India and Southeast Asia emerging as top manufacturing hubs: JLL

India and Southeast Asia are emerging as top manufacturing hubs beyond China, driven by supply chain diversification, says a report by JLL, a commercial real estate and investment management company.

The report highlights that various strategic policies and economic factors are making these regions increasingly attractive to global manufacturers.

It further added that one of the primary drivers for India’s growing appeal is the government’s initiatives such as the Production Linked Incentive (PLI) scheme and the National Logistics Policy. These initiatives by the government are designed to incentivize manufacturing investments and improve the overall logistics framework in the country. As a result, India has witnessed a significant surge in Foreign Direct Investment (FDI).

The report highlights that due to initiatives like Make in India, the FDI in the manufacturing sector has surged 55 per cent to USD 148.9 billion during 2014-2023, compared to USD 96 billion between 2005-2014.

“The Make in India initiative, Industrial Corridor Development Program, Production Linked Incentives (PLI), India Semiconductor Mission & National Logistics Policy are a few policies and initiatives that had helped propel the India story globally today,” said Chandranath Dey, Head. Logistics & Industrial, India, JLL.

He further added, “Manufacturing companies are exploring innovative transaction structures to complement their timeline targets and funding strategies in India”.

The global trend of companies relocating manufacturing operations outside China, known as the China+1 strategy, is also playing a crucial role. This strategy involves diversifying manufacturing bases to reduce dependency on China. India and Southeast Asia are the primary beneficiaries of this shift, attracting substantial investments from companies looking to establish or expand their manufacturing footprints.

The report also highlights several factors contributing to this relocation trend. It says rising labour and production costs in China are prompting companies to seek more cost-effective alternatives. India and Southeast Asia offer competitive advantages, including a skilled labour force, improving infrastructure, and relative political stability. These elements are crucial for companies aiming to maintain efficient and reliable manufacturing operations.

However, JLL emphasizes the importance of evaluating qualitative factors in India to ensure long-term success in manufacturing investments. These factors include the quality of infrastructure, regulatory environment, ease of doing business, and the availability of skilled labour. Addressing these aspects can significantly enhance the attractiveness of India as a manufacturing hub.

The other countries in South East Asia, with its strategic location, also emerging as suitable for manufacturers. Countries in the region are making concerted efforts to improve their industrial infrastructure and streamline regulatory processes to attract more foreign investments.

The JLL report highlights that India and Southeast Asia are poised to become leading manufacturing hubs due to a combination of favourable government policies, economic diversification strategies, and inherent regional advantages. Companies looking to diversify their manufacturing bases would benefit from closely examining the opportunities and challenges in these regions to make informed investment decisions.