The Indian government approved a long-debated manufacturing policy on October 25. The intent of the policy is to boost the country’s manufacturing capability; to increase the share of manufacturing from the current level of around 16% of GDP to 25% by 2022; and to create 100 million new jobs in special manufacturing hubs. This could be critical for India as an expected 130 million Indians will be joining the workforce, many of whom may not be qualified to participate in India’s growing software industry.
In India, manufacturing as a share of GDP is much lower than in economies such as China, where it is more than 40%. Electronics are likely to account for a large share of total manufacturing, which means that India’s new policy could be very important for the global electronics supply chain. Low labor costs could shift some manufacturing to India, and with a growing domestic market, local manufacturing could also have logistical benefits. Korean brands, Nokia, and Indian companies, such as Videocon and Onida, have already made India their regional manufacturing hub for exports to South Asian and Middle Eastern countries. There will also be incentives for electronics, semiconductor and LED industries, as well as improved taxation policies such as a new goods and services tax (a form of a value-added tax) system.
India will need to reach out to prospective manufacturers and investors to gain knowledge about manufacturing and global supply chain management, particularly in electronics.