Though India banks heavily on its services sector for growth, the manufacturing sector too plays a significant role in the Indian economy, contributing nearly 16 per cent to the GDP (in 2006-07). Encouraged by an increasing presence of multinationals, scaling up of operations by domestic companies and an ever expanding domestic market, the Indian manufacturing sector has been averaging a 9 per cent growth in the last four years (2004-08), with a record 12.3 per cent in 2006-07.

India is fast emerging as a global manufacturing hub. Be it automobiles or computer hardware, consumer durables or engineering products, all are being manufactured by multinationals in India. Moreover, according to a report by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Yes Bank, India is poised to become the global manufacturing hub for luxury brands over the next five years with manufacturing of luxury items becoming a US$ 500 million industry during this period.

India has all the requisite skills in product, process and capital engineering, thanks to its long manufacturing history and higher education system. India’s cheap, skilled manpower is attracting a number of companies, spanning diverse industries, making India a global manufacturing powerhouse.

According to a survey of the manufacturing industry, carried out by FICCI among 25 core sectors, 21 capital goods, 15 intermediate goods, 26 consumers durables, and 13 consumer non-durable sectors, the country’s manufacturing sector is expected to grow by 9.5 per cent in 2008-09, up from 8.8 per cent last fiscal.

• LG is looking at making India its global manufacturing hub for its mobile handsets. The company will soon be exporting mobile phones to Europe and the Commonwealth Independent States (CIS) from India.
• Luxury brands like Louis Vuitton and Frette are looking at India as a manufacturing base for their products.
• SkodaAuto, a part of the international Volkswagen Group based in the Czech Republic, plans to make India its regional manufacturing hub. It will start producing cars in India by 2010 with a manufacturing target of 50,000 units. Besides the domestic market, these will also be exported to neighbouring countries like Nepal, Sri Lanka, Burma and Bangladesh.
• Aircraft manufacturer Airbus is considering India as one of the key centers for design and development of its long haul A 350 plane.
• Cummins is making India its manufacturing hub for newly developed line of generator sets.
• Samsung plans to invest US$ 100 million over a period of four years in its manufacturing plant near Chennai and make it its global hub.
• Ford is making India its manufacturing hub for engine manufacturing.
• Hyundai has made India the manufacturing and export hub for its small cars. The i10 is being manufactured only in India and exported to the world. India is Hyundai’s largest base outside Korea.
• Suzuki too is making India its manufacturing hub for small cars. The A-Star is being manufactured solely in India and exported to Europe.
• Nokia is investing an additional US$ 75 million in its Sriperumbudur plant taking the total investment to US$ 285 million. Nearly 50 per cent of its production at Sriperumbudur is exported to countries across the Middle East and Africa, Asia, Australia and New Zealand.

India Advantage

India's vast domestic market and availability of low-cost workers with advanced technical skills has been instrumental in attracting an ever expanding number of multinationals who are setting up their manufacturing base in the country.

The sheer size of the Indian market has obvious appeal. The rapid growth of the Indian economy is likely to make India the fifth largest consumer market in the world by 2025 from twelfth in 2005, according to a study by McKinsey Global Institute. Aggregate Indian consumer spending is likewise estimated to more than quadruple to approximately US$ 1.5 trillion by 2025, on the back of a ten-fold increase in middle class population and a three-fold jump in household income.