India pips US; is 2nd most attractive manufacturing hub globally

India has overtaken the United States (US) to become the second-most sought-after manufacturing destination globally, driven mainly by cost competitiveness, according to real estate consultant Cushman & Wakefield.

China remains at number one position, the consultant said in its 2021 Global Manufacturing Risk Index, which assessed the most advantageous locations for global manufacturing among 47 countries in Europe, the Americas and Asia-Pacific (APAC).

"India takes the second spot after China as the most sought-after manufacturing destination globally," Cushman and Wakefield said in a statement.

The US is at third position, followed by Canada, Czech Republic, Indonesia, Lithuania, Thailand, Malaysia and Poland.

In last year's report, the US was at second position while India ranked third.

The consultant said that this indicates the growing interest shown by manufacturers in India as a preferred manufacturing hub over other countries, including the US and those in the APAC region.

"The growing focus on India can be attributed to India's operating conditions and cost competitiveness.

"Also, the country's proven success in meeting outsourcing requirements has led to the increase in the ranking year-on-year," the statement said.

The rankings in the report are determined based on four key parameters, including the country's capability to restart manufacturing, business environment (availability of talent/labour, access to markets), operating costs, and the risks (political, economic and environmental).

The baseline ranking for top manufacturing destinations is determined on the basis of a country's operating conditions and cost effectiveness.

"This year, India and the US switched places (second and third) taking India one rank above from the rankings released last year, when India stood at the third place.

"This switch in ranking is attributed to the plant relocations from China to other parts of Asia due to an already established base in pharma, chemicals and engineering sectors, that continue to be at the centre of the US-China trade tensions," it said.

As far as the cost scenario ranking goes, India continued to retain the third spot like last year, while Vietnam is pushed to the fourth position from the third.

"Despite being among the top-three countries in the baseline and cost scenario rankings, there is a long road for India to traverse when it comes to areas like managing the geopolitical risks involved in running business and its ability to restart its manufacturing business after a devastating second wave of the COVID-19 virus," Cushman said.

"IKEA has an ambition to meet 200 million people in India over next few years with an omnichannel approach," the statement said.

Photograph: Amit Dave/Reuters