Over the past few years, a manufacturing revolution has been well underway in the Indian economy, spurred on by the increasing presence of multinationals, scaling up of operations by the domestic companies and expanding domestic market. The sector has been averaging 9 per cent in the last four years (2004–08), with a record 12.3 per cent in 2006–07. Moreover, it contributed 16.3 per cent to the gross domestic product (GDP) in 2006–07.

India’s manufacturing base, which is the fourth-largest among emerging economies, is among the fastest growing and has seen more investments as a proportion of GDP than any country except China.

According to a Centre for Monitoring Indian Economy (CMIE) report, 2,144 listed manufacturing companies have registered a 33.9 per cent rise in their aggregate net sales, as evident from their financial outcomes, in the June 2008 quarter. In fact, inflation-deflated sales growth of Indian manufacturing industry would be around 22.6 per cent.

As a result, India is fast emerging as a global manufacturing hub. India has all the requisite skills in product, process and capital engineering, thanks to its long manufacturing history and higher education system. India’s cheap, skilled manpower is attracting a number of companies, spanning diverse industries, making India a global manufacturing powerhouse.

• Cummins is making India its manufacturing hub for newly developed line of generator sets.
• Samsung plans to invest US$ 100 million over a period of four years in its manufacturing plant near Chennai and make it its global hub.
• Ford is making India its manufacturing hub for engine manufacturing.
• Hyundai has made India the manufacturing and export hub for its small cars. The ‘i10’ is being manufactured only in India and exported to the world. India is Hyundai’s largest base outside Korea.
• Suzuki too is making India its manufacturing hub for small cars. The A-Star is being manufactured solely in India and exported to Europe.
• Nokia is investing an additional US$ 75 million in its Sriperumbudur plant taking the total investment to US$ 285 million. Nearly 50 per cent of its production at Sriperumbudur is exported to countries across the Middle East and Africa, Asia, Australia and New Zealand.

India Advantage

India’s vast domestic market and availability of low-cost workers with advanced technical skills has been instrumental in attracting the ever expanding number of multinationals who are setting up their manufacturing base in the country.

The sheer size of the Indian market has obvious appeal. The rapid growth of the Indian economy is likely to make India the fifth largest consumer market in the world by 2025 from twelfth in 2005, says a study by McKinsey Global Institute. Aggregate Indian consumer spending is likewise estimated to more than quadruple to approximately US$ 1.5 trillion by 2025, on the back of a ten-fold increase in middle class population and three-fold jump in household income.

India also offers abundant engineering and technical manpower, producing annually about 400,000 graduate engineers. Significantly, the technical workforce is set cross the two-million mark this year, with the march from one million to two million happening in just about three years.

Global Manufacturing exports hub

According to a CII-McKinsey report, manufacturing exports could increase from US$ 48 billion in 2003 to US$ 300 billion in 2015, simultaneously increasing India’s share in world manufacturing trade from 0.8 per cent to 3.5 per cent.