India to challenge China's forte as manufacturing hub

NEW DELHI: India, popularly known as the world's back office for IT and BPO services, is all set to threaten China's position as the world's backyard for manufacturing in the next 3-5 years, says a new report.

"India could challenge the position of China as the manufacturing centre of the world in next three to five years. Companies are planning to offshore manufacturing activities primarily to India that will surpass its IT and BPO activities," global consulting, technology and outsourcing services major Capgemini said in its latest report.

At present, manufacturing is the least offshored activity to India, but the survey respondents expected the country to become the number one outsourced manufacturing destination due to its competitive cost advantages over China, Capgemini added.

"Current developments suggest that some of the main manufacturing locations in China are becoming too expensive relative to other countries in the region, which includes India," the report added.

Emerging economies like India and China have the largest market share of offshoring activities. India is diversifying from its stronghold in the IT and BPO segment to the manufacturing segment, which is currently dominated by its neighbour.

The report, however, highlights that India has to make significant investments for improving its infrastructure to cater to the increased demand of manufacturing and supply chain operations.

The Indian government is eager to attract foreign manufacturing activities, but it will need to make significant investments to harvest this potential, Capgemini added.