Why Are Businesses Leaving China, Not Attracted To India?

Due to the US-China trade war, many manufacturers are shifting their production from China to other South East Asian nations, that are cheaper. It seems Vietnam is ahead of the other nations in this race. Countries in South Asia, especially India are losing these opportunities.

The reason for these missed opportunities is related to rising costs and expensive labor. Chinese manufacturers are facing this tough question of whether to invest in automation technologies or not, as the rising cost is a hindrance. They are left with other options to relocate, and less developed countries are presenting enormous opportunities with cheap labor. Chinese companies can help boost industrialization and improve their economic growth.

Not just Vietnam, African countries too are making manufacturing a top priority. In the past few years, Ethiopia has opened a dozen industrial parks. Even the reports from the World Bank suggest that since 2012 Sub-Saharan Africa has the highest number of reforms each year.

Reportedly, Chinese investment deals in Africa are 30% more than in South Asia. One can argue that Bangladesh could be a solution to the problem. But it has its internal problems of population explosion and the need to create 2 Million jobs per year at home for the rising man force. The country has fallen to the position of 176 among 190 countries in Global ease of doing business.

On the other hand, in India, there is a misconception that investors will be attracted to the nation simply because of its large population. There is a need for the government to acknowledge the prevailing competition and provide the necessary push to boost investment levels. This could involve creating opportunities for manufacturers to thrive here.

The Indian market also needs to understand the specific requirements of these businesses. This requirement varies from the product that a company makes. If we take the example of cloth manufacturing and clothing manufacturing, they have extremely different requirements. Manufacturing cloth requires huge amount of power-hungry machinery to churn out the cloth. While clothing depends on region to region and so its manufacturing is labor-intensive and involves lots of sewing and cutting depending on the style of clothes in demand.

Such minute analysis should be done by the countries who want manufacturing to come to them. Based on their available resources they can understand which manufacturing sub-sectors can flourish on their land.

The South Asian countries need to move fast and should take the necessary steps towards attracting manufacturers who are shifting from China, otherwise, the other less-developed nations will seize the opportunity to industrialize.

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