India has overtaken the United States to become the second most favoured manufacturing destination in the world, according to a report by real estate consultant Cushman & Wakefield. “India takes the second spot after China as the most sought-after manufacturing destination globally,” Cushman & Wakefield said in a statement. The US is in the third position, followed by Canada, Czech Republic, Indonesia, Lithuania, Thailand, Malaysia and Poland.
In last year’s report, the United States was in second position and India at third, but the reforms taken by the government during the pandemic and manufacturing incentivisation schemes such as PLI helped the country to pip the United States.
“This year, India and the US switched places (second and third) taking India one rank above from the rankings released last year, when India stood at the third place. This switch in ranking is attributed to the plant relocations from China to other parts of Asia due to an already established base in pharma, chemicals and engineering sectors, that continue to be at the centre of the US-China trade tensions,” it said.
The ranks are given on the basis of competitiveness on four key parameters – country’s capability to restart manufacturing, business environment (availability of talent/labour, access to markets), operating costs, and the risks (political, economic and environmental).
“The growing focus on India can be attributed to India’s operating conditions and cost competitiveness. Also, the country’s proven success in meeting outsourcing requirements has led to the increase in the ranking year-on-year,” the statement said.
Although the country is still third when it comes to cost competitiveness, given the fact the price of acquiring land and other factors of production such as electricity remains high. But the government is implementing reforms such as Electricity (Amendment) Bill, labour reforms (not notified yet) and may float land reforms in coming years. Thus, probably by next year, it can pip China to become the most attractive manufacturing destination in the world.
India has the existing capacity to become the ‘factory of the world’. Given the availability of skilled and semi-skilled workforces and a huge market, India is the perfect destination for companies around the world to set up their factories.
A few months ago, the Biden administration listed India’s ‘Aatmanirbhar Bharat’ campaign as one of the significant trade barriers American businesses face around the world. The US Trade Representative (USTR)’s office had cited the “Make in India” program as an impediment to the import of its products into India.
“US exporters continue to encounter significant tariff and non-tariff barriers that impede imports of US products into India. While the Indian Government has pursued ongoing economic reform efforts, it also continues to promote programs such as ‘Make in India’ that favour domestic production over importation,” the office of USTR said in its National Trade Estimate Report for 2021.
To further capitalize on India’s domestic capabilities, in May 2020, Prime Minister Narendra Modi announced the ‘Self-Reliant India’ (Aatmanirbhar Bharat) initiative to increase self-sufficiency by promoting domestic industry and reducing reliance on foreign suppliers.
With various incentives offered by the Union government and state governments under Make in India and AtmaNirbhara Bharat Abhiyaan, the country is becoming a favoured destination to set up factories for the countries around the world. And this is definitely not going well with the United States, which wants India to import American goods and services as well as restart manufacturing back at home.
