After the IT boom, a manufacturing revolution has been well underway in the Indian economy, spurred on by the increasing presence of multinationals, scaling up of operations by the domestic companies and expanding domestic market. The sector has been averaging 9 per cent in the last four years (2004-08), with a record 12.3 per cent in 2006-07.

India's manufacturing base, which is the fourth-largest among emerging economies, is among the fastest growing and has seen more investments as a proportion of gross domestic product than any country except China.

Consequently, manufacturers from across the world are transforming India--which has all the required skills in process, product, and capital engineering, thanks to its long manufacturing history and higher-education system--into a potential manufacturing powerhouse.

"Every major company has India on its radar screen," says Wharton Professor of Management, Saikat Chaudhuri. And the number of companies, spanning diverse industries, planning to make India their global hub for host of operations has only been increasing by the day.

Cummins is making India its manufacturing hub for newly developed line of generator sets; Samsung plans to make its manufacturing plant in Chennai its global hub; Ford is making India its manufacturing hub for engine manufacturing; Suzuki and Hyundai are making India the manufacturing and exports hub for small cars. In fact, all the top five telecom manufacturers have set up manufacturing facility in India.

India Advantage

India's vast domestic market and availability of low-cost workers with advanced technical skills has been instrumental in attracting the 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, says a study by McKinsey Global Institute. Aggregate Indian consumer spending is likewise estimated to more than quadruple to US$ 1.77 trillion by 2025, on the back of a ten fold increase in middle class population and three fold jump in household income.

Along with this India offers abundant engineering and technical manpower, producing annually about 4,00,000 graduate engineers. Significantly, the technical workforce is set cross the two million mark this year, with the march from one million to two million happening in just about three years.

Top of the Value-Chain

With such a large technical workforce it is no accident that high skill-sectors account for almost 40 per cent of the manufacturing output in India. Taking advantage of this fact, several multinationals operating in skill-intensive industries requiring advanced technical expertise have set up their shop in India.

For example, ABB, Honeywell, and Siemens in electrical and electronic products; Cummins, DaimlerChrysler, and Toyota Motor in auto components and engineering; and Degussa as well as Rohm and Hass in specialty chemicals have all set up their manufacturing base in the country.