India Emerges as Prime Manufacturing Hub in Wake of Global Tensions

Facing persistent supply chain disruptions since the COVID-19 pandemic and ongoing geopolitical tensions, many leading global manufacturing companies are diversifying their operations across regions. This trend aims to mitigate risks and enhance flexibility in the face of challenges such as the Ukraine-Russia conflict, the Israel-Hamas war, and Houthis’ attacks on shipping lines.

It is to be noted that geopolitical tensions and potential threats are significantly impacting supply chain costs. To navigate these challenges, companies are exploring emerging global supply chain regions for diversification. India, with its political stability, growing market, dynamic workforce, and rising income levels, stands out as a prime location for establishing manufacturing bases.

India continues to be the fastest-growing major economy, with GDP growth rates of 8.2% in 2023–24, 7.2% in 2022–23, and 8.7% in 2021–22. The nations massive and expanding domestic market makes it attractive for companies to set up production facilities to meet local demand. This is being boosted by production-linked incentives.

Currently ranked as the fifth-largest economy globally, India’s GDP is estimated at around USD 3.7 trillion, with aspirations to reach USD 5 trillion soon. The government is opening various sectors to foreign investment, which, coupled with India’s large English-speaking population and emphasis on STEM education, enhances its attractiveness for global business.

A Forbes article titled “India’s Rise in the Global Supply Chain” emphasized India’s strategic location and well-established sea routes, which make it an ideal business hub. Companies like Foxconn, Apple, and several electronics, aerospace, and medical device firms are expanding their operations in India, driven by government incentives and favorable policies.

Apple, for instance, began manufacturing iPhones in India in 2017, and its iPhone exports have surged from USD 6.27 billion in 2022–23 to USD 12.1 billion in 2023–24. Similarly, Samsung invested Rs 4,915 crore to double its Noida plant capacity and launched the ‘Make for the World’ initiative to export mobile handsets produced in India.

The Indian government’s Production-Linked Incentive (PLI) schemes aim to make Indian manufacturers globally competitive, attract investments, enhance exports, and integrate India into the global supply chain. Sanjeev Agrawal, President of the PHD Chamber of Commerce and Industry, highlighted the upward trajectory of India’s exports due to its integration into global supply chains and extensive connectivity.

The government is also heavily investing in defense and aerospace manufacturing, with several defense hubs being established. Indian defense PSUs have seen high returns on equities, benefiting from new orders. Ashish Saraf, Country Director of Thales India, noted that the company sourced over Rs 2,000 crore worth of equipment and technology services from India in 2023 to serve their global businesses.

India’s defense exports reached a record of Rs 21,083 crore (about USD 2.63 billion) in 2023–24, growing 32.5% over the previous fiscal year. This marks a 31-fold increase in defense exports over the last decade. The central government aims to achieve indigenous defense manufacturing worth Rs 175,000 crore, including defense exports of Rs 35,000 crore, by 2024–25.

With robust government support and strategic initiatives, India is poised to attract global investments across various sectors, solidifying its role as a key player in the global supply chain.

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