To challenge China, India needs to get out of the way of its factory owners
Subscribe to enjoy similar stories. Boosting manufacturing is critical to India becoming an economic powerhouse. It now has a fresh shot at that with the election of Donald Trump, whose promise to levy sky-high import tariffs on Chinese goods could send more manufacturers to the South Asian nation.
But first India has to get out of the way of its factory owners. In the southern city of Bengaluru, A. Dhananjaya, who has run a garment manufacturing company for nearly three decades, says he grapples with high labor costs and hundreds of labor-compliance rules.
He wouldn’t dare grow beyond about 100 workers, because that would mean more forms to fill out, more licenses to apply for, and more expenses. Before the pandemic, he lost business to China. In the past two years, larger and cheaper Bangladesh factories have wooed away many customers.
“The collapse is real," said Dhananjaya, who has laid off half his workers in recent years. “Five years down the line, I’m not sure if the garment industry will survive." India has generated splashy headlines under Prime Minister Narendra Modi by wooing high-profile companies such as Apple that have sought to diversify production away from China since the pandemic. But economists say that the country has done little to clear away hurdles for labor-intensive manufacturing, the foundation for economic growth from China to South Korea.
In India, manufacturing’s contribution to its gross domestic product has fallen from around 17% two decades ago to 13% in 2023, according to World Bank data. The country has about 65 million manufacturing jobs, while four times as many people work in agriculture. Millions of young people join the workforce every year in the world’s most populous nation.
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