India's manufacturing sector received a blow with Taiwan-based Foxconn Technology Group asking hundreds of its Chinese technicians working at iPhone production units in India to return home. There is no official word from Foxconn or Apple yet; but if the development is true, it could derail India’s ambitions of emerging as a global manufacturing hub. The move comes at the crucial juncture when Apple was planning to ramp up production of its flagship product here, eventually to manufacture all iPhones for the US market in India by 2026. Importantly, the move casts a shadow on the China+1 strategy, under which countries like India and Vietnam are aggressively going after global technology companies to shift production lines and reduce over-reliance on China.
As Apple Chief Tim Cook noted earlier, more than the cost advantage, the skill and expertise of Chinese assembly workers is something that cannot be found elsewhere. It means, in the absence of skilled talent that is found in abundance in the services sector, India woefully falls short in manufacturing. So it can only offer a cost advantage, which can also be found in, say, Vietnam or Indonesia. If China clamps down on the outflow of talent, technology and materials, India’s manufacturing growth story will slow down. While building production lines is one aspect, the availability of talent is equally crucial. There is an urgent need for India to train workforces and develop the skill sets needed for high-end manufacturing. Besides, it is important to build supply chains and encourage domestic component makers for manufacturing to flourish. Though the government made some humble attempts through the Make in India initiative and Production-Linked Incentive scheme, they are evidently not enough to catch up with China.
Manufacturing is integral to growth and has the potential to not only create jobs, but also boost exports beyond $1 trillion by 2030, according to some estimates. But despite efforts such as Make in India and PLI, the manufacturing sector’s share of the GDP has been stagnant at about 14-17 percent for a decade now. We need coordinated efforts by both the government and industry to raise the share closer to the government’s stated target of 25 percent. That’s when India can truly shift away from being an import-dependent economy to a global production hub.