India: New Manufacturing Hub of the World

By 2010-11, India has poised to become the new manufacturing hub of the world. The foundation has been built with liberalization policies taken during the 1990-95 . The major government policy was abolishing the excessive bureaucracy.With it ,the basic foundation created by the industrialists made India to align its manufacturing shops to the requirement of the world.

All major automobile companies started sourcing from India or started joint venture companies with Indian  companies. Volvo started joint venture with Eicher, Daimler with Hero Honda, Tata Motors with Fiat, Ashok Leyland with Nissan and so on. It’s not just cost factor alone that attracts foreign companies to establish their base in India. There are other natural ingredients that help in establishing and nurturing companies in India.

 Cheap labor: It’s the best place for cheap, but well educated and qualified people. A qualified engineer who passed from a premier institution like IIT get placed with $12K to $20K per annum in a good company compared to $50K to $80K in US. In India, people are ready to work continuously for more than 10 hours a day, because they save more money for their family and spent it lavishly.

 English Speaking Professionals: India boasts of 100 million English speaking people.There are more  schools, colleges and universities with English as medium of instruction compared to China. It gives lesser time for foreign companies to develop the human resource needed for them in India.

 Influence of Japanese Manufacturing principles: Japanese manufacturing principles were considered to be the best in the world for reducing cost of manufactured products. The concept of Just-in-time, Kanban, kaizen,Total Productive Maintenance (TPM) had proved successful in shop floors. The concept of Toyota Production Systems had revolutionized the entire value chain .Indian companies are better in following the Japanese manufacturing better than any country in the world. It effectively reduce the cost of production and improves the quality and customer satisfaction.

 Better utilization of Human Skills: Indian companies spend less in procuring highly productive machineries and equipments. It created a situation of maximum utilization of human skills in existing semi-automatic, general machines. The productivity may be less, but the cost of production is equally less.

 Firm Growth of Software & Allied services: India is specialized in software and IT related field. It helped in optimizing the supply chain and reduces the overheads. The cost of establishing an ERP system in Indian company is much cheaper compared to a foreign company. The quality of IT services is also at par with services of any developed nation.

 Increased Vertical Integration by companies:Many companies started vertical integration to reduce the manufacturing cost and ensure competitiveness. Companies such as Reliance & TATA had plunged into it during 90’s itself making other smaller companies to follow.

 Element of cost consciousness in product design: The affordability of the people in India to purchase a product is a major point in success of a product. In India, a split A/C should cost around $500 to $600,a price which is unheard in western world. So each manufacturer tries to bring in better feature within the budget limit to lure the customer. Indians are generally cost conscious. All are interested in one time cash payment than using credit cards. So the products will not be flamboyant in aesthetics but serves the purpose.

 Big market with a great market potential: It’s a country with more than a billion people.It’s a huge market for western manufacturers.It’s also a developing nation with a annual GDP growth rate of 6-8%.Such a market is a solomon’s gold mine for any manufaturers eyeing new markets.

It resulted in converting India into a new automotive manufacturing hub, which is ready to cater big manufacturers.India is ready for its second cycle of growth by 2011,when the global economy turn into growth phase.