Daily Current Affairs : 3-August-2023

India’s Prime Minister’s address at the World Economic Forum highlighted India’s determination to position itself as a global manufacturing and export hub. The country is actively pursuing a ‘plus-one’ strategy, aiming to attract businesses looking to diversify their manufacturing away from China. India boasts a sizable and trainable workforce, robust digital infrastructure, strategic location, cost advantages, and a strong legal system, making it an attractive destination for manufacturing investments.

Manufacturing Potential in India

India offers several advantages for manufacturing companies looking to expand their operations:

  1. Sizable and Trainable Workforce: India’s labor force is comparable to that of China, providing a vast pool of skilled and trainable workers.
  2. Digital Infrastructure: The country has invested significantly in digital infrastructure, enabling efficient and streamlined operations for manufacturing companies.
  3. Logistics Infrastructure: India has been working on improving its logistics infrastructure, making it easier to transport goods within and outside the country.
  4. Supply Chain Diversification: Being close to different countries, India offers supply chain diversification opportunities to businesses.
  5. Strategic Location: India’s geographic location provides easy access to emerging markets, making it an attractive choice for global manufacturers.
  6. Cost Advantages: India offers cost advantages for low-cost and economical manufacturing, making it a cost-effective choice for businesses.
  7. Strong Legal System and Patent Protection: India has a robust legal system that protects intellectual property rights, assuring businesses of their innovations’ safety.
Recent Examples

Several multinational companies have already chosen India as their manufacturing base:

  1. Boeing: The US aircraft manufacturer is planning to start production in India as part of its efforts to reduce reliance on China.
  2. Apple: The tech giant has been diversifying its production away from China amid the US-China trade war and is manufacturing some of its flagship iPhone models in India.
Challenges of Manufacturing in India

Despite the advantages, there are challenges that businesses face when setting up manufacturing units in India:

  1. High Tariffs and Import Duties: High tariffs and import duties can hinder smooth operations for businesses.
  2. Outdated Labour Regulations: Labor regulations that have not kept pace with changing times can create complexities for businesses.
  3. Regulatory Uncertainty: Uncertainty in regulatory policies can make long-term planning difficult for companies.
  4. Acquisition of Land and Permits: Obtaining land with clear titles and necessary permits can be time-consuming.
  5. Unskilled Labor and Inadequate Infrastructure: Unskilled labor and inadequate infrastructure can impact productivity and efficiency.
  6. Cracking the Indian Market: Even after setting up manufacturing units, penetrating the Indian market can be challenging due to diverse consumer preferences and competition.
The Way Forward

To become a global manufacturing and export hub, India needs to take certain strategic steps:

  1. Focus on Globally Competitive Sectors: The government and industries should identify focus sectors that can be operated at a global scale and provide them with support and impetus to compete in the global value chains.
  2. Enable Global Market Access: Greater emphasis on bilateral trade deals and trade agreements can enhance market access for Indian manufacturers.
  3. Build Flexible Infrastructure: Investing in agile physical and virtual infrastructure will boost the manufacturing sector’s productivity and growth.
  4. Leverage Digital Infrastructure: India’s robust digital payments platform and the India Stack can be leveraged to support manufacturing and export activities.

Important Points:

  • India’s Prime Minister emphasized the country’s ambition to become a global manufacturing and export hub.
  • India is actively pursuing the ‘plus-one’ strategy to attract businesses diversifying from China.
  • India’s labor force and domestic market are comparable to those of China, making it an attractive alternative.
  • The country offers several advantages for manufacturing companies, including a sizable and trainable workforce, digital infrastructure, logistics investments, and cost advantages.
  • India’s strategic location allows easy access to emerging markets and offers supply chain diversification opportunities.
  • Recent examples include Boeing and Apple setting up manufacturing operations in India.
  • Challenges faced by manufacturing in India include high tariffs, outdated labor regulations, regulatory uncertainty, and unfavorable growth conditions.
  • Acquiring land and permits can be time-consuming, and unskilled labor and inadequate infrastructure are concerns.
  • Cracking the Indian market can be challenging due to diverse consumer preferences and competition.

The Way Forward:

  • Focus on building globally competitive manufacturing companies.
  • Identify key sectors to operate at a global scale and support them in joining global value chains.
  • Enable global market access through bilateral trade deals and agreements.
  • Invest in flexible physical and virtual infrastructure to boost productivity.
  • Leverage India’s robust digital payments platform and the India Stack for manufacturing and exports.
Why In News

India’s Prime Minister’s resolute stance at the World Economic Forum underscored the nation’s unwavering commitment to transforming into a leading global manufacturing and export powerhouse. By leveraging its diverse talent pool, cutting-edge technologies, and investor-friendly policies, India aims to solidify its position as a formidable player in the international trade arena.

MCQs about A Global Manufacturing and Export Hub

  1. What advantage does India offer as a potential global manufacturing hub?
    A. Low-cost and trainable workforce
    B. Abundance of natural resources
    C. Access to developed markets
    D. Highly advanced technology infrastructure
    Correct Answer: A. Low-cost and trainable workforce
    Explanation: The India’s manufacturing potential stems from benefits like a sizable and trainable workforce. This means that India has a large labor force that can be trained and skilled to meet the needs of manufacturing industries, making it an attractive advantage for businesses.
  2. What is a significant challenge faced by businesses in India when setting up manufacturing units?
    A. High import duties
    B. Advanced regulatory policies
    C. Skilled labor shortage
    D. Favorable growth conditions
    Correct Answer: C. Skilled labor shortage
    Explanation: The unskilled labor and inadequate infrastructure are key factors that businesses consider before setting up manufacturing hubs in India. Therefore, the challenge faced by businesses is the shortage of skilled labor, which impacts productivity and efficiency.
  3. What approach should India adopt to boost its manufacturing competitiveness in the global market?
    A. Rely solely on bilateral trade deals
    B. Focus on all industries equally
    C. Leverage digital infrastructure
    D. Increase import tariffs for protectionism
    Correct Answer: C. Leverage digital infrastructure
    Explanation: The India should build flexible physical and virtual infrastructure, leveraging its robust digital payments platform (Unified Payments Interface – UPI) and India Stack. This technological foundation can be put to best use to enhance manufacturing and export activities.
  4. Why are Western businesses looking to diversify their manufacturing away from China to India?
    A. India offers advanced technology infrastructure
    B. China has imposed high import duties
    C. India’s workforce and domestic market are comparable to China’s
    D. India offers a price-sensitive market
    Correct Answer: C. India’s workforce and domestic market are comparable to China’s
    Explanation: The Western businesses are diversifying manufacturing away from China because India’s labor force and domestic market are comparable to those of China. This similarity makes India an attractive alternative for companies looking to reduce their reliance on China as the global factory.

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