The world economy is far from perfect, but recent World Bank data shows that China is now the undisputed manufacturing powerhouse in the world. China accounts for roughly 28% of global manufacturing value added, which means that over the past two decades China has manufactured more than 1 billion goods with output of $4.66 trillion, more than the value added of all economic giants, like the United States, Japan and Germany. In comparison, the Western and Asian manufacturing centers share only a 17% share (down from 22% two decades ago), Eurozone about 15%, Japan about 5%. The reason is strategic planning based on massive infrastructure investments, integrated supply chains and a successful transition from low-cost labor-intensive assembly to high-value manufacturing.
With Chinese industrial supremacy in place, India’s manufacturing ambitions are a long and bumpy road and India is only able to produce about 3% of the world’s manufacturing value added despite being the fifth largest economy. To the contrary, India is constantly pushing on in terms of structural policies and government programs and schemes like Make in India and Production-Linked Incentive scheme to drive up critical sectors like semiconductors, electronics, defense manufacturing and green energy to a higher level of output from its manufacturing bases. India is also actively pursuing its position as a top manufacturing destination for international companies to make products in the world market.
The need to expand manufacturing is great because a strong industrial base is vital to creating millions of jobs for young workers and to increasing export revenues and less reliance on foreign imports. And while India is still not as big as China (currently at 28%), policymakers believe structural industrial reform is an important pillar for long-term prosperity. As the global economy matures and supply chains converge, India is bound to grow in its manufacturing capacity over the coming decades so that there will be no big disappointment in the world.
