India officially ranks higher than United States (US) to become the second most desirable destination for manufacturing according to the Cushman and Wakefield 2021 Global Manufacturing Risk Index. A report by SURFACES REPORTER.
The reports placed the USA at the second spot majorly due to the relocation of manufacturing relocations from China to the other parts of Asia. A major driving factor for the placement is cost-effectiveness according to Cushman and Wakefield. The consultants state that report indicates a positive inclination of manufacturers towards India as a preferred manufacturing hub over other countries such as the USA and other countries of the APAC region. The data assessed 47 countries in Europe, the Americas and Asia-Pacific (APAC).
What worked in the favour?
The survey indicates that the Indian operating conditions and affordability have worked well for the country. The other reasons also include proven success in meeting the outsourcing requirements which have improved the country’s ranking over the years. The USA follows India at the third position whereas Canada, Czech Republic, Indonesia, Lithuania, Thailand, Malaysia and Poland are placed in the top ten in the same order.
The report based its rankings on four prime criteria, including the operational costs, business environment (availability of talent/labour, accessibility to markets), and capability to restart manufacturing. The US-China trade tensions also helped India reserve a better spot on the list.
Plant-based relocations from China to another part of Asia proved to be fruitful for the secular land of India. Since the pharma, chemical and engineering sectors have been the centre of Sino-American tensions, the resultant shift has proven beneficial for India.
Additionally, The USA has adopted technologies and policies that make it a tough competition to China even though the US itself is a larger consumer.
How did India perform in the other parameters?
On the cost outlook this year both India and Vietnam have slipped a `spot, overtaken by Indonesia. While China retains its number one position even on the cost front, India slips to the third rank and Indonesia rose to the second from the fifth.
Jakarta’s dipping rents have been responsible for Indonesia’s swift movement to the second spot. Vietnam’s Wages costs are lower than China due to the competition from the lower-cost locations. Another substantial mention is of Thailand that moved to the fifth spot from the eighth. Columbia too climbed up to the eighth spot from the fifteenth due to its labour costs being similar to Asia.
Parameters such as managing the geopolitical risks involved in running a business and its ability to restart the manufacturing businesses after a devastating second wave of the pandemic are some areas where India needs to ponder for becoming the most preferred spot for manufacturing. In these parameters, India ranks much lower in the list. For the risk scenario involving the lower levels of economic and political risks, India has been clubbed at the third quartile of the rankings along with several other countries such as Italy, Peru Malaysia, Belgium, Indonesia, Bulgaria, Romania, Thailand, Hungary, Colombia, and Vietnam. China is in the top quartile again followed by Canada, the USA, Finland, Czech Republic. Countries in the second quartile include Lithuania, France, Netherlands, Spain, Poland, Japan, UK etc.
The bouncing back rate which indicates a country’s ability to restart the manufacturing sector is another factor where India currently ranks in the fourth quartile along with Sri Lanka, Mexico, Thailand, Tunisia, Peru, Philippines, Vietnam, Indonesia, Bulgaria, and Venezuela.
The road ahead
The road to becoming the most reliable partner for manufacturing is long and the pandemic might slow down India’s quest to overtaking China even further. To become the most sought after place for manufacturing, India needs to become a more reliable destination in terms of risks as well as bounce back better after the pandemic!
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