Earlier this month, the Economist Intelligence Unit (EIU) revealed that India was one of the most improved countries in its quarterly forecast of the best business conditions over the next five years. The South Asian nation climbed six notches on a global basis and from 14th to 10th among 17 Asian nations in the EIU’s Business Environment Ranking (BER) issued on April 13.
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The research did caution, though, that “stiff competition from peer emerging markets, particularly in Southeast Asia, will make India’s journey to becoming a major manufacturing power a long one.” Excessive red tape and protectionist mindsets will continue to be obstacles for investors.”
According to the EIU’s BER scores for India, doing business in the country is growing increasingly simpler.
The Economist Group’s research and analysis section attributed India’s improved performance to “gains in its scores for foreign trade and exchange controls, infrastructure, and technological readiness.”
It went on to say that “India’s highest-scoring category is market opportunities, aided by the large and growing domestic market that the country offers, while political environment receives the country’s lowest score.”
As evidence of this development, Bloomberg reported in March of this year that Apple contractor Foxconn is considering to expand manufacturing in India. The iPhone maker intends to invest USD 700 million in the construction of a facility in Bengaluru, which may greatly increase Apple’s smartphone output in India.
It further stated that Indian officials have told Apple that it wants to shift 25% of its manufacturing to India due to concerns about China. Currently, India accounts for roughly 5-7 percent of Apple’s overall manufacturing production.
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The projected 300-acre manufacturing complex near the IT hub city of Bengaluru will produce iPhone components and may also assemble the handsets. It will most certainly employ 100,000 people, making it around one-third the size of the world’s largest iPhone manufacturing in Zhengzhou, China.
According to Bloomberg, the new factory in Bengaluru may “raise the country’s share of iPhone assembly to 10-15% from a current sub-5 percent.”
According to Forbes, JP Morgan predicted last year that Apple would shift 5% of worldwide iPhone 14 manufacture to India by the end of 2022, with that figure rising to 25% by 2025.
Foxconn announced earlier this year intentions to develop a huge electronics manufacturing facility in the state of Telangana, creating 100,000 jobs, but it is unknown whether that plant will produce Apple products.
Until now, Foxconn, the world’s top iPhone producer, has had the majority of its plants in mainland China.
The migration to India is the result of global geopolitical events, specifically the conflict between Beijing and Washington. Furthermore, as a result of the COVID-19 epidemic and the Russia-Ukraine conflict, multinational corporations have re-evaluated their manufacturing supply chains and outsourcing possibilities. Some are proposing “reshoring sourcing” and “localisation of manufacturing” initiatives.
Many corporations are apprehensive about over-reliance on China, the world’s factory, in their supply chains, and are implementing or exploring “China plus one” strategies aimed at expanding production across numerous markets.
Apple’s rumoured aim to expand manufacturing in India is intended to reduce the company’s reliance on Chinese factories. Foxconn’s announced investments in India are almost certainly an attempt to match with Apple’s objectives.
Apple’s activities in China were also hampered by Beijing’s tough anti-Covid lockdowns last year, including one that sparked protests at Foxconn’s Zhengzhou plant known as “iPhone City,” where Apple makes nearly of its iPhone 14 Pro and Pro Plus models. This disruption prompted Apple to fall roughly 6 million units short of its production target for the iPhone 14 in 2022.
Apple is far from the only major multinational corporation betting on India.
Samsung said in March that it will invest in smart manufacturing capabilities at its mobile phone facility in Noida to increase production competitiveness.
Samsung, which established a manufacturing R&D department in India in 1996, today employs around 70,000 people in the country. Noida is home to the world’s second largest manufacturing facility, whereas Bengaluru is home to the world’s largest research and development hub, which employs about 3,500 people. It employs 10,000 people in its R&D centres across India.
According to Samsung, India will have one billion smartphone users by 2026, and its 600 million people between the ages of 18 and 35 make it the world’s largest population of Millennials and GenZs.
A strong and stable economy, massively expanded incentive programs, infrastructure developments, and access to a big labour supply underpin India’s appeal to investors. Furthermore, policy changes are making it easier to do business in India.
According to EIU experts, significant improvements in sectors like as education, workforce participation rate, infrastructure, taxation, and trade regulation will further enhance investment.
According to the EIU assessment, “India’s increasing viability as a destination for manufacturing investment is clear.” Proactive government incentives for industry, gradually developing infrastructure, low-cost workforce availability, and bilateral trade agreements are propelling the economic environment forward. Broader geopolitical concerns, as well as the quest for alternatives to China, will entice investors to consider India.
The country has to energize its manufacturing sector, which accounts for less than 20% of its GDP… in order to promote economic growth and exports.” It went on to say that India will face stiff competition in luring investment from Southeast Asian countries.
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