India and Southeast Asia are emerging as top manufacturing hubs beyond China, driven by supply chain diversification, according to a report by JLL. The report highlights that various strategic policies and economic factors are making these regions increasingly attractive to global manufacturers. One of the primary drivers for India’s growing appeal is the government’s initiatives such as the Production Linked Incentive (PLI) scheme and the National Logistics Policy. These initiatives are designed to incentivize manufacturing investments and improve the overall logistics framework in the country, leading to a significant surge in Foreign Direct Investment (FDI).
Due to initiatives like Make in India, the FDI in the manufacturing sector in India has surged 55 per cent to USD 148.9 billion during 2014-2023, compared to USD 96 billion between 2005-2014. The Make in India initiative, Industrial Corridor Development Program, Production Linked Incentives (PLI), India Semiconductor Mission, and the National Logistics Policy are among the policies and initiatives that have propelled the India story globally. Manufacturing companies are exploring innovative transaction structures to complement their timeline targets and funding strategies in India, showcasing the growing confidence in the manufacturing sector.
The global trend of companies relocating manufacturing operations outside China, known as the China+1 strategy, is also playing a crucial role in India and Southeast Asia emerging as preferred manufacturing destinations. Rising labor and production costs in China are prompting companies to seek more cost-effective alternatives, where India and Southeast Asia offer competitive advantages such as a skilled labor force, improving infrastructure, and relative political stability. These elements are crucial for companies aiming to maintain efficient and reliable manufacturing operations and reduce dependency on China.
JLL emphasizes the importance of evaluating qualitative factors in India to ensure long-term success in manufacturing investments. Factors like the quality of infrastructure, regulatory environment, ease of doing business, and the availability of skilled labor play a significant role in enhancing the attractiveness of India as a manufacturing hub. Southeast Asia, with its strategic location, is also emerging as suitable for manufacturers, as countries in the region are making efforts to improve their industrial infrastructure and regulatory processes to attract more foreign investments.
The JLL report highlights that India and Southeast Asia are poised to become leading manufacturing hubs due to favorable government policies, economic diversification strategies, and inherent regional advantages. Companies looking to diversify their manufacturing bases would benefit from closely examining the opportunities and challenges in these regions to make informed investment decisions. With the right mix of policies, skilled labor, infrastructure, and stability, India and Southeast Asia have the potential to become key players in the global manufacturing landscape, attracting significant investments and driving economic growth in the region.
