Could India Become the New Manufacturing Powerhouse

Steven Petrov
The Paw Print
India has the potential of becoming the new “factory of the world.”

While China is trying to lower the independence of its economy on the foreign investments and the export, India has aimed towards this very same model for development, which can turn the country into the new world leader in manufacturing in the upcoming decade.
India’s prime-minister, Narendra Modi, expressed through his most recent speeches and actions that India, as the 3rd largest economy in Asia, needs a certain model for economical development.
The key aspects and goals that Modi is aiming to further develop are an increase in exports, building of new infrastructure, and the urbanization of the rural areas. This will represent a sharp turn of India’s current model for economic development, which is mostly focused on the increase in the services industry towards a more Eastern Asian type of economy. The global strategist in Deutsche Bank, Sanjeev Sanyal, explains that this type of economical change will significantly increase the employment rate in the country and will also increase the foreign investment capital that will be brought in.
Sanyal also talks about the world’s need of a mass manufacturer, and that if China is “running away” from this role; India has all the predispositions, including the cheaper labor to establish new monopoly in the mass manufacturing of goods. The Eastern-Asian economy model has been incredibly successful for both China and Japan in the last 2 decades, bringing a lot of economic prosperity.     However, it is quite complicated for this model to be implemented in India right away, due to the fact that India went from a completely agricultural economy to an economy dominated by the services sector completely skipping the middle step of the production dominance. Production in India equals only 15% of the GDP of the country, whereas the services sector brings 60% of the gross domestic product of India. The disproportion comes from the fact that even though services bring more than half of the GDP it only employs 28% of the working force. India needs an increase in the number of employment opportunities due to the large increase in its population and more specifically the working force. It is estimated that between 2015-2020 India’s workforce will increase from 804 to 856 million people. This requires the opening of at least 10 million positions ever year. The transition to an Eastern-Asian economy model will definitely not be an easy task, and will require a lot of reforms and structural changes, from which though a new World leader may come out.