MUMBAI: The overall value of India's manufacturing output is estimated at $450 billion and labour cost advantage, efficiency of capital and availability of raw materials are the key factors driving India's manufacturing competitiveness, stated a report prepared by Boston Consulting Group, along with the Confederation of Indian Industry (CII) and the Department of Industrial Policy and Promotion.

The report, "Advantage: The India Manufacturing Opportunity" — an insight into the manufacturing scenario in India, evaluates India as a key destination for multi national companies (MNCs) looking for a cost-effective manufacturing base and also mentions the key improvements in the policy arena that help fuel growth in Indian manufacturing.

Among the key factors driving India's manufacturing competitiveness, the report stated that the labour cost advantage, where India was projected to remain competitive even beyond 2009, while skilled labour forms a major portion of the working age population. The country will have 25 per cent of its population in the 25 to 30 age group by 2020.

Another factor is the efficiency of capital in India. It is pointed out that a full-fledged manufacturing facility in India costs 60-80 per cent less than its counterpart in a developed country. The final factor is India's original source of competitiveness, raw materials. The sectors that initially fuelled India's industrial revolution, such as textiles and steel, continue to benefit from the abundance of raw materials, making it more cost-effective to locate manufacturing facilities in India.

Manufacturing is shown as being a critical component of India's gross domestic product (GDP) (16 per cent), exports (53 per cent) and foreign direct investment (FDI) into India (79 per cent). Furthermore, the importance of manufacturing in job creation is also highlighted. While services are admittedly more labour-intensive, manufacturing plays a vital role as a transition sector for agricultural labour looking to enter more value-added industries.

The overall value of India's manufacturing output is estimated at $450 billion with food and chemicals forming the two largest components. However, rubber and petroleum and transport equipment (including India's much lauded auto components industry) are identified as being the high growth industries.

In this section, India is also compared to other low cost countries on the matrix of manufacturing GDP, growth in value added from manufacturing and growth in fixed investments. While India is fourth in terms of manufacturing GDP, it is second only to China on the other two matrices.

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