India’s ascent in the global supply chain is evident as businesses like FedEx, Foxconn, and Apple expand operations. The nation’s favorable incentives and diverse industries make it an attractive manufacturing hub.
To lower risk and improve cost and lead time flexibility, a lot of supply chain leaders are expanding their supply chains throughout different parts of the world. Instability on a global scale is detrimental. Geopolitical challenges abound in 2024, which will only exacerbate supply chain conflicts worldwide. The Wall Street Journal’s analysis indicates that supply chain costs are directly impacted by geopolitics. Consequently, as tensions rise in crucial markets, many corporations are bracing for more shockwaves.
Supply chain executives should investigate new global supply chain geographies to diversify. One of those exciting new areas is India. India is expected to surpass Germany and Japan to become the third-largest economy in the world by 2027, with a GDP of $5 trillion, according to forecasts from the International Monetary Fund. Furthermore, with over 2 million graduates annually, India is the country with the second-largest English-speaking population in the world and is a leader in STEM education. India is a great area to do business because of its highly educated workforce, strategic location close to the Middle East, Europe, and West Africa, as well as its established sea connections connecting it to Southeast Asia and East Asia.
India’s Emerging Role in the Global Supply Chain
According to the India Review, “India is emerging as a reliable alternate destination for manufacturers and supply chain diversification due to its large labor and consumer base, low operating costs, and linkages to important international markets.” India’s robust economy, relative ease of doing business, and growing range of industries open to international investment are further draws. I think that going forward, India is positioned to become a major hub for trade.
Businesses expanding their operations in India include FedEx, Foxconn, Apple, and numerous more well-known electronics, aerospace, and medical device industries. It’s probably partly because of the incentives. To establish India as a worldwide electronics hub, the National Policy on Electronics (NPE) was created in 2019 and promoted the production of motherboard chipsets, graphics chips, semiconductor chips, and other computing products. The electronics industry became more competitive on a global scale as a result. Subsequently, a financial incentive was provided via the Production Linked Incentive (PLI) program for large-scale electronics manufacturing to increase domestic manufacturing and draw big investments in semiconductor packaging and electronic components. Fourteen more industries are now included in these incentives.
Recent years have seen a notable expansion and diversification of India’s manufacturing sector, with several industries being crucial to the nation’s economic success. India’s manufacturing sector is vibrant and varied, encompassing a wide range of industries such as medical devices, vehicles, electronics, aerospace and defense, and space technology.
Aerospace: India is a great place to manufacture spacecraft, airplanes, and associated parts. With a concentration on both military and commercial uses, its aircraft manufacturing sector has risen significantly over time. Technological developments, a highly skilled labor base, and government programs to support aerospace production all assist the sector. Collaborations and partnerships with foreign aerospace businesses have contributed to the growth of this sector, which is recognizing India’s strengths in aerospace manufacturing on a worldwide scale.
Medical Technology: The field of medical technology, or MedTech, is expanding quickly. For instance, Boston Scientific established its first location in Gurugram in 2016. In 2023, the US-based corporation Boston Scientific 0.0% opened its second research and development facility in Pune. The company’s second-largest research and development facilities outside of the US are located in India. With businesses like Trivitron Healthcare and Opto Circuits India Ltd. providing a broad spectrum of medical equipment and gadgets for healthcare providers globally, India’s medical device manufacturing industry has also grown.
Automobiles: With businesses like Tata Motors, Mahindra & Mahindra, and Maruti Suzuki producing a wide range of vehicles, from automobiles and motorbikes to commercial trucks and buses, India is emerging as a major player in the global automotive sector.
However, this is only the start. The “Make in India” project is one of the many strategies that India is working hard to establish to boost international trade.
The “Make in India” initiative was launched by Indian Prime Minister Narendra Modi in 2014 to promote India internationally. The campaign’s declared goals are to attract investment, support innovation, improve skill development, safeguard intellectual property, and create a manufacturing infrastructure that is among the best in the world. 25 industries have been identified that will immediately benefit from the rise in foreign investment and job creation that follows, including medical devices, railroads, insurance, and defense.
Why Businesses Relocate to India
A webinar titled “Why India is the Next Manufacturing Hub” offered valuable insights into the factors that render India a desirable option for foreign enterprises pursuing international trade. Key insights include:
- Indian government:The panelists concurred that every effort is being made by the federal and state governments to promote the expansion of the industrial sector. States are, if anything, vying for international investment.
- Focus on manufacturing:—The panelists concurred that the future administration will continue to make investments in this area and that the emphasis on manufacturing has “left the station.”
- Investment in Infrastructure: India has already made significant investments in infrastructure, and they will only grow faster.
- Targeted investments in critical areas: Several industries have special economic zones, especially those that surround fabrication and semiconductor facilities.
- Bureaucracy or pro-business: The old bureaucracy, which moves very slowly, and “Invest India,” which aims to make doing business in India easier, are still at odds.
- Indian Education: The talent coming out of the best schools is ready for the workforce, but the next tier of schools is very different. On the other hand, industry and academia work closely together to close this disparity.
Shifting Consumer Demand
A portion of India’s manufacturing growth is being driven by changing consumer demand, particularly in the electronics industry. Consumers seek out premium goods with cutting-edge features and capabilities at competitive pricing points. India provides consumers with more options at lower costs, especially when it comes to electronics. However, aerospace is in a unique position to succeed in India. Well-known businesses are making large investments in India thanks to the country’s well-established aeronautical infrastructure, manufacturing alliances (because it’s all about relationships, right?), and generous incentives.
Lower Tariffs and Landed Cost
India is a preferred destination for enterprises due to its reduced tariffs (3% compared to 30% in China); nevertheless, another factor drawing in foreign corporations contemplating regional operations is India’s lower landed costs. India has more affordable labor than many other nations and is ideally situated for trade with Europe, the Middle East, and Southeast Asia. Furthermore, India has a number of trade agreements that lower tariffs and make import and export procedures easier and less costly. Ultimately, the overall landed cost for companies operating in the area is further reduced by logistical effectiveness and reduced transportation expenses.
Key Takeaways
India is emerging as a major force in the world industrial scene, and the Business Standard predicts that it will continue to do so in the coming years. India is a good choice to diversify your global supply chain because of its reduced tariffs, cheaper landed costs, and unique incentives for various industries. For supply chain managers, it is evident that being nimble in an evolving global economy sometimes means working across borders. India is a fantastic starting point.
Last year, GreatGameIndia reported that, according to Rajat Verma, Founder & CEO of Lohum, India can become a global leader in the lithium supply chain without even producing it, instead focusing on recycling.
