Advantage India: 5 factors that make India an ideal manufacturing destination

Business disruptions caused by the pandemic has made it a priority for international enterprises to diversify their production centers and expand the markets they cater to, with the aim to make their supply chains more resilient.

India offers several strategic advantages to global conglomerates. A sizable local market and a booming private sector, complemented by a geographical location suitable for exports are some of the benefits that made several MNCs in the electronics, engineering, automotive, chemicals, food processing and healthcare sectors to set up their manufacturing operations in India.  Here’s exploring the top five factors that has turned India into a global manufacturing magnet.

India’s Future Perfect Stature

India is home to a strikingly young population and by 2030 would account for world’s largest working age population. India is also projected to become the third largest consumer market by 2030, with expected consumer spending to grow to almost USD 6 trillion. Indian government has committed USD 1.5 trillion to improve energy, transport, logistics, industrial, social and urban infrastructure under NIP. All these factors and a swelling tech-savvy population with high digital adoption, second only to China, makes India one of the most advanced destinations for business.

Government Support for a Conducive Manufacturing Ecosystem

The current Indian government propagates the concept of think global, act local, serve ‘glocal’. Several central and state government initiatives have been taken to attract foreign investment in India as a part of the “Make in India” drive. It has already garnered USD 357 billion in Foreign Direct Investment since FY2014. Numerous policy-level reforms, improvement of industrial infrastructure, liberal FDI and foreign trade rules, and fast-tracking of projects with customized support for large projects are exemplary of some such initiatives.

Attractive Tax Rates

As per the new tax reforms, the effective Corporate Tax rate (including surcharge and cess) for new manufacturing companies in India is as low as 17.16% – one of the most competitive in the world. Various state governments have also announced tax-based incentives across several manufacturing segments.

Competitive Cost of Doing Business

The cost of setting up and operating a manufacturing unit in India is globally very competitive. Several Indian states have liberalized labor laws and the cost of quality labor in India is drastically low in comparison to China, Mexico and Thailand. Power rates in India are at par with China and lower than Brazil, Thailand and Mexico.

Ease of Doing Business

In the global ease of doing business index, India climbed 79 spots in the last 5 years and holds the 63^rd position, as of 2019. Fast tracking of multiple government processes, setting up special courts to accelerate legal proceedings and resolution of disputes, and implementation of easier exit policies have helped in improving India’s ease of doing business.

Apart from the afore mentioned factors, Indian government is also making sure that a substantial number of global requirements around sustainability are addressed. The country is also improving its logistics and infrastructure for faster and seamless transportation of consignments. Various steps have also been taken for pandemic proofing of supply chains.

World’s 5^th largest economy, India has a strong and stable government that is progressively working towards making the country conducive for global manufacturing operations. The whole package that India is offering is so lucrative that global conglomerates have taken notice. Many have already started their operations and many more are considering setting up their manufacturing bases in India to avail these benefits without wasting any more time.

To read the full PWC report click here