Report: India to Challenge China As World Manufacturing Hub

Survey says India will come in to its own in the next 3-5 years

Sean Murphy, Associate Editor -- Supply Chain Management Review, 10/15/2007 12:38:00 PM

A survey of more than 340 manufacturing companies around the world confirms that India could rival China as the most sought-after location for manufacturing within five years, according to a release from one of the survey’s sponsors.

Capgemini, an international consultant services company, and ProLogis, a $30 billion owner, developer and operator of industrial real estate, both sponsored the survey, which was conducted in the first half of 2007. The results were released last month.

“While China is currently the preferred offshoring destination for manufacturing activities, India is the destination of choice for IT, finance and customer service activities,” Capgemini officials said in the release. “However, according to the responses of more than 340 of the world’s largest international manufacturing companies—from Europe, Americas and Asia Pacific—India will become a substantial manufacturing destination over the next three to five years.”

Among its findings, the survey showed main manufacturing centers in China are already becoming more expensive than those in surrounding nations.

And in eastern coastal China, labor and real estate costs have gone up due to concentrations of various operations there, and much-needed infrastructure means moving to other parts of the country might not be easy, according to the survey.

But India has a ways to go, too. Only 69 percent of respondents found offshored activities to China “achieved or outperformed their expected benefits,” compared to 83 percent of the companies that outsourced to China.

The release also noted that 43 percent of survey respondents indicated their current operations in India had not yet achieved their initial objectives, but the main reason was lack of infrastructure there, too, something the Indian government could help with.

"India has a proven track record in providing quality services to overseas organizations and has more open policies on foreign entry to the market,” said Roy Lenders, Vice President for Consulting Services at Capgemini. “If the Indian government can provide the right investments in infrastructure for manufacturing and supply chain operations, it will soon become the destination of choice for manufacturing worldwide."

The survey itself, Offshoring Evolution can be downloaded from Capgemini’s Web site.