India Battles China For The Global Manufacturing Market

A Global Manufacturing Outlook

Manufacturing is big business globally. Generating $11.6 trillion annually, the field has long been dominated by China and the United States. China currently exports the majority of worldwide goods, accounting for 13% of global exports. The US follows at 10%. Key product groups vary greatly by location but include food, chemicals, transportation, equipment, pharmaceuticals, electronics, and textiles.

While these larger groups have traditionally dominated the industry, rising costs in labor and environmental concerns have opened the door for newcomers such as India to grab market share. India’s economy grew at a rate of 7.4% for 2014, outpacing China’s yearly growth of 6.8% and leading the way for a true manufacturing industry battle. Tweet This

India Increases the Competition but Faces Challenges Ahead

As the two largest countries in Asia, both China and India are in a race for a larger share of global manufacturing. Manufacturing accounts for 30% of China’s economy, but only 13% of the Indian economy. Indian Prime Minister Narendra Modi is hoping to change that by improving infrastructure and attracting more business. His proven efforts in Gujarat state have increased manufacturing to 28% of the area’s economy – with a goal of making it account for a third of the economy in five years. In addition to a ready workforce, India offers an incentive to businesses over China with significantly lower labor costs. According to the Boston Consulting Group (via a Bloomberg article), labor in India cost $0.92/hour while similar work in China cost $3.52/hour.

Changes are taking place in India, however, that may derail that growth trend. For one, the Wall Street Journal cited robotics as a trend to watch in 2016 in Indian economics. According to estimates from the International Federation of Robotics, there are 14,300 robots in industrial operation in India now, and that number is estimated to double by 2018. That technological progress has led to concerns that industrial automation will reduce the need for unskilled labor, in turn reducing the economic growth for the country.

Other potential hurdles for India include battling its reputation for excessive bureaucracy and building an infrastructure to support its manufacturing and population growth. A 2013 report from PricewaterhouseCoopers cites infrastructure challenges as a major drag on the country’s economic growth. The report highlights overloaded and inefficient shipping ports, unreliable electrical and water systems, an overcrowded rail system, and a national road system with a maximum highway speed of 30-40km per hour as a few of the more urgent problems the country must fix.

For a country on track to surpass China as the most populated country in 2022, with population forecasted to peak at 1.75 billion by 2050, it appears there will be some growing pains ahead as the country finds a way to grow out of poverty, and improve its reputation as a country that’s ready to support global business needs.