China Plus One: Low labour costs and growing workforce give India the edge

Contrary to earlier perception, China's manufacturing labour costs have risen to quite high levels -$7.1 per hour, far higher than India and other southeast Asian countries, and much closer to Taiwan's $11.7 per hour.

- SURAJEET DAS GUPTA

A combination of one of the lowest labour costs and a large surplus workforce, which will continue to grow until 2031, is one of the key competitive edges that India is leveraging to challenge its rivals in Southeast Asia in the race for a China-Plus-One strategy. Apart from India, the countries in the race to woo global companies that manufacture in China, as well as the supply chains to their country include Thailand, Indonesia, Malaysia, the Philippines, and Vietnam.

On the labour front, India is a clear winner. Data from Euromonitor, the World Bank, the ILO (International Labour Organization), and UNIDO (United Nations Industrial Development Organization), analysed by Morgan Stanley, shows that India has the lowest manufacturing wage cost in the region: At $0.8 an hour, it is 20 per cent lower than Indonesia, nearly half of Vietnam and the Philippines, around a third of Thailand, and a sixth of Malaysia.

Apart from labour costs, India can provide a continuous supply of labour to power manufacturing growth for years to come, unlike other countries in Southeast Asia, where in many countries, there is a growing shortage of labour in export-oriented industries.