This is the time for manufacturing in India to shine
The news of over 1,000 foreign firms contemplating shifting production from China to India has become a talking point. The “China plus one” sourcing strategy was already being seriously considered pre-COVID-19 and the pandemic has acted as a catalyst.
In fact, we are in the process of assisting a British manufacturer in limiting its supplies coming out of China to under 50 percent (previously around 90 percent) by finding alternative sourcing or manufacturing opportunities in India.
The existing manufacturing ecosystem has been honed for decades in India. For instance, India already has automotive capabilities – a mature ecosystem contributing circa 7 percent of the country’s GDP. Pharmaceuticals, mobile phones, machinery, and textiles are other well-established supply chains. This robust network of both small and large manufacturers, availability of skilled and semi-skilled labour, and the willingness to conduct business makes a strong case for manufacturing in the country.
More recently, the GBP 208 billion stimulus package announced by the Indian government focusses on tax breaks for smaller companies, as well as incentives for MSMEs, such as the GBP 31 billion collateral free assistance for MSMEs. This should, in turn, help India to locally substitute import of low-technology products and components.
A significant number of industrial units in India fall under the MSME classification. In the manufacturing sector, these MSMEs contribute to over 30 percent of India’s output and more than 40 percent of overall exports.
India MSMEs should not be underestimated. Start-ups set the tone when the pandemic struck. Indian entrepreneurs came up with lateral ideas and frugal innovations which addressed very India-specific problems – be it low-cost, easy-to-use and portable ventilators, or robots to deliver food and medicine to patients, or a water treatment company designing a disinfectant tunnel.
These are the entities that will define and shape India’s manufacturing sector in the immediate future. We must be mindful of not letting this innovative zeal fizzle away. Sadly, historically, there is empirical evidence this can be the case. This is where collaborations with UK industry come into the picture. Pretty much like a jigsaw puzzle where pieces of technology, ideas, and scalability complement each other to form a coherent picture.
If we consider all of these factors, in conjunction with the facilities that central and state governments have already made for foreign business such as easily available land, both in mega special economic zones (SEZs) and in standalone parcels; further complemented by increasingly business-friendly regulations, changes in state labour laws, tax breaks, and other incentives, it is clear why UK manufacturers are turning to India.
The next step is to understand whether these options are truly applicable and valuable for you. India’s aim is to increase competitiveness in line with the “Make in India” programme and the recent narrative of being “vocal for local”. Your UK business could play a vital role as a local player, de-risking its supply chain whilst developing significant opportunities that continue to emerge as we reset for recovery, linking to an India eco-system with the guile and ambition to form meaningful partnerships.
Contact firstname.lastname@example.org and understand your options in India today.