'Made in India' to challenge China: Report

'Made in India' could be the next big economic story with the country challenging China's position as the leading global manufacturing hub within five years, says a new report. Right now China is the favourite choice for outsourcing manufacturing while India is preferred for information technology, finance and customer services, said Capgemini, Europe's largest computer consultancy.

But "there's a very keen interest in moving more manufacturing to India," said Roy Lenders, vice president at Capgemini Consulting Services and the report's author.

In fact, "India could challenge the position of China as the manufacturing centre of the world in the next three to five years," Lenders said, citing a survey of 340 mainly Fortune 500 global manufacturing companies.

"What surprised us was when we asked about their plans for the next three or four years, they said outsourcing manufacturing (to India) was a higher priority than outsourcing back office work," he said.

"If we look at the respondents' plans for the coming years, manufacturing will become the number one activity to be off-shored to India," Lenders said, with lower costs the key factor driving the trend.

"The results in favour of India were overwhelming," he said. In fact, manufacturing outsourcing looks set over coming years to surpass India's flagship IT and business process outsourcing activities in importance, he said.

Right now, China's share of the world's manufacturing exports is more than 8% while India stands at just under 1%. But "the interest of global manufacturers in manufacturing in India is very high compared to China. In terms of trend there will definitely be a move. China has a reason to be worried," Lenders said.

However, India must improve its infrastructure with nearly half of the firms surveyed that had already outsourced manufacturing to India complaining about a lack of manufacturing and supply chain infrastructure.

India's ramshackle infrastructure of potholed roads, dilapidated ports, shabby airports and erratic power is regularly cited as an obstacle to economic growth along with the maze of red tape. It has already taken some steps to promote an export-led manufacturing boom by setting up special economic zones or SEZs - havens of economic freedom that drove China's industrialisation.

But even more "substantial investments" need to be made, Lenders said. "The lead factor driving India's new manufacturing popularity is price," he said. Some of the main manufacturing sites in China are becoming too pricey. Chinese manufacturing wages are $250 to $350 a month whereas they average $100 to $200 per month in Thailand and other parts of Asia. In India factory jobs start at $60 a month.

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