Why is India not a Global manufacturing hub?

India has been looking to become the world’s manufacturing hub for at least a decade. Despite being the fastest-growing economy, with all previous governments, India was not able to attract investments in manufacturing due to ineffective policies and approaches. Apart from this, the coronavirus pandemic also came along and wreaked havoc, disrupting global supply chains. The Russia-Ukraine war added to these woes.
The unprecedented economic and social impact of the two pandemic years has ushered the manufacturing industry into a new era of a digital, global and green future. India has shown signs of a confident rebound with more manufacturers investing heavily in digitising the process thereby, pushing our already existing potential to be an integral part of the global manufacturing scene. In that sense, the pandemic instilled a new wave of realisation that it’s time India pushed more to reach it’s full potential as a global manufacturing hub. However, some long-term, as well as short-term challenges, need to be tackled in making India a global manufacturing hub. An important focus point for sprucing up India’s manufacturing sector will be developing infrastructure. The lack of robust infrastructure leads to higher costs of manufacturing compared to countries like China. Transporting raw materials and finished goods in India is still slow and expensive given the umpteen regulations and taxes, conditions of Indian roads, archaic labour laws and extreme weather conditions impacting road infrastructure. So it is crucial for India to find solutions which are cost-effective, fast and flexible.
When it comes to labour, India faces a two-fold problem. One is the stringent labour laws, the other is the lack of a skilled workforce. India has the advantage of having a large population and a readily available workforce that is inexpensive too. Although most manufacturing companies are working towards making their labour force more efficient, we still face a shortage of skilled workforce. With manufacturing getting more and more digitised, the Indian workforce needs to be trained to keep abreast of the latest technological advancements and their application. The other part of the challenge is India’s obsolete labour laws, which discourage MNCs from making India their manufacturing base. India’s stringent labour laws do not permit company owners to hire and fire labour at will. Hence, the MNCs end up leasing their workforce from temping agencies who are not trained or upskilled for the job. MNCs are thus, unable to move their manufacturing base to India as these archaic labour laws do not allow them to be flexible. Consequently, many MNCs do not take the risk of establishing their Research and Development bases in India, which is the first step towards setting up a manufacturing base.
Another challenge in the way of India becoming a manufacturing hub is its complex land acquisition laws. MNCs cannot acquire land in India without Government intervention. The land acquisition laws mandate that MNCs acquire land owned only by the government. Due to these laws and the large black market existing in India, there are many discrepancies in land prices. This leads to the exploitation of big, foreign companies and they are automatically discouraged from setting up manufacturing units in India.
These challenges need to be tackled efficiently and for that several industries in India have begun to reconstruct their manufacturing processes. The current government is offering incentives and PLI schemes that encourage more MNCs to establish a manufacturing base in India. Manufacturers have realized the importance of intelligent technologies and have started introducing them into almost all stages of the value chain. New technologies like the Internet of Things (IoT) are being put into action to facilitate the smooth running of the supply chain. Machine Learning, Artificial Intelligence (AI) and Automation techniques are leading the way to modify industrial operations thereby ushering the Indian manufacturing sector into a bright and advanced future.
The sector is showing tremendous resilience with support from government initiatives, added to the private sector’s push for digitization. Manufacturers and the government have collectively risen to face the challenge head-on, devising future strategies based on technology and adapting to the changing demands of the consumer. Consistent efforts are being made by the government to establish a strong IP protection regime for manufacturers to inspire trust in India.
India is a desirable location for foreign manufacturing ventures. Numerous companies, including those from the Electronic manufacturing, luxury, automobile, and gadgets industries, have already established or are planning to do so in the nation. Although it is not yet a major centre for manufacturing, India is moving in the right direction and with efforts from all stakeholders, India will soon see itself running the top league on the global manufacturing front. An entire restructuring of the Indian manufacturing sector is the need of the hour to set these roadblocks aside and get ahead in the race.