India likely to emerge as world manufacturing hub

India is being viewed as the most likely candidate to undertake industrial relocation and emerge as a global manufacturing hub, as per a recent study. Published in the ‘Humanities and Social Sciences Communications’, the article attributes some of the reasons to be the rise of labour costs in China, constraints on resources and environment, and ongoing geopolitical conflicts. The study’s abstract states that this shift could reshape the global carbon emission landscape. However, ex ante measurement of the environmental effects of such industrial relocation is poorly understood.

As pointed out by an Economic Times (ET) Manufacturing report, contributing around 17% to the country’s GDP and sustaining a 27-million-strong workforce, India’s manufacturing sector is a vital economic driver. The government’s vision to elevate the sector’s share in the economic output to 25% by 2025 further amplifies its critical role in India’s growth story. The discourse surrounding India’s manufacturing sector today is not just about economic growth but also about environmental responsibility. At the heart of this debate lies the challenge of harmonizing ambitious growth targets with equally bold sustainability goals. This association is crucial as India strives to maintain its position as a global manufacturing powerhouse while mitigating its carbon footprint.

The Introduction to the former cited study titled ‘The environmental and economic impacts of India’s emergence as the global manufacturing hub’, warns that the worsening global climate crisis, marked by rising temperatures, frequent extreme weather events, and rising sea levels, poses significant challenges to human society and ecosystems. Trade, a crucial component of global economic activity, plays a significant role in driving global carbon emissions and environmental changes.

Further, the study states that as the global manufacturing landscape adjusts, India, with its vast market, low-cost labour, and strategic industrial policies like ‘Make in India’ and ‘Production-Linked Incentive’, has attracted substantial capital and is poised to become a new growth hub in global manufacturing. Additionally, India’s rich experience in the information technology and service outsourcing industries can effectively enhance its manufacturing competitiveness, aiding its rise as the next global manufacturing hub. While India’s emergence as the global manufacturing hub could provide significant economic benefits to India, this transition can also significantly reshape the greenhouse gas emissions landscape and profoundly affect the long-term global climate change mitigation efforts. India’s manufacturing sector stands as a cornerstone of its economy and drives exports amounting to $447.46 billion annually, according to the ET report. The most feasible path for India to become the global manufacturing hub involves relocating industrial activities currently based in China.

However, the report adds that the path to sustainable growth is fraught with challenges. India’s heavy reliance on fossil fuels and an industrial infrastructure incapable of managing energy efficiency and pollution control pose significant barriers. The upfront costs associated with adopting green technologies and renewable energy solutions deter many manufacturers due to financial constraints, as well as the pressure to keep costs low as they put up with global competition. Environmental concerns such as resource depletion, greenhouse gas emissions, and waste management further complicate the quest for sustainable industrial practices. The push for sustainable manufacturing practices is gradually gaining momentum in the manufacturing industry. This progress, fuelled by favourable government policies and investment plans, reflects a concerted effort towards a more sustainable industrial landscape. As another ET Edge Insight points out, India’s push for sustainable manufacturing is also powered by smart policies. The National Action Plan on Climate Change (NPACC) provides the roadmap for sustainable industrial growth. Furthermore, Zero Effect Zero Defect (ZED) certification promotes efficiency in smaller companies and Renewable Energy Certificates (RECs) make green energy more accessible. However, as India strives towards a $5 trillion economy, the manufacturing sector must lead the charge and balance growth with ecological responsibility.

The Insight adds that economic aspirations and environmental responsibilities must go hand in hand. Sustainable manufacturing practices will particularly be instrumental in cementing India’s position in responsible global industrialisation. Environmental, Social, and Governance (ESG) commitments are reshaping India’s manufacturing sector. They push manufacturers to rely on cleaner energy sources, use resources more efficiently and reduce waste. India’s manufacturing giants are spearheading this revolution by pushing boundaries and rethinking their production processes.