Dr. Wilfried Aulbur

Ascent of low-cost competitors
A major consideration of the ‘Make in India' campaign is the observation, that manufacturing wages in China have risen and are now close to a factor two larger than corresponding wages in India. In principle, this opens up opportunities for India to enter manufacturing plays that are no longer viable in China.

However, India is not alone. Manufacturing costs in Vietnam are 60 percent, in Indonesia 64 percent, and in the Philippines 67 percent lower than in China. In terms of labour availability, India leads the three other countries by a large margin, however, Indonesia and the Philippines trump India in terms of English speaking percentage of population.

And while India is the largest market among the four nations that we are considering, the internal market in Indonesia is also large and that of Vietnam and the Philippines is relevant.

A number of global indicators are cause for concern. In the global competitiveness report 2014-15, India scores a rank of 71 out of 144 countries compared with 34 for Indonesia, 52 for the Philippines and 68 for Vietnam. In terms of the World Bank's Ease of Doing Business index, India is again last with a rank of 140 vs 117 for Indonesia, 86 for the Philippines and 72 for Vietnam.

In terms of the 2014 International IP index, India ranks behind Indonesia and Vietnam (Philippines have not been ranked) while its logistics performance index is such that India ranks 54 behind Indonesia (53) and Vietnam (48) but ahead of the Philippines (57).

Clearly, just because China is forced to vacate parts of the manufacturing space, it does not imply that India is the only or best alternative. As a consequence, the ‘Make in India' initiative needs to drive its agenda quickly in order to change key global rankings. The latter are important, as global companies to take them into consideration when evaluating their global manufacturing footprint and deciding on fresh investments.

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