It's true India has a lot of issues. But the good thing about investments like these is that it creates an opportunity for everyone involved to potentially make a change for the better. This could be the start of a new series of investment in manufacturing and the potential could batter enough heads together to fix issues like electricity reliability especially if every has a vested interest in making it work out.
I'm not saying it will definitely happen, but these are the sort of gamechangers that could disrupt the status quo for the better.
In theory this is all true, but you really have to look at the facts on the ground and the specific situation. Tons of folks have agreed with what you're saying, and poured in investment, and the situation remains really challenging. It's not for a lack of effort — India has a huge potential labor force, it's well-situated for shipping to emerging markets (like China, parts of Africa, or India itself). And, as was pointed out above, it has a strong democratic tradition that makes it appealing to Western investment.
But that same democratic tradition makes it a very different situation from China. It can take literal decades to organize and satisfy all the constituencies involved for projects like a power station, factory complex, or highway construction. Labor constituencies are strong and organized enough to seriously push back against projects, and are often skeptical of foreign investment and "interference". Political parties even resort to violence to stop initiatives that they disagree with.
I'm not saying that it's going to be like this forever. As a US national of Indian origin, I would be happy if the the situation was different so that I could work with manufacturing partners in India. Having some cultural and legal ties to the country would give me an advantage that I don't have when working with partners in Shenzhen or Shanghai.
But it's really just not the case right now. By all means, I'm happy that this investment is happening, but I think we need to be realistic. For a manufacturing ecosystem to develop that looks anything like China does, it's going to be more on the scale of 50 years or more, not 5-10.
Indeed. The thing is that China has been investing like crazy in infrastructure projects which proved crucial to develop industry and its physical supply chain.
> no paved roads, and no electricity
And they built all that first.
I was in Shenzhen 10 years ago with an Indian colleague, its first trip to China. He was shocked when he saw that Shenzhen was a modern metropolis with large avenues as he was expecting something like in India...
May be they were, but I doubt they are the largest anymore. LF is has been selling asset after asset and their share price are now in 20 Yr's low. Basically they are a dying company.
I was in Shenzhen in the early 90s, and there was already reliable electricity, roads, ports etc., and those were not built by Li & Fung
1: https://www.flickr.com/photos/lwdemery/sets/7215761115407137...
(I know for a while only the state of Gujarat had it; back in the day, even Bangalore didn't have 24/7 power so most multinationals that set up shop there ran their own generators)
I've heard this a number of times over the last decade or so, and wonder what is it that prevents factories from running their own generators/power stations. Is fuel availability also a problem? Is is not economically feasible? There are plenty of factories in the world that have backup power sources. What's happening in India that makes this not common?
1. https://appleinsider.com/articles/12/03/10/apple_provides_ad...
Generators are complex and weird. Many use more fuel at 50% of their capacity than at 80%, even though the latter is delivering substantially more power.
The roads are narrow and dangerous, which also means that they are unreliable and slow. For example, it can routinely take 3-4 hours to travel just 60 miles, in a passenger vehicle. The issues only get worse if you need to move a large amount of materials or goods.
Many commercial and residential complexes in India do have a backup power source, but I don't think it would be feasible to run a factory off that.
It seems like that they would be a big enough consumer of electricity that any standard grid would struggle to accommodate them, and they would be doing things like:
- Placing themselves immediately beside the power plant.
- Place their own wires between themselves and the power plant.
- Maybe even build their own power plants (particularly with things like solar/wind that scale down nicely).
Renewables in this scenario is a fairy tale.
[No Renewable Subsidy] + [Shift Downside onto Public] + [Energy Demand Timing] = COAL!
Since India is also a closed market, but more aligned with Western values
Even though India now has a net surplus of electric generation, there are systemic problems with the electric grid. Some of them are due to poor infrastructure, others due to theft or corruption. But the takeaway is that a factory in India just can't run for 24 hours a day the way it can in China.
This is not likely to change in the foreseeable future, even with sustained international investment. There are a ton of constituencies in India that make fixing these kinds of issues much more complicated than in China. So while a company like Foxconn may be able to setup a factory and use their considerable resources to make it work, I don't think we're likely to see the kind of ecosystem pop up that you see in Shenzhen.