India pips US to be 2nd most attractive manufacturing hub; China first

India pips the US to be 2nd most attractive manufacturing hub globally, China retains the first position. And know more about India's manufacturing sector.

Created On: Aug 26, 2021 17:03 IST
India 2nd most preferred manufacturing destination, Source: PTI
India 2nd most preferred manufacturing destination, Source: PTI

India has emerged as the 2nd most attractive and sought-after manufacturing destination globally, stated Cushman & Wakefield 2021 Global Manufacturing Risk Index. The Index assesses the most preferred locations for global manufacturing among 47 countries in Europe, the American, and Asia Pacific region. China retained the top position while India and the US ranked second and third respectively. In the last year’s report, the US ranked second while India was third.

COVID-19 has had a significant impact on the manufacturing sector in the countries across the Asia Pacific region over the past 18 months resulting in total industrial output falling by approximately 7 per cent in the first half of 2020 before bouncing back. Asia-Pacific’s largest manufacturing hubs have recovered due to the country’s ability to restart its manufacturing sector. Countries such as China and India who have ranked first and second respectively on the Index have demonstrated economic conditions and infrastructure supportive of a faster recovery.

What is Global Manufacturing Risk Index?

Cushman & Wakefield 2021 Global Manufacturing Risk Index assesses the most preferred locations for global manufacturing among 47 countries in Europe, the American, and Asia Pacific region. The Index offers clients and manufacturers key information and statistical data to make optimal location decisions.

What are the parameters for Global Manufacturing Risk Index?

The countries are assessed on four key parameters:

(i) Bounce Back: This indicates the country’s ability to restart its manufacturing sector. Countries with economic conditions and infrastructure supportive of a faster recovery rate are at the top of the ranking while ones facing obstacles in achieving a full recovery are at the booth.

(ii) Conditions: This indicates the business environment, including the availability of labor and access to markets.

(iii) Costs: This indicates the operating costs including labor, electricity, and real estate.

(iv) Risks: This indicates the economic, environmental, and political risks.

How did India emerge 2nd most preferred manufacturing destination?

The rising interest in India as a preferred manufacturing hub has been attributed to the country’s proven success in meeting outsourcing requirements, operating conditions, and cost competitiveness. As per the Index report, manufacturers in India could also benefit by relocating activities from China to other parts of Asia. However, further reforms to both land and labor laws are critical to maintaining India’s success as a global manufacturing hub.

India’s Manufacturing Sector – Key developments

In World Bank's Ease of Doing Business Ranking 2020, India jumped 79 positions from 142nd in 2014 to rank 63rd in 2019 among 190 countries.

With the improvement in the rank of Ease of Doing Business in India, growth and demand potential, subsidies and incentive schemes, industry-specific policies, supportive infrastructure, FDI relaxations, availability of skilled labor, strong macro-economic fundamentals have been fueling the growth of India’s manufacturing sector.

The Indian government has been introducing ambitious initiatives to bring in reforms to boost the manufacturing sector such as:

(i) Introducing tax reforms such as reducing corporate tax from 30 per cent to 22 per cent for existing manufacturing companies and from 25 per cent to 15 per cent for new manufacturing companies, and scrapping the Dividend Distribution Tax since April 2020.

(ii) Introducing initiatives such as Skill India, Make in India, National Infrastructure (NIP), Credit Guarantee Scheme for Micro and Small Enterprises, ASPIRE, PM Employment Generation Programme (PMEGP), Atmanirbhar Bharat program, Industrial corridors that aid in creating a favorable growth ecosystem to emerge as a trusted supply chain partner and preferred manufacturing hub.

(iii) Schemes to strengthen the manufacturing industry such as Production Linked Incentive Scheme (PLI), Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), Modified Electronics Manufacturing Clusters (EMC 2.0).

(iv) The Indian government is also looking into investor-friendly land reforms to boost the manufacturing sector thus encouraging foreign companies to relocate their manufacturing centers to India.

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