© 2023 KENW
background_fid.jpg
Play Live Radio
Next Up:
0:00
0:00
Available On Air Stations

What would it take for India to become the factory of the world?

A MARTÍNEZ, HOST:

China has dominated global manufacturing for more than a decade. However, a challenger could be emerging. Adrian Ma and Darian Woods from our daily economics podcast, The Indicator, lay out a case for India becoming the next high-tech factory for the world.

DARIAN WOODS, BYLINE: There are several reasons why India might or might not become the next big global manufacturing hub. Steven Tseng is a senior analyst at Bloomberg Intelligence, focusing on tech hardware.

STEVEN TSENG: In the near future, it is going to be difficult. But in the longer term, it's definitely possible.

WOODS: Steven lists a bunch of pros and cons for India. So first, the positives - and we start with the fact that India is not China. Leaders of a Western company looking for a manufacturing base might look at the trade war between the U.S. and China. And they might remember China's heavy-handed lockdowns, and they might worry about how geopolitical tension with the U.S. might play out.

ADRIAN MA, BYLINE: Second, India has its population. The U.N. estimates India will officially be the most populous country in the world this year, and its demographics skew much younger. China's median age is 38, while India's is only 28, and that means more people to potentially work in factories.

WOODS: Third, India's government is subsidizing large companies to move their manufacturing to India. Those are the positives.

MA: Now for, well, the negatives. First, education. Now, India does boast some of the best engineering education in the world at its top end. But the adult literacy rate in India is about 74% versus about 97% in China.

WOODS: Tariffs are the second headwind facing India if it's to really compete with China in high-tech manufacturing. You have so many imported components for things like smartphones. So when you're making them, any frictions and added expenses in importing parts makes the country less attractive.

MA: The third negative for India is its infrastructure. Only 5% of the roads are highways, while 40% of roads are dirt roads. And Steven says India's decentralized political system makes building new transport connections more difficult.

TSENG: If you're building some sort of railroad or highway from province A to province B, if province B has some issue with that, it can take years to sort out the differences.

WOODS: And ensuring movement is critical not just for getting components and products shipped, but for factory inspections.

MA: Now, there is a fourth obstacle, which is language. India is a vast and diverse country where people speak tons of different languages, which brings us to our final obstacle - discrimination.

WOODS: Discrimination might be in the form of religious animosity, or it might be in other forms. India has a class system of castes. That can mean that people in lower castes are passed over for jobs that they're qualified for. Or if they're, for instance, given a supervisory role, they might not be listened to.

MA: But with all that said, multinational companies are setting up shop in India. Samsung has been rapidly increasing its factories there. And Apple CEO Tim Cook said in a recent earnings call that he is, quote, "very bullish on India."

WOODS: India can take on more manufacturing now, but everyone we spoke to said it will take a lot of work and a 10- or 20-year period to get close to where China is today. Darian Woods.

MA: Adrian Ma, NPR News. Transcript provided by NPR, Copyright NPR.

Adrian Ma
Adrian Ma covers work, money and other "business-ish" for NPR's daily economics podcast The Indicator from Planet Money.
Darian Woods is a reporter and producer for The Indicator from Planet Money. He blends economics, journalism, and an ear for audio to tell stories that explain the global economy. He's reported on the time the world got together and solved a climate crisis, vaccine intellectual property explained through cake baking, and how Kit Kat bars reveal hidden economic forces.