Here’s why India lags 15 years to China in the manufacturing sector

China’s manufacturing sector led by labour intensive manufactures has grown much faster than that of India both in terms of production and exports. It is often argued that India’s manufacturing sector that is relatively capital intensive must now follow China’s example and promote labour intensive manufactures. This is said to be essential if India were to promote growth and employment that are both essential for reducing the relatively high levels of poverty in the country

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Manufacturing Wages

Manufacturing Wages
When it comes to manufacturing wages, India has some of the lowest in the world. The average manufacturing labour cost in India in 2014 was just $0.92 per hour, as opposed to $3.52 per hour in China. India’s relatively low cost of labour is one of the strongest incentives for setting up a plant there.

Productivity

Productivity
According to a 2012 article published by McKinsey & Company, “Indian manufacturers lag behind their global peers in production planning, supply chain management, quality, and maintenance—areas that contribute to their lower productivity.”

According to the database of the World Bank, China’s per capita GDP in 2014 was $12,609, adjusted for PPP. This figure is more than double India’s equivalent, $5,565. It’s important to note, however, India’s manufacturing sector accounted for about 17 percent of the country’s GDP, while China’s represented about 31 percent of their GDP, as of 2014.

Availability of Labour

Availability of Labour
The availability of labour is a third factor to examine when considering manufacturing in India. China and India represent the two largest national populations in the world. India’s labour force amounted to about 502 million people in 2014, while China’s was approaching 802 million.

Logistics

Logistics
The World Bank publishes a Logistical Performance Index (LPI) every two years, ranking countries according to several criteria like Quality of infrastructure, Ease of arranging shipments at competitive prices, Competence and quality of logical services etc.

Cost of Logistics

Cost of Logistics
India's spend on logistics activities – equivalent to 13 percent of its GDP is higher than that of the developed nations due to relatively higher level of inefficiencies in the system, with lower average trucking speeds, higher turnaround time at ports and high cost of administrative delays.

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