Can India truly be a global manufacturing powerhouse?

NEW DELHI: India has announced a series of measures to boost its manufacturing sector, in Prime Minister Narendra Modi's first budget since securing a historic third term in office.

These measures include cuts on customs duties to make it cheaper to import certain raw materials, as well as incentives for factories to employ more workers.

For a decade now, Modi has urged foreign companies to move their production lines to the subcontinent, under his flagship "Make in India" initiative aimed at turning the world’s fifth-largest economy into a manufacturing hub.

INDIA’S WORKING POPULATION “CAN RIVAL CHINA”

Sunlord Apparels, for instance, has become one of India's largest toy manufacturing firms. 

It mass produces toys that are custom-ordered by foreign companies. About 80 per cent of its products are exported to the United States and Europe. 

“Our biggest market is the USA, and we are working with some of the top brands and retailers there,” said Sunlord Apparels executive director Amitabh Kharbanda. 

Sunlord Apparels started manufacturing plush toys 30 years ago, but Kharbanda said it was only after the COVID-19 pandemic that Western firms began toying with the idea of diversifying their supply lines away from China.

“India is the only country with a working population that can rival China,” he added. 

In 2021, a major US toy maker approached Sunlord Apparels with an offer to collaborate. Since then, production has more than doubled and requests from other western businesses have been streaming in, Kharbanda told CNA.

“We've already started a new factory last year, which is focused more on high-volume production and we've got connections with quite a few large US brands who want to source from India (and) already visited the factory and audited it,” he added. 

In the past four years, India's toy exports have been on the rise.

STILL DEPENDENT ON CHINA FOR RAW MATERIALS

India’s large and affordable labour pool is drawing foreign firms, and the government hopes to use this advantage to create millions of new jobs. 

But even as it markets India as an emerging manufacturing hub, the industry's success is still largely dependent on raw materials from China, said observers. 

Despite heavy restrictions on Chinese investments after a border standoff along part of their Himalayan frontier in 2020, India has continued to allow the import of industrial goods from China.

Recently, the Modi government indicated it may consider allowing Chinese investments to give the sector a boost. 

“Economies of scale has always been a challenge in India,” said Kharbanda. “We would love to be able to import more materials from China more easily, to help us meet the global requirements that we have.”

For years, the Modi administration has struggled to tackle record unemployment levels. 

A robust manufacturing sector, which now employs 11 per cent of the workforce, could help to add millions of jobs, experts pointed out. 

They noted that India’s manufacturing targets can be best achieved if it makes a pivot of supply lines to the country more permanent.

“We have to look into developing an ecosystem where parts and components are also manufactured in the country,” said Ajay Sahai, director general and CEO of the Federation of Indian Export Organisations. 

“Today, most of the large companies are procuring from India. They have not set up their base in India, because once they are settled in India, they will probably help us in developing an ecosystem for that,” he added. 

INDIA’S MOBILE MANUFACTURING SUCCESS

India's mobile manufacturing industry is one such success story. 

As of this year, nearly all of India's mobile phones are made locally, while 30 per cent of output is exported.

Experts said tech giant Apple’s move to shift part of its production line from China to India has partly contributed to the progress, and attracted ancillary players that make camera and phone components to the country.

If India can persuade Western firms to move their entire production lines here, then it can truly claim to be a global manufacturing powerhouse, they added.