India overtakes the US to become second globally, boosting confidence in the idea of Make in India.
India's feat in overtaking the US to become the second-most sought-after manufacturing destination globally is certain to boost the confidence of companies and investors in the idea of Make in India.
Although China tops the global rankings by real estate consultant Cushman & Wakefield in its 2021 Global Manufacturing Risk Index, India has swiftly taken the second spot as the most sought-after manufacturing destination globally, driven mainly by cost competitiveness.
The US is at third position, followed by Canada, Czech Republic, Indonesia, Lithuania, Thailand, Malaysia and Poland. Last year, the US was at second position while India ranked third.
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Cushman said that this indicates the growing interest shown by manufacturers in India as a preferred manufacturing hub over other countries, including the US and those in the APAC region. "The growing focus on India can be attributed to India's operating conditions and cost competitiveness. Also, the country's proven success in meeting outsourcing requirements has led to the increase in the ranking year-on-year," it said in a statement.
The rankings in the report are determined based on four key parameters, including the country's capability to restart manufacturing, business environment (availability of talent/labour, access to markets), operating costs, and the risks (political, economic and environmental). The baseline ranking for top manufacturing destinations is determined on the basis of a country's operating conditions and cost-effectiveness.
"This year, India and the US switched places (second and third) taking India one rank above from the rankings released last year when India stood at the third place. This switch in ranking is attributed to the plant relocations from China to other parts of Asia due to an already established base in pharma, chemicals and engineering sectors, that continue to be at the centre of the US-China trade tensions," it said.
With a stated ambition to boost domestic manufacturing in the nation under Indian Prime Minister Narendra Modi's Make in India initiative and turn India into a global manufacturing hub, the government has introduced various financial incentives for companies and reforms to boost the economy.
For instance, India has reduced corporate tax from 30% to 25% - the lowest in Southeast Asia. The government's ‘Skill India’ initiative has created thousands of job opportunities in the manufacturing sector and enhanced skill development to create a large pool of skilled human resources. Rules regarding land acquisition have been subsequently relaxed over the years, while income tax, GST, and other custom reliefs have been provided for favorable business conditions.
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As far as the cost scenario ranking goes, India continued to retain the third spot like last year, while Vietnam was pushed to the fourth position. "Despite being among the top three countries in the baseline and cost scenario rankings, there is a long road for India to traverse when it comes to areas like managing the geopolitical risks involved in running the business and its ability to restart its manufacturing business after a devastating second wave of the COVID-19 virus," Cushman said.