Transformation of Indian Manufacturing

Industry through Make in India and

comparison to the factory of world –
China

Dr Navneet Gera
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2
Introduction
 The research paper is intended to analyse the
India’s competitiveness for manufacturing
sector through macroeconomic variables.
 The comparative study of India vs china shall
help us to understand as to the factors
favouring Indian economy for manufacturing
and where the country needs to transform.
Introduction
 Indian economy is set to transform through
‘Make in India’.
 It reminds us of 1990s when economic reforms
took place and the economy was set to globalise.
 Chinese economy has been liberalised in 1978
and is therefore the manufacturing hub
technically said to be the factory of the world.
 Indian economy has been able to establish itself
as service Industry and is gradually set to move
towards manufacturing through make in India
and other initiatives of NaMo Govt by ease of
doing business and attracting FDI.
Research Objectives
 Objectives of Research
 The objective of research is to analyse and interpret
the manufacturing competitiveness of India vis a vis
china.
 Research Methodology
 The research is an exploratory and conclusive
research and is focused on News Papers, Journals
and the secondary data collected from the reliable
sources. The research is qualitative in nature due to
its nature of research. The quantitative research has
been done through the global competitive reports
and the same has been analysed and interpreted
for Indian economy vs the Chinese economy.
India’s Key Indicators
Manufacturing GDP CAGR (2005–10) 8.5%
Manufacturing GDP percentage of total GDP 14.2%
(2010)
Labor costs (US$/hour) (2011) 0.9
Manufacturing exports percentage of total exports 50.3%
(2011)
Manufacturing jobs created per hundred persons 1.6
(2001–2010)

Highest corporate tax rate (2012) 32.4%

Researchers per million population (INSEAD 136
2012)
Per capita personal disposable income (US$) 1,271
(2011)
Per capita personal disposable income (2011) 11.7%
CAGR (2001–2011)
Drivers of Manufacturing Competitiveness

 We will analyse the global competitiveness

report, wherein a survey of CEOs from
different countries was conducted.
 The ratings on a scale of 10 are mentioned for
India and china.
 Higher ratings here means the situation is
better and affirmative and lower ratings shows
less confidence and trust on the given factors
such as talent, economic and financial trade,
cost of labour etc.
 Drivers of Manufacturing Competitiveness
Main Drivers Subcomponents India China

Talent 5.82 5.89

Quality and availability of researchers, scientists,
and engineers Quality and availability of skilled
labor
Economic, Trade, Financial and 4.01 5.87
trade system Tax rate burden and system complexity
Clarity and stability of regulatory, tax and economic
policies
Cost of labour & materials 9.41 10.0
Cost competitiveness of materials
Availability of raw materials
Supplier Network 4.82 8.25
Cost competitiveness of local suppliers
Ability of supply base to innovate in products and
processes
Legal and Regulatory System 2.75 3.09
Stability and clarity in legal and regulatory policies
Labor laws and regulations
Physical Infrastructure 1.78 6.47
Quality and efficiency of electricity grid, IT and
telecommunications network
Quality and efficiency of roads, airports, ports, and
railroad networks
Drivers of Manufacturing Competitiveness
Main Drivers Subcomponents India China

Energy Cost & 5.31 7.16

Policies Cost competitiveness of energy
Ongoing investments to improve and modernize energy
infrastructure
Local Market 5.90 8.16
Attractiveness Size and access of the local market
Intensity of local competition
Healthcare System 1.00 2.18
Cost of quality healthcare for employee and society
Regulatory policies (e.g., pollution, food safety, etc.) that
are enforced to protect public health
Govt Investments 5.09 8.42
in Manufacturing Government investments in R&D: science, technology,
& innovation
engineering and manufacturing
Private and public sector collaboration for long-term
investments in R&D: science,
technology, engineering and manufacturing

Source: Deloitte Touche Tohmatsu Limited and U.S. Council on

Competitiveness, 2013 Global
Analysis
 In comparison to the scores mentioned above as per the global
competitive report.
 India is lagging behind in terms of Infrastructure, healthcare
and Government Investment in manufacturing and innovation.
 However, India is having close score in terms of talent, cost of
labour and regulatory framework.
 The country’s strong talent pool in the areas of science,
technology and research, in conjunction with some of the
lowest labour rates in the world, were cited by survey
participants as significant competitive advantages that would
positively impact India’s ability to conduct cost-efficient
research and development.
Recommendations for India’s Manufacturing
Competitiveness

