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In the wake of COVID-19, it became apparent to investors that the megalithic supply chain monopoly they were working with — China — has its limits. Relying on a single faraway source to manufacture and distribute practically everything in our vital electronics market began to feel risky, and companies increasingly sought ways to make their supply chains more resilient and diversified. Investors are looking seriously at India as an alternate supply chain as part of this massive decision — and one that is not being made simply based on trade wars.
It needs to be seen whether India is a reasonable risk for global electronics companies looking to relocate to a new electronics manufacturing hub.
Historically, the business environment in India has not been very conducive to these kinds of initiatives. In purely economic terms, global players choose to work in areas that are simpler and easier; in the last decade, India has not been characterized by a stable government that is purely focused on investments. However, this has begun to change in the last five or six years and seems unlikely to revert any time soon. Let’s take a look at some of the changes wrought by recent developments in policy in India’s early-stage transformation.
By 2016, India was the fifth largest manufacturer globally, with a total Manufacturing Value Added (MVA) of over $420 billion. Manufacturing in India has grown at 7% annually and constitutes 16 to 20% of its total GDP. With its fast-growing economy and population of 1.4 billion people — making it the second largest and demographically the youngest country in the world — India has almost unprecedented consumer demand, and with it, growing demand for manufacturing on home soil.
To that end, there are several sectors, including automotive manufacturing, in which India is already self-sufficient. Almost all c …