India becomes second-most sought-after Manufacturing Destination

• 26 Aug 2021

India has been ranked as the second-most sought-after manufacturing destination in the world according to the 2021 Global Manufacturing Risk Index released by Cushman and Wakefield.

• It is second only to China and has surpassed the US to bag the second ranking.
• India, however, slipped a rank in the cost scenario and was overtaken by Indonesia.
• The report states that, India could benefit from relocations from China to other parts of Asia, as it already has an established base in pharmaceuticals, chemicals and engineering sectors that continue to be the focus of the US-China trade tensions.
• It, however, stated that reforms in land and labour laws are critical to ensure India’s success as a global manufacturing hub.

China the Leader

• China has retained its top position and continues to diversify its manufacturing base. Even with the Biden administration’s concerns about trade, China continues to diversify its base to move up the value chain to focus on telecom, high-tech, and computers. Guangdong and Jiangsu regions are spearheading its electronic components and automotive manufacturing, while Zhejiang and Liaoning focus on chemicals and natural resources.

The Report on US

• The US is a desirable hub as it offers a large consumer market as well as incentives at both state and federal levels. But its rapid adoption of technology and policies could make it a tough competitor to China.

Cost Scenario: Indonesia on the Move

• When it came to the cost scenario, India and Vietnam were overtaken by Indonesia, while China retained its lead position. India slipped to the third rank, while Indonesia moved to the second from the fifth spot.
• Jakarta’s dipping rents have a part to play in cost effectiveness that pushed Indonesia up by three spots. While wage costs in Vietnam are cheaper than in China, it is facing increasing competition from lower cost locations. Similarly, Thailand’s cost profile moved it to the fifth spot from eighth. Colombia that has labour costs similar to Asia’s climbed from 15th spot to the eighth spot.

Risk Scenario

• When it comes to the risk scenario that takes into account lower levels of economic and political risks, India is nowhere near the top.
• India has been clubbed in the third quartile of the rankings along with Malaysia, Belgium, Indonesia, Bulgaria, Romania, Thailand, Hungary, Colombia, Italy, Peru and Vietnam.
• On top of the first quartile is China, followed by Canada, US, Finland, Czech Republic.
• The second quartile has countries like Lithuania, France, Netherlands, Spain, Poland, Japan, UK etc.

Bounce Back Rating

• When it comes to the bounce back rating that takes into account a country’s ability to restart its manufacturing sector, India is in the fourth quartile with Sri Lanka, Mexico, Vietnam, Indonesia, Bulgaria, Thailand, Tunisia, Peru, Philippines and Venezuela.