India has the potential to reshape supply chains and become a global manufacturing hub, according to a report by the World Economic Forum (WEF)
It estimated India could contribute more than $500bn (£360bn) in annual economic impact to the global economy by 2030. The country’s domestic demand, demographics and government programmes encouraging manufacturing put it in a unique position.
The white paper, Shifting global value chains, noted that while the Covid-19 pandemic has had a catastrophic impact on global value chains, India is well-placed to adopt a larger role as they are reconfigured as part of efforts to build resilience.
The potential for significant domestic demand, the government’s drive to encourage manufacturing, and a considerable proportion of the workforce being young people produce a significant opportunity for the country, the report said.
India is expected to become the world’s most populous nation and the third-largest economy by 2030, it added. Its consumer market is projected to grow by 300% from $1.5tn (£1.1tn) in 2019 to around $6tn (£4.3tn).
Accelerated growth in consumption, including by new middle-income citizens, has made India a prime and large domestic market for multinational corporations.
Efforts to attract investment, such as production-linked incentives, labour reforms, landmark infrastructure projects and making it easier to conduct business, could also help position the country as a major manufacturing destination.
Government initiatives to upskill a workforce set to be the biggest in the world by 2030 also play in its favour.
Conversely, falling GDP, stubbornly high unemployment and a significant trade deficit are contributing to a pressing need for India to invest in manufacturing, the report said.
The study, produced with Kearney, outlines five ways India could realise its manufacturing potential. These include coordinated action between the government and private sector to help create globally competitive manufacturing companies, and shifting focus from cost advantage to workforce skilling, innovation, quality and sustainability.
Reduced trade barriers and enabling competitive global market access for Indian manufacturers, lower cost of compliance, and focusing infrastructure development on cost savings, speed, and flexibility were also recommended.
The pandemic has accelerated new trends including emerging technologies, sustainability drives and reconfigured value chains, WEF found.
“With Covid-19 adding fuel to these changes, if developed and emerging economies, including businesses of all sizes, are to secure their place in tomorrow’s global economic system, they urgently need to understand the risks and opportunities associated with these mega-trends and the resulting shifts in global value chains,” it stated.
The study concluded that a thriving manufacturing sector would help India deliver on the imperatives to create economic opportunities for nearly 100m people likely to enter the workforce in the coming decade and to distribute wealth more equitably.