Purchasing Weighs in on the Pros/Cons of India’s Export Economy

When it comes to global sourcing in the direct materials area, many people I speak with have less familiarity -- and experience -- with India than China. But like many others who believe that a democratic free market will ultimately reward its citizens more than a centrally planned approach to the economy and government, I believe that India's growth will ultimately be more interesting to watch than its neighbor to the East. India, however, is not without its sets of challenges, many of which I've been pointing out on this blog for years. This recent article in Purchasing is a good general primer on the subject (even if its primary audience is the electronics market). According to one expert interviewed for the piece, the primary challenge, as many of us already know, is the sad state of India’s road and rail network. As a result, "It takes an inordinate amount of time to get materials and supplies in and out of India just because of the roads and general chaos in their transportation system."

Top this off with other basic infrastructure challenges and you have a country that can often feel more like the third-world than a thriving economy. Consider how the electrical grid is "abysmal and unreliable" and how the country still has "problems with water and trash collection." At the same time, the article points out, developing a localized supply chain in India can be tough because a lot of raw material still must be imported from outside of India. Still, if you can get past these issues, you’ll find a manufacturing environment that is gearing up for big things. In my view, a large base of skilled labor (at attractive rates), English skills, production flexibility (e.g., the willingness to commit to smaller volume production runs), a port system, which relative speaking, is not that bad and a better understanding of the expectations of Western businesses give India an advantage over China from a manufacturing export perspective. But whether or not they can translate these tactical advantages into manufacturing export growth rates that continually out pace their neighbor is the million lakh question!

- Jason Busch

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