Looking Into the Future – Can India Take China’s Crown in Manufacturing?

India and China, two of the world's most populated countries, have both been on the radar for their potential in the global manufacturing sector. China has long held the crown as the "world's factory" with a robust manufacturing sector and a well-established supply chain. However, India is now actively working to expand its industrial footprint, raising the question: Can India Take China's' Crown in Manufacturing?

As India positions itself as a global manufacturing hub, the question of whether it can rival China's manufacturing capacity has become increasingly pertinent. With the Indian government's push for initiatives like "Make in India," the semiconductor ecosystem's growth, and recent geopolitical shifts, India is on a path toward enhancing its manufacturing capabilities. 

Can India Compete with China in Manufacturing?

India is set to become the world's third-largest economy by 2030. As a result, the demand for electronic products in the country is expected to increase significantly, making it an attractive market for companies looking to sell their products. A report from Morgan Stanley predicts that India's' domestic market for electronic products will grow due to steady consumer demand, reaching about $92 billion by 2032. India's manufacturing sector has shown promising growth, contributing about 16-17% of the country's GDP & the Indian government aims to raise the manufacturing sector's GDP share to 25% by 2025.

India's' Current Standing: India's' manufacturing sector makes up about 4% of the global manufacturing output, valued at approximately $500 billion each year. Supported by a growing infrastructure and a workforce of about 60 million people, India's' key industries include textiles, electronics, and automotive. Labor costs in India are lower, averaging around $2 per hour in manufacturing, making it an attractive option for cost-effective production. However, India faces challenges in scaling up infrastructure and enhancing technology.

India is currently advancing its manufacturing sector through several key initiatives:

1. Make in India: Launched in 2014, this initiative aims to encourage both multinational and domestic companies to manufacture their products in India. It focuses on 25 sectors, including electronics, textiles, and automotive.
2. Production-Linked Incentive (PLI) Scheme: Targeting a $300 billion electronics market by 2025, NPE aims to make India a global hub for electronics manufacturing.
3. National Policy on Electronics (NPE): Launched in 2019, the NPE aims to make India a global hub for electronics manufacturing, targeting a $300 billion market by 2025.

China's Current Standing: China is the world's largest manufacturer, contributing around 28% of global manufacturing output, valued at approximately $4 trillion each year. This success is backed by a robust infrastructure, a skilled workforce of about 200 million people, advanced technology, and strong government support. Key industries include electronics, machinery, and chemicals, which contribute significantly to its economy. Rising labor costs of about $6.5 per hour on average in manufacturing and strict environmental regulations are challenging, but China's' large-scale production and efficiency keep it in the lead.

China is currently advancing its manufacturing sector through several key initiatives:

Industrial Internet Development Action Plan: Integrating internet technologies, big data, and AI to enhance manufacturing efficiency and drive smart manufacturing.

Green Manufacturing Initiatives: China's' focus on sustainable practices promotes resource conservation, emission reduction, and the development of eco-friendly technologies.

Talent Development: Programs like "Made in China 2025" aim to cultivate a skilled workforce, enhancing fields such as robotics, aerospace, and IT.

Comparative Analysis: India vs. China

China dominates global manufacturing with 28% output valued at $4 trillion, supported by a skilled 200-million workforce, advanced tech, and government support, despite $6.5/hour labor costs and strict regulations. India, at 4% of global output and $500 billion annually, has lower labor costs of $2/hour and key sectors in textiles, electronics, and automotive. However, scaling and tech limitations hinder India from matching China's' efficiency and scale. China offers faster production and shipping lead times due to advanced logistics networks and strategic port locations, making shipments to the U.S. and Europe typically 15-20% faster than those from India. India's shipping lead times are generally 5-10% longer, impacted by infrastructure limitations and the need for longer routes. However, India is implementing improvements in logistics and trade policies to support reshoring efforts, aiming to close this gap and become more attractive for global manufacturers.

Opportunities for India

Geopolitical Shifts: The ongoing trade tensions between the U.S. and China have prompted many multinational companies to rethink their supply chains. India stands as an attractive alternative for companies looking to diversify their manufacturing bases.

Skilled Workforce: India boasts the largest number of English-speaking graduates in science, technology, engineering, and math (STEM) fields, along with a low dependency ratio of 31.2 percent, which measures the proportion of young people (ages 0–19) to seniors (over 65). This combination ensures a steady and abundant labor supply. Ernst and Young forecasts that India's' working-age population will peak at 68.9 percent by 2030. This is expected to be the highest level of working-age population in India's history.

