Why India couldn’t become a manufacturing hub though it is the world’s second most populous country?

India’s manufacturing capacity is dismally poor compared to China and other East Asian countries.  There are many reasons behind this poor performance.  Let us see what are the chief reasons hindering the growth of manufacturing sector in India.

1. If there is one reason which can stop the manufacturing growth in India then that will be Bureaucratic obstacles.  India ranks 142 in ease of doing business.  There are hundred of license and permissions to got before starting the business.  These hurdles actually increases the chance for corruption.  For instance getting construction permits in India involved an average of 25 procedures that took 186 days and cost 28 percent of the warehouse value.  Whereas in countries like Singapore and Scandinavian countries it takes less than a week for starting a business.   
2. Infrastructure bottlenecks are the next biggest problem for the business india.  Both raw materials and finished goods have to be moved to and from the factory.  This to happen smoothly with less cost the transport infrastructure like road and rail have to be of world class.  Indian road and rail network are over crowded with poor quality.  The ship and air ports are also over crowded and the service rendered by the authorities are of poor standard and corruptive in nature.  Telecom services like phone and internet services have improved a lot but the bandwidth have to be increased to reach the global standard.
3. Land shortage is another important problem that is holding back the growth of manufacturing in India.  Land prices in cities and towns have shot up in-exorbitantly  due to heavy shortage.  Acquiring agricultural farms is a nightmare today with it becoming a big political issue.
4. Labour laws are strict in India and they encourage unions and whereby the output and quality of the products are dampened. When a labour is not working properly and if the management want to fire him, it is almost impossible today.  
5. Power shortage is so acute that lot of manufacturing companies in India need to have their own generator backup.  This increases the cost of manufacturing.  In some southern states the power cut per day goes even up to 10 hours.  The cost of power supplied to manufacturing facility is also high compared to international cost.  Power companies have high distribution loss and theft and they give the electricity free or for very less cost to agricultural customers.  To compensate this cost, the price levied on manufacturer are high.  They have to pay high price for unreliable power.
6. Shortage of skilled labour is another hurdle in the growth of manufacturing.  Illiteracy is rampant in many states of India and though they are educated in some states, they are not trained for manufacturing.  They have basic high school education or college education is more on arts course. So there are no sufficient technically qualified people for manufacturing to grow.
7. Technology is another important factor in growth of high end manufacturing capacity.  India’s Research and Development expenses compared to the western countries and even the East Asian countries like China and Korea are only in fractions.  Except few sectors like automobiles and pharmaceuticals, still India is lacking the advanced technology.
8. High tax compared to countries like Singapore is also one of the reasons for manufacturing companies not coming up in India.  Countries like China and Korea give lot of subsidies and create special economic zones for the particular type of manufacturing facility, like zone for only pharmaceutical companies.   These zones gives financial subsidies along with low cost and continuous power with low or no tax.  India has very few SEZ compared to manufacturing tigers like China and Korea.
9. Government support before and after starting the business is another important factor in growth of manufacturing facilities in China, Singapore and other East Asian countries.  Government policies should be clear with out any ambiguity.  Though India had a stable government for last few decades their policies were not geared to the growth of manufacturing capacity in the country.  Government officials in China were personally involved in bringing the companies to their city or province, whereas in India most of the politicians and officials were more interested in getting corruption from these companies.  They were not helping in setting up or running the factory efficiently.
10. Attitude and efficiency of workers are poor in India compared to manufacturing tigers.  This will create higher output with best quality products.  When a foreign manufacturer has a choice between China/Korea and India, he will see the quality of the labour and their output capacity compared to the cost per worker.  Thought the constant cost per labour may be less in India compared to China, but the output and quality of the output is comparatively lower here.  This may be due to inadequate technical skills and the work culture.

These are some of the hindrances in why India could not achieve the manufacturing capacity which countries like Korea and China have done in last few decades.  Even countries like Malaysia, Vietnam and Indonesia are doing good compared to India in creating manufacturing capacity.  As the cost of the labour in these countries are starting to go up, international manufacturers and local manufacturers from these countries are looking for other available options to set up their manufacturing facilities.

India has the right time now to act in overcoming these above mentioned problems.  Modi has become the Prime Minister with great hope and has brought lot of programs like “ Make In India” campaign.  But the government has not really stroke the actual problems that create hurdle in setting up manufacturing facility or to run smoothly in long term with high efficiency and quality.

Not only the central government can do it solely everything to create manufacturing atmosphere in India, state governments and government officials in various fields have to put their maximum effort in bringing the “Make in India” campaign a reality from it’s present dream.