India: Manufacturing Opportunity Knocks

Over the weekend, I had the chance to read this article on the Indian news website, DNA. Written by Ramesh Mangaleswaran, a McKinsey consultant, the piece offers a succinct perspective on India's potential to become a manufacturing export giant, as well as some of the challenges holding it back today. According to Mangaleswaran, "Historically, MNCs [multi national corporations] have not treated India as a global sourcing and manufacturing hub. Yet, there are several recent examples of MNCs beginning to see signs of success (e.g., Siemens and ABB in electrical and electronic products, Toyota and Cummins in auto components and engineering). For MNCs, India could become either a dominant sourcing and manufacturing base in its own right (in auto components, custom-based and non-electronic products), or an alternative sourcing hub to China to avoid the risks inherent in single-country sourcing (e.g., in apparel)."

What does India have to do to encourage companies to direct global spend its way? Mangaleswaran argues that it's up to the government to "accelerate reforms to support export growth: A few important measures include lowering indirect taxes which will lower price points, boost domestic demand and, therefore, provide scale for export competitiveness; creating enabling infrastructure e.g. the recently announced sector specific manufacturing investment regions, accelerating power and port reforms etc; and supporting skill development e.g. public private partnerships to boost skilled manpower availabilities." As someone who is a big believer in the potential for Indian manufacturing -- albeit with a few words of caution -- I agree with much of what Mangaleswaran has to say. But ultimately what I believe will help India most on the global manufacturing stage is the quality of its labor force and proven university system. Ultimately, this should translate to US-style product innovation in the private sector and help the infrastructure-challenged nation to position itself as much more than just a low cost manufacturing hub. And perhaps, then, even more Indian entrepreneurs will start and focus innovative ventures at home rather than abroad.

Jason Busch

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