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India manufacturing competitiveness

By Tim Hanley - January 14, 2013

India flagExecutives often ask me about the manufacturing landscape in India. Based on my observations during a recent visit to India and my ongoing discussions with our clients, India is a vibrant market which continues to attract investment interest. This trend indeed is echoed in the 2013 Global Manufacturing Competitiveness Index report released by Deloitte Touche Tohmatsu Limited’s (DTTL) Global Manufacturing Industry group.  The global industry survey had over 550 respondents, who were chief executive officers (CEOs) and senior leaders at manufacturing companies around the world. These executives ranked India as the fourth most competitive nation today and believe that the country will rise up in the rankings to be the second most competitive manufacturing nation in five years. As you can imagine, there were many executives and government officials in India who were very interested to hear more about the study, so my trip back to India last month was very timely.

I traveled to three cities – Delhi, Hyderabad, and Mumbai – for a series of client meetings and events and had the opportunity to share some of the insights on India highlighted in the 2013 Global Manufacturing Competitiveness Index report. While India dropped back slightly in terms of its competitiveness index ranking from second to fourth since the 2010 report, the CEO’s surveyed for the 2013 report believe this decline may be short-lived as many feel that the country could regain its former position, behind China which ranked No. 1. India offers access to a strong talent pool in the areas of science, technology, and research, in conjunction with some of the lowest labor rates in the world. These were cited by the executives surveyed as significant competitive advantages that would positively impact India’s ability to conduct cost-efficient research and development.

During my visit, I led a very interesting client event in Delhi that focused on the findings of our report and discussed the implications for business. The Deloitte India hosted event was attended by a senior executive audience from over 50 companies. After my presentation, I had the privilege of chairing a panel with the Director of the Indian National Manufacturing Competitiveness Council and a chief financial officer from a prominent India based manufacturing company.

While the political climate in India is viewed as stable, executives surveyed cite concerns with the country’s public policy, regulatory, and healthcare systems, and under-developed physical infrastructure as some of the country’s least competitive factors. These points resonated with both executives and government officials that I met during my trip, and they suggested the insights from the competitiveness study will help them further to support their efforts to improve India’s manufacturing competitiveness.

The Prime Minister’s Economic Advisory Council (PMEAC) in India recently lowered the country’s growth estimate to 6.7 percent for the current fiscal year, which was lower than the rate of almost 8 percent for the past 5 years. Despite the revision, some economists believe the PMEAC’s projection seems optimistic, and gross domestic product (GDP) growth could end up even lower. As 2013 begins, slowing growth is a shared concern for manufacturers and government officials alike and something being watched closely. 

Over the longer-term, my view is that India’s workforce skills and cost advantages, improving policies and regulations, growing middle class, and ongoing investment in infrastructure will boost its competitive advantage and help maintain the country’s position as a strong contender on the global manufacturing front. On a more personal basis, I am already looking forward to my next visit to India to continue to observe the dynamic marketplace and share observations with senior executives who also share a passion to learn more about how they can make India more competitive globally.

 

Source:

  • 2013 Global Manufacturing Competitiveness Index. DTTL Global Manufacturing Industry group analysis. 16 November 2012.

Tim HanleyTim Hanley is the Global Leader of the Manufacturing Industry group of Deloitte Touche Tohmatsu Limited (DTTL). In his global industry leadership role, he directs strategic initiatives and investments to grow Deloitte member firm market share within the manufacturing industry. During his distinguished 32-year career, Hanley has led teams serving all business aspects, including consulting with top management regarding organizational financial strategy development and execution, acquisitions, and market development.

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The manufacturing industry is closely linked to the services sectors in many economies, often having a multiplier effect in terms of employment and growth. With the plans to grow the manufacturing industry in India, the services sector is likely also to experience a positive effect of this.

Great article Tim! I think the manufacturing sector in India is highly undervalued and also under-researched. I've seen that manufacturing percent of GDP was 26.4 a few years ago (http://www.anythingresearch.in/India-Manufacturing.php). What are your expectations for the future of the services sector?

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