without local knowledge. Decision makers from manufacturing would naturally place the bet on some critical factors like supply chain, management consulting and human capital sourcing. When considering expansion or setting up a new business in the Indian context, the following would be paramount to any growth plan-
- Quantified costs and skill advantages in human resources that India offers
- Selection of the right manufacturing destination within India based on an individual context
- Procurement of human resources and related data for business planning
A promising opportunity for global companies lies in India which uniquely offers an upskilled and affordable workforce, along with a supporting industrial ecosystem. This makes it an excellent manufacturing base for the globe and not just for APAC. A democratic and demographically gifted India offers an alternative to China, as the world gains confidence in our country’s economic resilience, governance, and geo-political contributions.
A Promising Future Ahead
The Industrial sentiment around India is very positive, and this is already leading to companies moving their supply chains to India. As mentioned above, the recent announcements made by the Indian Government around easing land acquisition and labor laws have propelled the journey of India as the next big global manufacturing hub. Additonally, these policy reforms have also been acknowledged by varied nations globally who are eyeing India for business in the near future. For example, a memorandum of understanding (MoU) between the a state led government body and the UKIBC was recently signed to collaborate and share information that can help improve connections between UK businesses and India, including by facilitating investor interactions in the UK and in Maharashtra (Financial Capital of India).
As companies around the world reorganize themselves looking for growing markets’ stability, reliability in supply chains, efficiency in operations and workforce, India is not a leap of faith but a logical destination to achieve the manufacturing imperatives of scale, efficiency and quality.
Commentary by Gaurav Chattur. Here’s what you’ve missed?
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