India is poised to become a “manufacturing powerhouse,” according to a recently released study.
Research by The Boston Consulting Group and The Wharton School of the University of Pennsylvania found that issues holding India back, like poor infrastructure and restrictive labor laws, are rapidly changing, which could help India grow its manufacturing sector in the next five to 10 years.
“Over the past five or six years, many firms have restructured their manufacturing operations and implemented world-class practices,” says Arindam Bhattacharya, a partner in BCG’s New Delhi office. “Slowly but surely, they have started building a globally competitive manufacturing base in industries like pharmaceuticals, auto components, cars and motorcycles.”
Driven by the emergence of a large domestic market and relatively low-cost workers with advanced technical skills, many companies are setting up manufacturing operations in India. Ford, Hyundai and Suzuki all export cars from India in significant numbers. ABB, Schneider, Honeywell and Siemens have set up plants to manufacture electrical and electronic products for domestic and export markets.
According to the study, India is currently in the midst of the most ambitious infrastructure upgrade in the nation’s history. Improved roads, power and airports could increase the country’s annual GDP growth rate to eight percent. India’s outsourcing providers are also moving up the value chain toward knowledge process outsourcing (KPO) services, focusing on area expertise.