The combined populations of China (1.4 billion) and India (1.3 billion) constitute more than a third of the global population. When it comes to manufacturing prowess, China currently holds the number one spot on the Deloitte 2016 Global Manufacturing Competitiveness Index, while India places eleventh.
Although the same index projects the United States (currently in second place) to overtake China by 2020, it also predicts that India will rocket into fifth place, overtaking South Korea in one of the largest shifts in competitive positioning over the next four years.
Chinese investment is likely to be one of the major factors driving this growth.
Chinese Train Maker Launches Operation in India
China is investing in India through companies like China CRRC Corporation Ltd., the country’s largest rail transportation equipment manufacturer, which recently announced the opening of its first joint-venture facility in India.
The CRRC Pioneer (India) Electric Co. Ltd. is located in the Bavo industrial district in India’s northern state of Haryana. CRRC controls 51 percent of the USD$63.4-million investment in the new facility.
According to the company, the India plant will repair and manufacture railway locomotive engines, provide support for India’s rail system and supply electric transmission systems to oil, wind power and mining equipment manufacturers in India.
Although CRRC also established a North American plant in Massachusetts last year, CRRC vice president Yu Weiping made it clear that India is a much more attractive market.
“Given more than 60,000 kilometers of railways in India, it is far from enough to build a single locomotive engine plant in India,” Yu Weiping said. “CRRC will build more plants able to produce trains, locomotive traction systems and other key parts in India.”
Should India Embrace Migration of China’s Production Capacity?
“India may need to carefully think about whether it wants to resist or embrace the migration of China's production capacity, which allegedly involves some investment in heavy polluting industries,” wrote Hu Weijia in China’s state-run Global Times.
However, Hu Weijia was quick to point out that “these concerns [regarding pollution] are unfounded” and that “A large number of Chinese manufacturers have acquired far more advanced technology than some local Indian firms despite those Chinese enterprises [having] suffered problems of overcapacity domestically.”
In other words, India could provide Chinese manufacturers with a way around US and European duties imposed on imports of Chinese steel and other materials.
From a somewhat less cynical perspective, the growing Indian labor force could shore up the shrinking Chinese one. This could explain the 37 mobile phone manufacturing companies that have established new facilities in India in the last year alone.
According to India’s IT Minister, Ravi Shankar Prasad, 110 million mobile phones were manufactured in India in the last year, compared to 60 million in the previous period.
Chinese mobile companies Gionee and Xiaomi are now both manufacturing handsets at the Foxconn plant in Andhra Pradesh.
“India imports electronic goods of over Rs 3 lakh crore [approximately $44.7 billion],” said India’s Minister of State for IT and Law P.P. Choudhary. “By 2020, the government aims to bring those imports down to zero.”
Encouraging domestic start-ups in an effort to reduce the country’s dependence on imports is a laudable strategy and one the West should take note of. Nevertheless, from a production standpoint, the question remains: Should India embrace China’s excess manufacturing capacity?
If it doesn’t, one of the other “Mighty Five” up-and-coming manufacturing nations from the Deloitte index—Malaysia, Thailand, Indonesia or Vietnam—surely will.
Which countries do you expect will be the top manufacturing nations in 2020? Comment below.