1. India, a market which allows you to learn while you earn
TThe economy of India is still characterized as a “developing market economy”. In-fact, it is the world’s fifth-largest economy by nominal GDP at USD 2.6 trillion and the third-largest by purchasing power parity, accounting for 39% of the world’s average. The current government has targeted USD 5 trillion in GDP by 2024.
Even though today’s market for imported products is relatively moderate, it is too big a market to ignore. Plus, in India, you can learn how 85 % of the world’s population which we do not consider “our market” (i.e. different purchasing patterns due to lower purchase power – and this counts for companies as much as for private individuals) spend their money. What do they buy, how do they buy, what is an important factor and what is less of an important factor for a purchase decision?
2. Supportive Government policies
Indian manufacturing is emerging as one of the high growth sectors. Prime Minister of India, Mr. Narendra ModiPrime Minister of India, Mr. Narendra Modi, had launched the ‘Make in India’ program to place India on the world map as a manufacturing hub and give global recognition to the Indian economy. Hence, this makes India a potential market for capital goods manufacturing firms worldwide.
The Indian government has demonstrated its strategic investment support with the ‘Make in India’ campaign that supports manufacturing companies investing in multiple sectors. The government is trying to give a boost to the contribution made by the manufacturing sector and aims to take it up to 25 percent of the GDP from the current 17 percent.
With the impetus on developing smart cities and industrial corridors, the government is aiming for the overall development of the nation. The corridors would further help integrate, monitoring, and develop a conducive environment for industrial development and will promote advance practices in manufacturing.
The manufacturing sector of India has the potential to reach US$1 trillion by 2025 and India is expected to rank amongst the top three growth economies and manufacturing destinations of the world by the year 2020. Implementing the Goods and Services Tax (GST) has made India a common market with a targeted GDP of US$5 trillion along with a population of over 1.3 billion people, which will be a big draw for investors.
India is an attractive hub for foreign investments in the manufacturing sector. Several mobile phones, luxury and automobile brands, among others, have set up their manufacturing bases in the country. Global giants such as GE, Siemens, HTC, Toshiba, and Boeing have either set up or are in process of setting up manufacturing plants in India, attracted by India’s market of more than a billion consumers and increasing purchasing power.
3. Risk Mitigation
Germany’s economic power lies in its exports. With the trade wars, the protectionist approach, global slowdown and industry cyclical downturn coinciding, has resulted in the contraction in the global demand and reflecting in order intake falling for German manufacturers.
Technological disruptions like E-mobility, artificial intelligence, and 3D printing are some factors that would impact machine manufacturers in the mid to long term. The sluggishness in the automobile sector because of weaker demand in China and far-east has made a dent on the metal, machinery and automobile manufacturers with recent numbers showing a significant drop in industrial production numbers.
With a focus on adopting Industry 4.0, there are many benefits that manufacturing will achieve. One of the important outcomes of this is the improvement in the productivity of manufacturing units, which would release excess production capacities. Markets like the US and China are already cluttered with local and international manufacturers, with intense competition on price and quality.
For these factors, new market explorations are inevitable. It becomes important that the manufacturers explore markets like India, which are showing signs of healthy economic growth and increasing investments and domestic demands. The Indian economy’s growth trajectory is predicted to be nearly 7% YoY.
4. As an alternate manufacturing site
In the wake of ongoing trade wars and the protectionist approach adopted by some countries, India remains a preferred trading partner by most of the countries. In the worst-case scenario, India would command a preferential treatment as everyone wants to participate in the market and hence can be alternate manufacturing and export hub for companies that may face direct or indirect restrictions on entering certain markets in the future.
India has a large, low-cost skilled manpower, making it an attractive destination for manufacturing. Due to this, many German companies have set up their manufacturing plants in India because of the cost and location advantages.