Indian manufacturing has long been a topic of discussion and debate. While some perceive it as unreliable, with challenges in supply chain management, price competitiveness, and lead times, the reality is far from these misconceptions. In recent years, India’s manufacturing sector has witnessed significant growth and has emerged as a strong alternative to China, often referred to as the China+1 strategy.
India’s manufacturing sector GDP increased by an average of 9.5 percent per year over the fiscal years 2006 and 2012. Growth then fell to 7.4% during the following six years. Manufacturing contributed more than 15.3 percent of India’s GDP in 2000, or 17.4 percent, in fiscal year 2020. Additionally, compared to a five-point growth for the services sector during the past 13 years, India’s manufacturing sector’s employment share climbed by one percentage point.
Source: www.mckinsey.com
In this article, we will debunk the myths surrounding Indian manufacturing and shed light on the realities that make it an attractive destination for manufacturing partnerships and sourcing.
Myths Vs. Reality Behind Indian Manufacturing
Myth 1: Unreliable Supply Chain
The misconception that India harbors an unreliable supply chain is far from reality. In recent years, India has made remarkable strides in bolstering the dependability of its supply chain.
For instance, the time taken for goods to travel from factory to customer has shrunk by 20% since 2015. Concurrently, the count of logistics providers has surged by 50% within the same timeframe.
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This transformation from current manufacturing logistics providers is a result of multifaceted efforts, including government-driven initiatives like the “Make in India” campaign. Such campaigns are aimed at trimming bureaucratic complexities and enhancing infrastructure. The Goods and Services Tax (GST), introduced in 2017, further streamlined logistics by unifying the tax structure across the nation.
As a consequence, India’s supply chain is now considered more reliable than those of many other developing nations. The World Bank’s recent study ranks India’s supply chain at 38th globally, a substantial improvement from its 72nd position in 2016.
Source: pib.gov.in
While there’s room for refinement, India’s supply chain has shed its prior unreliability. This shift elevates India’s attraction for manufacturing and businesses reliant on a steadfast supply chain.
Myth 2: Lack of Price Competitiveness
It’s often stated that India lacks price competitiveness in manufacturing due to its labor costs. However, this perception doesn’t paint the full picture. India’s manufacturing sector remains price competitive for several compelling reasons.
- Enhanced Productivity: Indian manufacturers have harnessed automation and technology to boost productivity. For instance, automation in the automotive industry has reduced the workforce needed to produce a car by up to 30%. (oliverwyman.com)
- Skilled Workforce: India boasts a vast pool of skilled labor that contributes to cost reduction and improved quality. Remarkably, the World Bank’s study reveals that Indian workers are among the world’s most productive, even in comparison to developed nations.
- Focus on Innovation: Indian manufacturers are actively investing in innovation, fostering the creation of more efficient and cost-effective products and processes. Government-established innovation hubs further drive technological advancements for the sector.
These factors are shaping India’s manufacturing sector into a price-competitive force. A recent Boston Consulting Group study even identifies India as a prime destination for manufacturing investment globally.
Supporting this stance, significant statistics include:
- Indian manufacturing companies have raised patent filings by 30% in the last five years. (Source: livemint.com)
- The cost of manufacturing a car in India is now comparable to China’s.
These figures vividly illustrate India’s growing price competitiveness in manufacturing. This is particularly promising for businesses exploring manufacturing opportunities in the country.
Myth 3: Lengthy Lead Times
The perception that Indian manufacturers grapple with extended lead times is far from today’s reality. In recent years, these manufacturers have undergone transformative shifts by infusing modernization into their production processes. For instance, the average lead time for crafting a garment in India has dwindled from 6 weeks to 4 weeks over the past five years.
Similarly, the automotive sector has witnessed notable headway, as the lead time for producing a car has scaled down from 12 months to 8 months within the same period.
These commendable reductions in lead times stem from various factors, including:
- Embracing lean manufacturing principles that prioritize continuous enhancement and waste reduction.
- Harnessing advanced machinery and automation.
- Implementing effective inventory management systems.
- Harnessing e-commerce and digital platforms to streamline communication and order processing.
While lead times may vary based on product intricacy, Indian manufacturers remain committed to curtailing delays and ensuring punctual deliveries.
Furthermore, it’s noteworthy that the Indian government is actively advancing the country’s manufacturing infrastructure. For instance, the establishment of special economic zones (SEZs) comes with a suite of benefits, including tax exemptions and streamlined customs clearance. These SEZs have significantly attracted foreign investment and invigorated manufacturing pursuits in India.
Myth 4: Importing from India is a Challenge
Dispelling the notion that importing from India is arduous, recent years have witnessed substantial strides in simplifying the import process, thanks to government reforms and digitalization. For instance, the average import time has halved from 20 days to 10 days over the last five years. Concurrently, the requisite import documents have seen a 50% reduction, dropping from 30 to 15 in the same period.
These advancements find grounding in:
- The introduction of a single-window clearance system consolidates document submission to a single agency.
- Digitalization of customs procedures, enhancing tracking capabilities and duty payments.
- Simplification of import regulations, fostering greater understanding and compliance.
While certain challenges may persist, the process of importing from India has undoubtedly gained efficiency and streamlining. With proper guidance and assistance, businesses can now navigate Indian imports smoothly.
Prominent figures substantiating this narrative include:
India now holds the 10th position in terms of the business climate for the years 2023 to 2027, up from the 14th position for the years 2018 to 22.
Source: www.business-standard.com
These data affirm the Indian government’s dedication to fostering an import-friendly environment. With ongoing reforms, the trajectory indicates that importing from India will likely become even more straightforward in the years ahead.
Unleashing the Power of Indian Manufacturing
Indian manufacturing has come a long way and is debunking the myths surrounding its capabilities. The country offers a reliable supply chain, price competitiveness, reduced lead times, and a simplified import process. As a result, businesses worldwide increasingly recognize India as a favorable manufacturing partner.
With a skilled workforce, technological advancements, and supportive government policies, Indian manufacturing is well-positioned to meet the evolving needs of global industries. It is time to embrace the realities and explore the immense potential that Indian manufacturing has to offer.
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FAQs
The Indian government has implemented initiatives like “Make in India” to promote manufacturing, simplify customs procedures, and reduce bureaucratic red tape. These measures have created a favorable environment for the growth of manufacturing in the country.
While labor costs may not always be the lowest, India compensates with a skilled workforce, productivity improvements, and advancements in technology and automation. These factors contribute to price competitiveness in the global market.
Yes, Indian manufacturers have invested in modernizing their production processes, adopting lean manufacturing principles, and implementing efficient inventory management systems. These efforts have significantly reduced lead times and improved overall efficiency.
Importing from India has become simpler with initiatives like the single-window clearance system and digitization of customs procedures. The government has made efforts to streamline the import process and create a more business-friendly environment.
Indian manufacturing offers a skilled workforce, competitive pricing, technological advancements, and a favorable business environment. These factors make it an attractive destination for manufacturing partnerships and sourcing.