Transformation of Indian Manufacturing

Industry through Make in India and

comparison to the factory of world China

Dr Vikas Nath (Professor & Director, BVIMR), Dr Navneet Gera,

Associate Professor, BVIMR New Delhi

Introduction

The research paper is intended to analyse the

Indias competitiveness for manufacturing
sector through macroeconomic variables.
The comparative study of India vs china shall
help us to understand as to the factors
favouring Indian economy for manufacturing
and where the country needs to transform.

Introduction

Indian economy is set to transform through

Make in India.
It reminds us of 1990s when economic reforms
took place and the economy was set to globalise.
Chinese economy has been liberalised in 1978
and is therefore the manufacturing hub
technically said to be the factory of the world.
Indian economy has been able to establish itself
as service Industry and is gradually set to move
towards manufacturing through make in India
and other initiatives of NaMo Govt by ease of
doing business and attracting FDI.

Research Objectives

Objectives of Research
The objective of research is to analyse and interpret
the manufacturing competitiveness of India vis a vis
china.
Research Methodology
The research is an exploratory and conclusive
research and is focused on News Papers, Journals
and the secondary data collected from the reliable
sources. The research is qualitative in nature due to
its nature of research. The quantitative research has
been done through the global competitive reports
and the same has been analysed and interpreted for
Indian economy vs the Chinese economy.

Indias Key Indicators

Manufacturing GDP CAGR (200510)

8.5%

Manufacturing GDP percentage of total GDP

(2010)
Labor costs (US$/hour) (2011)

14.2%
0.9

Manufacturing exports percentage of total exports 50.3%

(2011)
Manufacturing jobs created per hundred persons 1.6
(20012010)
Highest corporate tax rate (2012)

32.4%

Researchers per million population (INSEAD

2012)
Per capita personal disposable income (US$)
(2011)
Per capita personal disposable income (2011)
CAGR (20012011)

136
1,271
11.7%

Drivers of Manufacturing Competitiveness

We will analyse the global competitiveness

report, wherein a survey of CEOs from
different countries was conducted.
The ratings on a scale of 10 are mentioned for
India and china.
Higher ratings here means the situation is
better and affirmative and lower ratings shows
less confidence and trust on the given factors
such as talent, economic and financial trade,
cost of labour etc.

Drivers of Manufacturing Competitiveness

Main Drivers

Subcomponents

India

China

Talent

Quality and availability of researchers, scientists,

5.82

5.89

4.01

5.87

9.41

10.0

4.82

8.25

2.75

3.09

1.78

6.47

and engineers Quality and availability of skilled

labor
Economic, Trade, Financial and
trade system

Tax rate burden and system complexity

Clarity and stability of regulatory, tax and economic
policies

Cost of labour & materials

Cost competitiveness of materials

Availability of raw materials

Supplier Network

Cost competitiveness of local suppliers

Ability of supply base to innovate in products and
processes

Legal and Regulatory System

Stability and clarity in legal and regulatory policies

Labor laws and regulations

Physical Infrastructure

Quality and efficiency of electricity grid, IT and

telecommunications network
Quality and efficiency of roads, airports, ports, and
railroad networks

Drivers of Manufacturing Competitiveness

Main Drivers

Subcomponents

India

China

Energy Cost &

Policies

Cost competitiveness of energy

5.31

7.16

5.90

8.16

1.00

2.18

5.09

8.42

Ongoing investments to improve and modernize energy

infrastructure

Local Market
Attractiveness

Size and access of the local market

Healthcare System

Cost of quality healthcare for employee and society

Intensity of local competition

Regulatory policies (e.g., pollution, food safety, etc.) that
are enforced to protect public health

Govt Investments
in Manufacturing
& innovation

Government investments in R&D: science, technology,

engineering and manufacturing
Private and public sector collaboration for long-term
investments in R&D: science,
technology, engineering and manufacturing

Source: Deloitte Touche Tohmatsu Limited and U.S. Council on

Competitiveness, 2013 Global

Analysis

In comparison to the scores mentioned above as per the global

competitive report.
India is lagging behind in terms of Infrastructure, healthcare
and Government Investment in manufacturing and innovation.
However, India is having close score in terms of talent, cost of
labour and regulatory framework.
The countrys strong talent pool in the areas of science,
technology and research, in conjunction with some of the
lowest labour rates in the world, were cited by survey
participants as significant competitive advantages that would
positively impact Indias ability to conduct cost-efficient
research and development.

Recommendations for Indias Manufacturing

Competitiveness

Infrastructural Issues In order to transform

into
a
truly
manufacturing
sector,
infrastructural network and connectivity has
to be improved at all levels. In india the
logistics cost is high which is 13-14 per cent of
GDP vis a vis developed countries which is 7-8
per cent.
The uninterrupted power supply is the need of
the hour along with other renewable sources
(wind energy) to be established at mega level.
The port charges are too high as well as self
sufficiency in container industry has to be
developed.

Recommendations for Indias

Manufacturing Competitiveness

Cost of doing business in India In

comparison to many other economies the
interest rates are higher and thereby
increasing the cost of production.
On the other hand the corruption also
increases the cost of production for domestic
companies as well as MNCs and thereby anti
corruption laws and mechanism has to be
established.

Recommendations for Indias

Manufacturing Competitiveness

Industrial Policy and Environmental Norms

Industrial policy need to be fine tuned with the
entrepreneurs and business friendly so that
the procedural parts are automated and time
taken to set up an Industry is reduced which is
quiet high in India.
A framework has to be prepared based on
future plans with a focus on manufacturing
growth.
The role of various Government bodies needs
to be supportive rather than controlling and
regulating.

Recommendations for Indias

Manufacturing Competitiveness

Self Declaration and automated processes The procedures of doing business in India is
complex and it is recommended to keep it
simple.
The procedures and filing of documents need
to be shifted to self-declaration mode as well
as online mechanism as far as possible.

THANK U FOR YOUR PATEINCE LISTENING

Email drvikasnath@gmail.com