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Factory to the world

January 12, 2009

 Abstract: Globally, China’s manufacturing enjoys an edge due to: (a) its large population, which provides a huge domestic market, and thereby, a partial insulation from external shocks; and (b) a high percentage of people in working age group (20-59), indicating a comparative wage cost advantage. While India is also a very populous country, its share of working age population has been relatively lower, which has deprived India from enjoying similar advantages.

During 2010-2030, however, things are set to change: according to projections by the UN, India would add a considerably larger population to the working age group as compared to China. Would that lead manufacturers to relocate production capacity from China to India—thereby making India the new ‘factory to the world’? Not necessarily, because, much would depend on whether the workers in India get the right skills and the producers, the right environment.

Keywords: projection; population; demography; manufacturing; skills; wages; labour; jobs

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