Indian manufacturing is on the up and Chinese investment is leading the way

India, once considered less than ideal for major manufacturing projects, is seeing its reputation shift thanks to Modi’s efforts, with China now the fastest-growing source of foreign investment

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Workers on the production line at the Daikin air-conditioning plant in Neemrana, southwest of New Delhi. According to a Deloitte survey, India is expected to be one of the world’s top five manufacturing nations by 2020. Photo: AFP

Alan Rosling

Alan Rosling is an entrepreneur, adviser and commentator based in Hong Kong.

Published: 3:04pm, 20 Feb 2019Updated: 10:30pm, 20 Feb 2019

When I was the international director for the Tata Group, India’s largest manufacturer, some 15 years ago, we found that we could buy truck wheels from China cheaper than the steel cost in India. We, like thousands of other companies, ramped up sourcing from China.

Things look different today. With escalation of costs in China, shifts in exchange rates, and now the threat of tariffs, China is no longer a cheap manufacturing location. Sourcing of volume goods, like textiles or electronics, is migrating from China. So far, India has not been a major beneficiary of this trend; this looks set to change.

India has followed a different development path from most other successful Asian economies in not prioritising export-led manufacturing. Despite India’s long history of sophisticated manufacturing, strong engineering capabilities and abundant affordable labour, industry accounts for only 23 per cent of GDP. Misdirected government policy, poor infrastructure and crazily complicated regulation have historically contributed to the unrealised potential of India as a manufacturing hub.

One of the first initiatives of the government of Prime Minister Narendra Modi in 2014 was to launch the “Make in India” campaign to boost manufacturing. This was viewed as essential to drive higher GDP growth and create jobs for the million young people who enter the labour market each month.