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3 Pillars that Make India the Next Big Global Sourcing Destination

3 Pillars that Make India the Next Big Global Sourcing Destination

The Covid-19 pandemic has affected the entire world and forcing nations to rely on social vaccination measures like – social distancing, lockdown, and quarantine of the infected. The flu-like virus originating in China has led to a severe global crisis – health and economical.

It has paused global supply chains that were mostly reliant on manufacturing in China. Global trade has come to a standstill. With increasing distrust of China – due to its lack of clarity in alerting the world regarding the virus and its aggressive expansionist policies in Asia, global manufacturers are looking to relocate their manufacturing units out of China to elsewhere in the region. Adding to its list of economic troubles are the trade wars with the US, all of which are accelerating production out of China.

India is ready to step up its game and is looking to make the best use of opportunities arising out of the current crisis. Global brands are currently looking for China + 1, an alternative destination to which they can move their factories.

The biggest question is – Who is ready to become the next prominent manufacturer of the world? Here, in this article, we take a look at the top reasons why India is all set to become the world’s sourcing leader in this brand new decade.

Skilled and Cost-effective Workforce

India’s biggest asset is its vast population – 130 crore. As the second-largest populated country in the world, and as one of the world’s youngest nations, India has a substantial qualified and skilled workforce. Young Indians are well-educated and fluent in English, making them a much sought-after workforce.

Additionally, the labour costs in China have soared significantly in the last few years. Currently, the average minimum wage of a Chinese factory worker ranges from $140 to $346 per month. Comparatively, in India, the minimum monthly average wage of a factory worker ranges from $66 to $202, providing huge cost-benefits to manufacturers.

The Indian government has also launched several initiatives like the National Skill Development Mission to provide comprehensive and advanced training programs to around 400 million youth, making them more suitable for the job market. All of which makes India one of the most sought-after labour destinations in the world.

Increasing Investment in Support Infrastructure

One of the biggest hurdles in the Indian manufacturing story – was the lack of robust infrastructure. India is a vast country and is home to hundreds of major and small ports and boasts the world’s largest railway network. Yet, India’s transport infrastructure cannot be matched to that of China, which boasts of super-fast railways and roadways.

Transportation plays a crucial role in making a country a world-class manufacturing hub.  Without the right transportation network, raw materials cannot reach factories on time, and finished goods cannot be exported quickly.

India realising the importance of a robust transportation network has invested significantly in its infrastructure in the last decade. Today, all the major cities and towns in the country are well-connected by modern roads and rail networks.

The central government has also implemented two massive transportation projects – the Bharatmala and Sagarmala. These projects, when completed, will further enhance the logistics sector in India, reducing transportation inefficiencies. Besides these two projects, the government has set up five major industrial corridors covering the entire country to accelerate manufacturing.

Favourable Laws for Manufacturing and Doing Business

The current Indian government has done away with the major chunk of red tape plaguing foreign investments for decades. Currently, the process of registering and incorporating a business in India is hassle-free and quick. The latest legislation makes it possible to complete the process online at nominal costs. The time taken for a new company to register in India is just 3 to 5 working days.

The Way Forward

Given the unprecedented circumstances, global companies are reluctant to place all their eggs in the Chinese basket. This presents a huge opportunity for India that is ramping up production and manufacturing across sectors. With the Prime Minister’s vision of “Aatmanirbhar – Self Reliance,” India is all poised to become the next big sourcing destination of the world.

Just a few decades ago, at the time of the software revolution, no one imagined that India – a third-world country will emerge as the world’s leading destination for outsourcing software production and knowledge processes. But, we managed to and hold the title even today. Today, the country is all set to replicate its success – this time in the world of manufacturing.

Robust infrastructure, cost-effective and skilled labour, and simplified regulations are the three pillars that drive India forward as the next big manufacturing hub in Asia and the rest of the world. The time is ripe for India to utilise the current geopolitical shifts and emerge as a global sourcing leader in the brand new decade.