Can India be expected to rank amongst the top three manufacturing destinations by 2020?

India jumped onto the manufacturing bandwagon a few years ago, eventually surfacing the prospects for a promising future in the industry. Backed with favorable demographic dividends for the decades to come, and a relatively low priced quality workforce at 0.92 USD per hour, we hold a firm demographic advantage. The rapidly escalating infrastructure along with a lucrative shift into skilled workforce makes it a potential hotbed for investors. While pots of gold are being poured into this sector, it has also captured the good will and the interests of the government. The ' Make in India' movement has been as good as its word in luring many players into the game, encouraging international and domestic companies to carry forth manufacturing in India. Through various incentives, budget plans and allowances, it has appealed to a businessman’s instinct on various scales and in various sectors and further encouraged investors. PM Modi has rightly pointed out that we have the 3 D's - Democracy, Demography and Demand up our sleeve and we're all set to shake the business world.
Make in india
Source: thenamopatrika.com

But where does India really belong on the global manufacturing scale? Could it join China, Japan, US and Korea at the top of the ladder by 2025? Translating this into the economic jargon, it means increasing India's manufacturing share in GDP from the current 17.4% to 25% by 2025, which demands a lofty annual GDP growth rate of more than 6%. In contrast to China's 45% share in GDP, India still hangs below at a modest 17.4%. These statistics drive a first nail into the coffin of the great Indian dream of being the next manufacturing destination.

Manufacturing

India having the second largest growing service sector compromises the growth of employment in the manufacturing domain. Also, India's Economic complexity index (ECI) ranks low at number 54 amongst the 144 countries. This means that the diversity and complexity in the manufacturing export basket does not meet the required standards i.e. while countries like Japan and Germany manufacture driverless cars and multifunctional robots through astounding advances in technology, India manufactures goods that could potentially be manufactured anywhere across the globe. This factor yet again drags us one step behind the game.


Diversifying our product range to develop capabilities in core products will surely help us keep up pace. Setting up manufacturing units of large capacities to incorporate specialty materials, nanotechnology, embedded systems, precision devices, medical imaging equipment etc., along with sound research and development centers are indispensable. Through massive industrial sector reforms and redirection of employment towards manufacturing sector rather than service sector, India stands a chance of belonging in the crème de la crème of the manufacturing industry by 2025. 

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