TheNFAPost Podcast

Though the economy is very slowly limping back to normalcy, there is still uncertainty and fear among the people about job opportunities and the future of various sectors.

Can India become the new manufacturing hub as many industries are shifting from China? Yes, say experts.

In a recent article, State Bank of India (SBI) Group Chief Economic Adviser Soumya Kanti Ghosh said, “To understand whether India can benefit if factories from China were relocated, we looked at the Capital Goods, Consumer Goods, Intermediate Goods and Raw Materials Revealed Comparative Advantage for India and China. Although, the Revealed Comparative Advantage (RCA) for India is lower than China as far as Capital Goods Exports are concerned, India can still capitalize on this opportunity to push its Capital Goods exports.”

Ghosh added, “However, the bigger opportunity right now is in Consumer Goods Sector, in which India has an RCA greater than China. For Consumer Goods Sector, looking at the MSME profile of the country, the biggest concentration is in the textile and clothing sector(17.30%), food products (12.30%) and crop and animal products (10.0%). Although we do have comparative advantage in textiles and animal goods, in food products we are not competitive. The government can give a direct push to this sector, so that MSME firms involved in food product manufacture get benefited.”

India is a preferred location compared to countries like Vietnam, Thailand and other Southeast Asian countries predominantly because of government initiatives, better port infrastructure and higher intensity of tech adoption, Sudeep Kumar Sen of TeamLease Services Limited said.

“The technical education system of 10+2+4 years and also ITI have contributed to the strengthening of fundamentals. Furthermore, India has taken various initiatives to attract investors. It is expected to take the lead and emerge as the preferred destination and this shall have an upswing in the employment rate by minimum of 10-15% predominantly in technical jobs back with Industry 4.0,” Sen told the NFAPost.

It is said that over 60 manufacturing companies in the business of manufacturing and assembly cycle, have decided to partially or fully shift the ‘Factory/productions setups’ to cost effective locations like India, Vietnam, Thailand and other Southeast Asian countries.

“India is ranked 18th in terms to automation readiness index rating, it has a $12 billion domestic consumer electronics market and $49 billion FDI inflows. These analytics and data help India score much higher than locations like Vietnam and other Southeast Asian countries. India is a preferred location for the MNCs to set up their shops, and it is a big leap towards ‘Make in India’,” Sen added.

Although 2020 is a lost year, in terms of trade, India can think long-term and build relations so that it can occupy the space vacated by China. India can look in the range of incremental exports growing by $20 billion in the least favourable outcome to a significant $193 billion jump in the 5 year horizon, only if it builds its capabilities and captures share from China, Ghosh said.

Though other Southeast Asian countries are gaining, India can make use of mass trade and factory diversion from China. Various sectors are now adopting and training its employees to acquire new skills. Experts opine that there are bigger opportunities in the manufacturing sector and that the country has all the potential to grab the present shift.

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