 Infrastructural Issues – In order to transform

into a truly manufacturing sector,
infrastructural network and connectivity has
to be improved at all levels. In india the
logistics cost is high which is 13-14 per cent of
GDP vis a vis developed countries which is 7-8
per cent.
 The uninterrupted power supply is the need of
the hour along with other renewable sources
(wind energy) to be established at mega level.
 The port charges are too high as well as self
sufficiency in container industry has to be
developed.
Recommendations for India’s
Manufacturing Competitiveness
 Cost of doing business in India – In
comparison to many other economies the
interest rates are higher and thereby
increasing the cost of production.
 On the other hand the corruption also
increases the cost of production for domestic
companies as well as MNCs and thereby anti
corruption laws and mechanism has to be
established.
Recommendations for India’s
Manufacturing Competitiveness
 Industrial Policy and Environmental Norms –
Industrial policy need to be fine tuned with the
entrepreneurs and business friendly so that
the procedural parts are automated and time
taken to set up an Industry is reduced which is
quiet high in India.
 A framework has to be prepared based on
future plans with a focus on manufacturing
growth.
 The role of various Government bodies needs
to be supportive rather than controlling and
regulating.
Recommendations for India’s
Manufacturing Competitiveness
 Self Declaration and automated processes -
The procedures of doing business in India is
complex and it is recommended to keep it
simple.
 The procedures and filing of documents need
to be shifted to self-declaration mode as well
as online mechanism as far as possible.
Make in India
 The "Make in India" initiative,
launched in 2014 by the Indian
government, aims to boost the
country's manufacturing sector,
attract foreign investment, and foster
innovation.
 It has been a key component of
India’s industrial growth strategy,
with several notable achievements
across various sectors. Here are some
key achievements:
1. Increased Foreign Direct Investment (FDI)
 Achievement: Since the launch of "Make in
India," India has become one of the top
destinations for foreign direct investment
globally. The country attracted record FDI
inflows, growing significantly in sectors like
telecommunications, computer software and
hardware, and services.
 Example: In 2020-2021, India saw record FDI
inflows of around $81.72 billion, supported by
investments from global tech giants like
Google and Amazon, boosting the country’s
economy and industrial capability.
2. Growth in Automobile Manufacturing

 Achievement: The automobile sector saw

significant growth under "Make in India,"
helping India become one of the largest
producers of automobiles globally.
 Example: Companies like Suzuki, Hyundai,
and Ford expanded their manufacturing
operations in India, with Suzuki investing $1
billion in a facility in Gujarat to produce hybrid
and electric vehicles. India is now one of the
leading producers of two-wheelers and small
cars worldwide.
3. Defence Manufacturing and Indigenization
 Achievement: The initiative promoted
indigenous defense manufacturing to reduce
dependency on imports. Defense sector FDI
limits were raised, and policies were
streamlined to encourage domestic
production.
 Example: The development of the Tejas Light
Combat Aircraft (LCA) by Hindustan
Aeronautics Limited (HAL) and the induction of
the Arjun Main Battle Tank into the Indian
Army reflect India’s progress in defense
manufacturing. India also signed deals with
companies like Lockheed Martin to produce
defense equipment locally.
Rise of the Electronics Manufacturing Industry

 Achievement: India’s electronics

manufacturing industry saw rapid growth,
turning India into one of the major global
players in smartphone production.
 Example: Companies like Apple, Samsung,
and Xiaomi set up manufacturing plants in
India. In 2020, Apple’s manufacturing
partners, such as Foxconn and Wistron,
expanded their operations in the country,
supporting the production of iPhones locally.
This has reduced import dependency and
promoted local employment.
5. Expansion in Renewable Energy Manufacturing
 Achievement: "Make in India" encouraged
domestic production in the renewable energy
sector, especially in solar energy. The scheme
supported the goal of achieving 450 GW of
renewable energy capacity by 2030.
 Example: India became the world’s third-
largest producer of solar energy by 2021.
Domestic companies like Tata Power Solar and
Adani Solar expanded their operations, with
the government launching a Production Linked
Incentive (PLI) scheme for solar modules to
promote manufacturing.
6. Development of Industrial Corridors

 Achievement: Industrial corridors were

developed to create infrastructure for large-
scale manufacturing and logistics, connecting
key production hubs to enhance supply chain
efficiency.
 Example: The Delhi-Mumbai Industrial
Corridor (DMIC) has been one of the flagship
projects, with initiatives like the construction
of smart cities and industrial zones. The DMIC
has attracted significant investment and is
expected to generate jobs and boost
manufacturing activity across regions.
7. Support for Startups and Innovation

 Achievement: "Make in India" has fostered a

startup ecosystem focused on manufacturing,
leading to the emergence of technology-
driven solutions in sectors like healthcare,
agriculture, and logistics.
 Example: Companies like Ola Electric, Ather
Energy, and Log9 Materials are examples of
Indian startups in electric mobility and
advanced materials manufacturing.
Additionally, India’s startup ecosystem is now
the third-largest globally, with a focus on
homegrown innovations and products.
8. Job Creation in Manufacturing

 Achievement: The scheme aimed to

generate employment through increased
industrial activity, with millions of jobs created
across various sectors.
 Example: Sectors like electronics,
automobile, and textiles have seen job
growth. For instance, Foxconn’s smartphone
manufacturing operations have provided
employment to thousands in Tamil Nadu and
Andhra Pradesh, offering skill development
opportunities in electronics.
9. Boost to the Textile and Apparel Industry

 Achievement: The "Make in India" initiative

has revitalized the textile sector by supporting
manufacturing and exports, leading to
significant growth.
 Example: Indian textile manufacturers such
as Welspun India and Raymond have
expanded operations to meet international
demand. Textile exports increased
significantly, with India becoming a major
global supplier, especially in cotton and home
textiles.
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