INTRODUCTION

India is today in the midst of rapid economic transformation in the global economy. In fact, it is
one of the major factors behind the shifting of the global economic focus towards Asia, and is
expected to play a significant role in making the 21st century largely about Asia. India has been
ranked 25th in terms of economic transformation (Transformation Index 2008), way ahead of
China's 85th position, by German Bertelsmann Foundation.

India is fast emerging as a global manufacturing hub. It has all the requisite skills in product,
process and capital engineering, thanks to its long manufacturing history and higher education
system. India’s skilled manpower is attracting a number of companies, spanning diverse
industries, making India a global manufacturing powerhouse. The greatest advantage that India
has over the other manufacturing hubs is greater mobility and better communication skills and
knowledge of English. India with its vast design skills has attracted a lot of outsourcing
technological orders.

According to a UNIDO analysis mentioned in the International Yearbook of Industrial Statistics

2009, India ranks among the top 12 producers of manufacturing value added (MVA).

INDIA AS MANUFACTURING HUB

India's has fast emerged as a manufacturing hub as Multinational companies look for long term
alternatives. As a result of Government policy, progress has been achieved in the manufacturing
of telecom equipment in the country. There is a significant telecom equipment-manufacturing
base in the country and there has been steady growth of the manufacturing sector during the past
few years. In the last 5 years, the country contribution in mobile devices has increased from 0 to
6% of the global device production. Several Indian companies in the telecom and electronics
industry are creating global scale.

Rising demand for a wide range of telecom equipment, particularly in the area of mobile
telecommunication, has provided excellent opportunities to domestic and foreign investors in the
manufacturing sector. The last two years saw many renowned telecom companies setting up their
manufacturing base in India. Nokia and Nokia Siemens Networks have set up their
manufacturing plant in Chennai. Ericsson set up GSM Radio Base Station Manufacturing facility
in Jaipur. Motorola , Foxconn ( OEM ) has setup large manufacturing plants in Chennai, Elcoteq
set up handset manufacturing facilities in Bangalore. LG Electronics set up plant of
manufacturing GSM mobile phones near Pune. Ericsson launched their R&D Centre in Chennai.
Flextronics set up an SEZ in Chennai. Other major companies like Aspcomp, Solectron etc have
decided to set up their manufacturing bases in India. A large number of companies like Alcatel,
Cisco have also shown interest in setting up their R&D centers in India. With above initiatives
India is expected to be a manufacturing hub for the telecom equipment.

With upcoming broadband revolution, the demand for wireline products, transmission
equipment, wireless equipment, fibre and devices will multiply, providing large scale
opportunities for Indian and Multinational companies.
The rapid development of the semiconductor ecosystem and the electronic ecosystem in India is
connected with the growth of telecom sector in India, as both domestic and foreign companies
are expanding their operations across the whole value chain in the country.

FAVOURABLE FACTORS
There is little doubt that India has been moving progressively to becoming a competing
manufacturing hub to other developing countries. There are several reasons for India’s
manufacturing competitiveness:-

 Strong manufacturing quality and skills: Several Indian companies have won the Deming
prize for total quality management. In hardware manufacturing, India has the potential to
move up the value chain by offering design capabilities and not merely low cost facilities.
 Large domestic market advantage: This large, rapidly growing market will be the key to
India’s manufacturing base. India’s mobile market is the world fastest growing market
with over 10 million new subscriber additions every month. Companies in India can
leverage on this domestic market growth to attain export competitiveness through scaling
up capacities.
 Software and service support: The benefit of labor arbitrage continues to provide the
basic comparative cost advantage.
 Global supply capability: Many India firms are building up the global supply capability
model by accessing other markets for components, acquiring stake in foreign companies
to facilitate marketing, servicing, and establishing local assembly and/or manufacturing
units abroad
 Secure Information Infrastructure.
 Capacity Building through Knowledge for a sustained growth.
 Available talent pool and environment for innovation.
 Cheap raw materials
 Value Added Services: Most innovative solutions in VAS domain along with rich content
library from Bollywood and cricket.
 Stable and transparent political environment

India's strength also comes from its ever growing numbers of well-educated, skilled people,
adept in the English language, helping India to become a major exporter of software services and
software workers. India’s working age population is likely to grow at a healthy rate and there is
greater scope for productivity and education levels to increase across the Indian population.

Indian business leaders – in a survey by Korn/Ferry International – are found to be more

entrepreneurial than their Asian counterparts, owing largely to their strong language skills and
association with a society that encourages entrepreneurship. The geo-political strategy of
utilizing India’s young demographics as against its ageing population, both as a source market
for goods and services as well as cost competitive re-export base is a masterstroke by our
economic leaders.
FOCUS ON EXPORTS
In the past, telecom equipment manufacturing was limited to meeting the domestic requirement
and there was no emphasis on the export of telecom equipment and services from India. Often,
imports were the only means of fulfilling even domestic demand. Now that India has emerged as
a manufacturing base and more and more investments are being committed, there is need to give
focused attention for exports as well. This goes back to 1994 when the Government announced
the National Telecom Policy which defined certain important objectives including ensuring
India’s emergence as major manufacturing / export base of telecom equipment.

