Companies have historically associated low cost with China. However recently, they are considering other options, which have put countries like India on the radar. Besides the issue of China not being as cost effective as before, there is also the issue of distributing risk. There have been several natural disasters in recent years that have affected business – Tsunami in Japan and Thailand are just a couple of examples which caused businesses to consider diversifying risks associated with business. When considering risk and business continuity, the overall costs sometimes discourages putting all your eggs in China’s basket.
India provides different value as compared to China i.e. China caters to high volumes and mass production, while India can provide customization and quality with its well-trained work force. The economic slowdown caused drastic work stoppages in China, due to streamlined operations and a focus on quality. With India, this would not cause such a drastic problem if the country can take lessons from China’s story and improve its infrastructure.
While the Yuan continues to rise in value as compared to the Dollar, the Indian Rupee is at a stage which is advantageous for outsourcing. Along with the depreciative state of the currency, inflation is also considerably lower in India than China.
Though India’s manufacturing sector contributes to just 16% of the GDP, a motivated effort to resolve infrastructural issues, and update labor laws would give a much needed push in a services reliant economy.
Vaibhav Sharma 