1 October 2024
The global manufacturing landscape is evolving, with many companies looking to move their operations out of China and establish manufacturing units in other locations. A notable example is Apple, which has been gradually transferring its manufacturing from China to India. In 2020, the tech giant announced plans to produce its iPhone 11 at a Foxconn facility in Tamil Nadu, marking a significant shift in global manufacturing dynamics.
India’s government has actively promoted domestic manufacturing for several years. The Make in India initiative, launched in 2014, was a major effort to position India as a global manufacturing hub, aiming to enhance the attractiveness of the country for both domestic and international investors. By 2020, the government introduced the Production Linked Incentive (PLI) scheme, offering financial incentives to manufacturers across various sectors, including electronics, pharmaceuticals, and textiles. This initiative has been crucial in increasing India’s manufacturing output, with a budget allocation of INR 1.97 trillion ($26 billion) over five years, helping to draw companies to establish or expand their manufacturing operations in the country.
Additionally, India’s business environment has seen significant improvements. According to the World Bank’s Ease of Doing Business Index, India climbed from 142nd place in 2014 to 63rd in 2020, reflecting the government’s efforts to streamline regulatory processes, enhance infrastructure, and improve the overall business climate.
While policy initiatives have been essential, cost advantages have also played a key role in the migration from China to India. Labor costs in China have risen sharply over the past decade, partly due to the growth of labor unions. In contrast, India maintains relatively low labor costs, with the average monthly wage for a manufacturing worker in 2023 being around $150, compared to China’s average of approximately $650. This substantial wage difference has been a significant factor in attracting companies.
Furthermore, the overall cost of operations, including land, electricity, and logistics, tends to be more competitive in India. A Deloitte report indicates that India’s logistics costs are expected to decrease by 2025 due to ongoing infrastructure improvements, making the country an increasingly appealing destination for manufacturing, especially for companies looking to optimize their expenses.
