As the world comes to grips with the Covid-19 pandemic certain changes are taking place rapidly. Paradigm shifts are taking place all over the globe. The most significant change being noticed is a tentative shift of manufacturing companies from China. It should be noted in this regard that Wuhan, the Chinese province where the Coronavirus has supposedly originated, is also one of the biggest manufacturing hubs in the world. Although China is limping back to normalcy the companies are not too comfortable operating from the country. Against this backdrop it is expected that India stands a fantastic chance to replace China as the manufacturing capital of the world.
As the Covid-19 pandemic takes a vice-like grip on the world, the question is can India benefit from a global endeavour to shift focus from the supply chains rooted in China? The socio-economic moment may look imminent, but without overhauling its economic policies India is likely to struggle to keep pace with nimbler rivals like Vietnam and Thailand.
Beijing’s bumbling efforts to control the pandemic in its initial moments, as well as its outsize role in supplying protective equipment such as masks and gowns, has raised concerns around the world.
As more and more global companies look towards shifting their production from China, German footwear brand Casa Everz Gmbh is the latest to shift its entire production setup from China to India. Casa Everz Gmbh, the owner of healthy footwear brand Von Wellx, has decided to set up its production at Agra in Uttar Pradesh in collaboration with Iatric Industries Pvt Ltd. This came shortly after Uttar Pradesh Government conducted a webinar with several international companies in an attempt to persuade them to invest in the country.
Of late, several industries have realised the shortcomings of being excessively dependent for their manufacturing on a single country and have started looking to expand the geographic spread of their facilities.
The Indian growth story will continue to require free flows of capital, labour, goods and services. In a world where distrust over China has been increasing, India can be a part of multiple economic webs and gain from them.
India requires another engine of growth in the post-Covid evolving world. Large-scale manufacturing offers could be one such opportunity. China beat India in this game in the pre Covid-19 world but in a new world where China is distrusted, India can be part of more economic webs and build its own strength.
A decade ago, China surpassed the US to emerge as the world’s leading manufacturing hub. However, the rise of China as the world’s factory began way back in the 1980s initially as a producer of low-end products which gradually turned to become a manufacturing hub of everything under the sun – from drugs to electronic gadgets. According to estimates of the UN Statistics Division, China accounted for 28 per cent of global manufacturing output in 2018. Yet, the Coronavirus epidemic has begun to change this scenario in various ways. The supply shock created by the Chinese shutdown has prompted global firms to look for new manufacturing centres as a part of a risk hedging strategy for the future. Several industries have realised the disadvantages of being excessively dependent for manufacturing on a single nation and increasingly looking to expand the geographic spread of their facilities.
Post COVID-19 Opportunities for Indian manufacturing
Such tectonic developments have presented a moment of opportunity for India which can reap rich dividends by creating a manufacturing-friendly environment and offering lucrative facilities to global entities for setting up units in India. Reports have indicated that a large number of companies have already initiated talks with Indian authorities seeking to pursue production plans in the country in sectors such as electronics, medical devices and textiles, among others. It is needless to say that India needs to capitalise on this opportunity and present itself as a viable alternative destination for manufacturing.
Interestingly, the long-drawn China-US trade tariff battle had already made global companies jittery about keeping a bulk of their manufacturing centres in China. The COVID 19 pandemic has further emboldened and accelerated their plans to diversify their manufacturing capacity beyond China. A host of countries have emerged as viable manufacturing options in this situation. Vietnam, Indonesia, Cambodia and Singapore apart from India are prominent options that global companies have been considering.
Against this backdrop, India needs to act proactively to create an environment that is conducive to global manufacturing activities so that once the COVID 19 crisis blows off, international organisations can look at us as a trusted supply chain partner. This needs creation of a best in class manufacturing ecosystem that offers efficient and highly trained manpower, encourages innovation, allows ease of doing businesses and protects intellectual property.
It will be in India’s interest to go back 30 years in history and learn what the Chinese did back then to become a global manufacturing powerhouse. The initiatives that prompted China’s success were factors such as world-class infrastructure, logistics, complete policy support to the sector as well as low labour costs. If India learns from that experience and creates a favourable ecosystem with a cluster of buyers, sellers, technology and skilled labour, it can definitely become the next global manufacturing hub.
In order to generate higher foreign investments, we need to foster innovation and boost manufacturing infrastructure to create greater mechanisation skills in the country. There are different levels of manufacturing capabilities. First is the set of manufacturing activities such as mining, producing raw materials and agriculture-related goods which require a very low level of skill set.
On the other hand, there are areas such as textile, apparel and electronics manufacturing which require a low level yet specialised skill-sets. Having said that, I’d like to add here that manufacturing of high-end complex products such as sophisticated machinery and complicated chemical products requires highly sophisticated capabilities of development. As a country that wishes to become a manufacturing hub, India must work to bolster its capabilities in all kinds of production ends by fostering innovation.
The government has already placed a decisive focus on leveraging the manufacturing sector to create jobs for millions of Indians with initiatives such as Make in India and ‘Skill India’. Enhancing skill development to create a large pool of skilled human resources is also an important element of preparation. When the world looked around to outsource its services sector work two decades ago, India already had a ready pool of IT experts and English-speaking graduates who could avail that opportunity and helped to make India an international services hub.
Similarly, for us to become the most preferred manufacturing hub, we need a ready pool of skilled human resources in all the fields. With automated processes becoming the norm in every sector, the nature of jobs has also changed. The emergence of IT-enabled technology in every sector has created a demand for specialist workers such as 3D printing specialists, automobile analytics engineers, apparel data analysts, E-textiles specialists, etc. It is imperative that India has to boost the skill of its workforce with an eye on these futuristic needs.
The Indian manufacturing sector have to rise to the occasion and plan with a long-term approach towards attracting a major pie of the international manufacturing business looking for relocation from China. We hope in future the evolution of the Indian market, particularly the manufacturing sector, will enable us to scale up manufacturing hubs to feed multiple manufacturing requirements of global industries.
Article by Arijit Nag
Arijit Nag is a freelance journalist who writes on various aspects of the economy and current affairs.
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