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India's Manufacturing Sector Creates Low-cost, High-end Products - 2003-11-02

India's success in the field of information technology is widely known. But less known is its emergence as a manufacturing center for a range of other goods.

Forty years ago, India's protected economy missed out on the shift in manufacturing from Western countries to less expensive bases in East Asia.

But 12 years after India liberalized its economy, the manufacturing industry is finally catching up, producing products ranging from automobiles and their components to steel, pharmaceuticals and petrochemicals.

In recent years, several multinational companies that initially came to sell to the Indian market started-up manufacturing operations when they discovered the low production prices.

India's huge pool of engineers and product designers are a big draw. The country has two million working engineers and tens of thousands more graduate from its schools every year.

An economic analyst with the Federation of Indian Chambers of Commerce and Industry, Anjan Roy, said an engineering talent pool in a developing country can create low-cost, high-end products.

"There is certainly a lot of optimism about India emerging as a major manufacturing base because first of all, technical skills are very widely available and of a very good quality, and then other costs are also manageable here compared to international levels, for example wages and salaries are very much competitive. Where we are somewhat handicapped is the … lack of proper infrastructure facilities," Mr. Roy said.

Several leading car companies such as Ford, Hyundai and Suzuki use Indian operations to produce compact cars for markets in Latin America, Asia and Africa.

India's domestic auto industry is also benefiting. The country's third-largest passenger car company, Tata Motors, recently signed a deal to manufacture 170,000 compact cars for the Britain-based M.G. Rover group over the next five years.

Vehicle components such as gear boxes and compressors are another growth area, with Indian companies now supplying American and Japanese car makers, including Ford and Toyota.

Car exports increased nearly threefold to 70,000 in the last year, and exports of auto parts are expected to touch $1.5 billion this year.

The Indian pharmaceutical and steel industries are also reporting increased profits, based partly on exports to China.

While Indian industry is rapidly developing, many analysts, like Mr. Roy, are concerned that growth will slow if the country does not improve its tax structure and often rickety infrastructure, including roads and power.