The figures for production and export of telecom equipment are shown in table given below:
(Rs. in crore)
Year Production Export

2005-06 17833 1500

2006-07 23656 1898

2007-08 41270 8131

After companies like Microsoft, Intel, IBM, Hewlett-Packard, Dell, Citigroup, J P Morgan and
Morgan Stanley, Yahoo and Google, many other companies are also planning to enter the Indian
market with big investments. They have plans to make India a hub for developing and
manufacturing products for global markets and sourcing components across core areas. India has
overtaken the US and China to emerge as the largest developer location for Sun Microsystems.
Besides these large corporates, mid-sized IT services firms such as TCS, Wipro, Patni Computer
Systems are using alliances to strengthen their presence. Today India ranks 2nd, next to Mexico
in terms of the total cost of production.

The services sector is one of the most important segments of Indian economy in terms of its
contribution to the gross domestic product (GDP) in recent years. The sector is set to benefit by
the recent government incentives announced as a part of the third stimulus package. The growth
of the Indian services sector has not been confined to the domestic market alone. It is also
reflected on its trade front. A vertical break-up of India's IT- BPO exports sector shows telecom
contributed 20 per cent. The Global NOCs/Hosting services provided by telecom giants are all
contributors to this growth.

According to IT research firm Gartner Inc, India has maintained its advantage in the field of
offshore services in 2008, as one of the global leader in the market. India has 45 per cent share of
the global off-shoring market, which has a market volume of around US$ 70 billion. In 2008,
India generated close to US$ 40 billion in proceeds from IT and IT-based services. Indian IT
outsourcing firms will be able to provide a relief to IT services market where countries are
looking to cut costs in the recessionary clime by outsourcing to cheaper destinations as India
rather than China or Korea.
RELEVANCE OF SEZs and ITIRs
India's Special Economic Zones (SEZs) can spearhead its export-led industrialization providing
tax holidays and other incentives. SEZs also will have more control over infrastructure like water
and power and less regulation. They can create an appetite for worldwide giants to come to India.

Exports from special economic zones (SEZs) rose 33 per cent during the year to end-March
2009, far outpacing the country’s overall exports growth of just 4 per cent, according to the
Commerce Department. According to the data, exports from such tax-free manufacturing hubs
totalled US$ 18.16 billion last year.

Also, Information Technology Investment Regions (ITIRs) are being set up across the country as
part of the strategy to provide an investor-friendly environment. ITIRs, which are supposed to be
bigger than special economic zones (SEZs), would facilitate co-existence of manufacturing
plants, infrastructure and other support services required for the growth of the IT/ITeS and
electronic hardware-manufacturing units. The new ITIRs might include existing SEZs, industrial
parks, export-oriented units or growth centres that have been duly notified by relevant central or
state legislation.

CONCLUSIONS
The global rush towards lower costs component outsourcing provides with a window of
opportunity like never before. With continued commitment to total quality management (TQM)
and investment in R&D, India will be able to build on its inherent strength, take on global
competition, and realize the ambition of building Indian MNCs.

India's rapidly expanding economy along with a booming consumer market and easy availability
of skilled personnel has been instrumental in attracting several companies to invest in India. The
rapid growth of the Indian economy is likely to make India the fifth largest consumer market in
the world by 2025 from twelfth in 2005, according to a study by McKinsey Global Institute.
Aggregate Indian consumer spending is likewise estimated to more than quadruple to
approximately US$ 1.5 trillion by 2025, on the back of a ten-fold increase in middle class
population and a three-fold jump in household income.

Besides the big companies investing in India, India continues to provide back office work to a
large number of companies and industries. IBM, Intel, Boeing, Lockheed Martin are among
several large corporates supporting joint research in high-tech areas.

Target Setting
To achieve an export led manufacturing growth, the following are the targets:
 Exports growth at 25% CAGR
 Production targets growth 18% CAGR
 Productivity doubling in next 5 years
 Employment targets of 18mn by 2015

India's growing consumer market, skilled human resources and software excellence, its
manufacturing prowess and cost competitiveness will provide a strong platform for the growth of
their economies and also their bilateral economic ties. Moreover, the rest of Asia will also
continue to be energized by the boom in India.

There are several areas where there is abundant scope to further improve economic cooperation
between India and other countries. Opportunities for progress exists especially in areas like
communication infrastructure, the IT sector, telecom sector, optic fibre cables, gateways,
satellite-based communication, wireless, IT-enabled services, IT-enabled education, data centres,
software development, and other knowledge industries. India offers all the prerequisites
necessary to execute KPO services, be it proactive government policies or a large talent pool of
engineers, MBAs and PhDs. India has managed to replicate its success in IT outsourcing in the
KPO industry as well, making it the leading player in the global KPO market.

According to UK-based think-tank, Economist Intelligence Unit, India is expected to be

comparatively less impacted by the ongoing global financial crisis. With the India growth story
still standing on firm ground, sovereign wealth funds are likely to look at Indian companies.