Manufacturing in India

Writes the Economist:

An increasing number of India’s old-economy firms have quietly restructured. Spurred on by the threat of foreign competition, they have discovered how to make internationally competitive goods by shedding labour, designing new products and improving management. They are cashing in on the same low labour costs and technology-astute employees that have helped India in software and outsourcing. In the process, this has given Indian firms the confidence to search out markets in developed economies and even to buy operations abroad.

Many of India’s old industries, such as machine tools, general engineering and basic textiles, remain mired in inefficiencies and protectionism. But marked changes are being led by the vehicle sector, where exports of components more than doubled in the past four years, to almost $1 billion. There have been big improvements in drugs and consumer products too. That has helped manufacturing growth to rise to 7% a year. The gradual liberalisation of the economy from 1991 helped to motivate change, but the main catalysts were a slump in demand four years ago, competition from China, and the threat of markets being opened up by the World Trade Organisation.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.