Growing Domestic Market: With a population of over 1.4 billion, India presents a vast domestic market. This can significantly benefit manufacturers who aim to cater to local demand while also exporting goods.

Focus on Semiconductor Mission: India Semiconductor Mission is a targeted initiative to establish a comprehensive semiconductor and display ecosystem in India. With over $10 billion in government backing, the mission aims to attract leading semiconductor manufacturers and facilitate local production. With major investments from companies like Tata, Tower Semiconductor, Adani, and strong government support, India is ready to take a key role in the global chip industry.

India Areas for Improvement to Compete with China

Collaborations with Global Players: India is actively seeking partnerships with global semiconductor companies, aiming to build local manufacturing capabilities. Companies like Intel, TSMC, and GlobalFoundries have expressed interest in establishing manufacturing units in India.

Research and Development: Investments in R&D are essential for developing advanced semiconductor technologies. Collaborations with educational institutions and research organizations are being promoted to foster innovation. Intel has invested in research programs at IIT Bombay to advance semiconductor technology in areas like microprocessor design, fabrication techniques, and AI-driven chip architectures.

Infrastructure Development: Establishing semiconductor fabrication facilities (fabs) requires substantial investment in infrastructure. The government is focusing on creating semiconductor parks equipped with the necessary facilities. One key initiative under this program is setting up semiconductor parks, such as the proposed Dholera Semiconductor Facility in Gujarat. These parks are planned to provide advanced infrastructure, power, water supply, and waste management systems essential for semiconductor fabrication facilities (fabs).

Focus on Vocational Skill Training: India faces a shortage of skilled and semi-skilled labor, along with insufficient vocational training opportunities. Indian Prime Minister Narendra Modi's' government in recent years has sought to address this gap by launching a range of skill-development programs and vocational training centers under its Skill India Mission. While the government in 2024 claimed that the Mission has trained 14 million young people and up skilled or re-skilled 5.4 million people.

Case Studies: Successful Manufacturing Initiatives

Foxconn: In 2023, Foxconn announced plans to invest $1 billion in India to establish a manufacturing facility for electronic components. This move signals confidence in India's potential as a manufacturing hub.

Samsung: The South Korean tech giant has significantly expanded its operations in India, investing over $1 billion in a new factory in Uttar Pradesh. This facility aims to produce smartphones and other electronics, contributing to India's electronics manufacturing landscape.

Wistron: The Taiwanese company Wistron has also ramped up its manufacturing capabilities in India, producing iPhones for Apple. This partnership highlights the potential of India to be an essential player in global electronics manufacturing.

Looking Into the Future – Can India Take China's Crown?

India's ability to grow is not solely dependent on its population size or geographical advantages. Similar to Germany, a smaller population can still be competitive in the global marketplace. Political tensions between China and Western nations, coupled with lower wages in India, might encourage businesses to explore opportunities in India.

However, higher inflation rates in India have raised living costs and dampened consumer demand, potentially slowing manufacturing growth. Although India's inflation is beginning to ease, the gap between it and China remains substantial. China's established infrastructure, extensive workforce, robust domestic consumption, and plentiful resources position it favorably, making it unlikely for India to surpass it in manufacturing capabilities soon. Despite projections of similar growth rates, China's significant lead presents a formidable barrier for India to overcome.

While India is making significant strides in manufacturing, it may take years before it reaches China's level of capacity. However, India's focus on building a resilient, efficient, and high-quality manufacturing base puts it on the right path. With continued government support, strategic investments, and a focus on key sectors like semiconductors, India has the potential to emerge as a powerful manufacturing hub.

India's achievements in space exploration, like the Chandrayaan missions to the Moon and the Mangalyaan mission to Mars, are prime examples of the nation's ability to achieve extraordinary feats on a limited budget. Both missions were conducted at a fraction of the cost of similar programs by other countries, demonstrating India's capacity for innovation, resourcefulness, and efficiency in high-tech sectors. These successes highlight India's potential to achieve complex goals with strategic planning and low-cost solutions, reinforcing its ambition to lead in advanced manufacturing.

For now, India is strengthening its foundation by establishing fabs, building infrastructure, and creating robust supply chains tools like Octopart. These steps are essential if India aims to become a self-sufficient manufacturing powerhouse capable of meeting both local and global demands.

India may not match China immediately, but with persistence and investment in the right areas, it can establish itself as a leader in manufacturing, especially in sectors like semiconductors where it's' already making headway.