Have you ever walked into shop, and seen more employees than customers? This is not uncommon. Chances are, many of these retail establishments would just be fine with half as many workers. Many of those workers would love the opportunity to earn a bit more. And perhaps some of them will soon find opportunities making phones.
Punitive US tariffs on China are set to remain in place. And so, Apple recently announced it would manufacture all US bound iPhones in India. In fact, Apple intends to move all its iPhone production to India in the coming years. This heralds a golden opportunity for India’s manufacturing sector. As of 2023, manufacturing as a share of India’s GDP stands at just 13%. In contrast, manufacturing as a share of China’s GDP is 26%.
ALSO READIndian stocks are now less risky than US Stocks
Unfortunately, manufacturing as a share of GDP has been trending down in recent years. It was as high as 17% in 2010. And its recent peak was 18% in 1995.
Policy makers want India’s manufacturing share to increase to 25% by 2030. And for good reason. All of today’s wealthy countries either were, or are, dominant in manufacturing. The Indian economy’s growth in recent years has been driven mostly by services. The IT sector is a good example. Revenue grew at 11% in 2024. It is expected to comprise 10% of the country’s GDP next year.
And yet, the IT sector employs just 5.4 million people. As a fraction of the population, this is only 0.4%. The IT sector, and industries like it, generate good opportunities for well-educated and high skilled workers. But high-end service industries will not make the country rich. And that’s because these sectors can’t hire masses of workers.
This is where the manufacturing sector is needed. The manufacturing sector can hire large numbers of people. And it can create good paying jobs for those in the middle and lower part of the income distribution. Like the extra person working in the shop.
This is how China achieved solid growth in recent decades. By becoming the world’s manufacturer. And focusing on medium to high end products. If Apple and other manufacturers expand production in India,
» Read More
