02 September 2010

All change out East

Published:: 01 October 2007

India is diversifying from IT powerhouse to become a substantial manufacturing destination. According to the responses of more than 340 of the world''s largest international manufacturing companies to a survey by Capgemini, India will become a substantial manufacturing destination in the next five years.

Some of the main manufacturing locations in China are becoming too expensive relative to other countries in the region, which includes India. While 43 per cent of the companies that offshored manufacturing to India have not achieved their objectives, the main barrier to success has been a lack of manufacturing and supply chain infrastructure. If the Indian government makes significant investments in this infrastructure, it should be able to attract foreign activities and realise its potential.

Despite China''s booming manufacturing industry and rapidly growing consumer market, the clustering of manufacturing centres around major coastal regions has also led to a surge in labour and real estate costs. Wages, being the most significant cost, are now around double the wages in neighbouring countries. Furthermore, moving to other parts of China may not be a solution as lack of infrastructure would mean a significant rise in transport costs.

Roy Lenders, vice president for consulting services at Capgemini, says: ''If the Indian government can provide the right investments in infrastructure for manufacturing and supply chain operations, it will soon become the destination of choice for manufacturing worldwide.''

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