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Knowledge@Wharton is the online business journal of the Wharton School, the business school of the University of Pennsylvania.
The Boston Consulting Group is an international strategy and general management consulting firm whose mission is to help leading corporations create and sustain competitive advantage. India still has a reputation that makes many big manufacturers shudder: a chronic electricity shortage, lousy infrastructure and nightmarish labor laws (for example, employers of 100 or more people need government permission to fire a worker). So why are companies such as Hyundai, which has decided to produce all of its small cars in India, making a move there?
While the environment as a whole may not yet be attractive to many manufacturers, India has been quietly making a name for itself in some key industries -- just as it did in the service and information technology sectors more than a decade ago. Numerous multinationals are beginning to set up shop in India, drawn by two crucial factors: rapidly growing domestic demand, like that being experienced in many emerging markets and access to highly skilled but relatively low-cost workers. And while it has shortcomings for manufacturing overall, India is emerging as a leading producer of quality auto parts and has more pharmaceutical plants that meet rigid Food and Drug Administration standards than any country outside the United States, says a special report on India published in February 2007 by the Boston Consulting Group and Knowledge@Wharton, an electronic publication of the Wharton School of the University of Pennsylvania.
The report, What's Next for India: Beyond the Back Office, examines key aspects of India's struggle to emulate China as an economic powerhouse: its growing telecommunications industry, its ever more diverse and competitive outsourcing services and reform efforts intended to make it more hospitable to both foreign and domestic business. The following excerpt of the report focuses on manufacturing and its prospects for rapid and long-term growth. The key right now is to focus on industries -- such as autos and cell phones -- for which local demand is booming and worker productivity is increasing.
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