India to Flex Manufacturing Muscle

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India will have the fastest-growing electronics manufacturing industry in the world over the next several years, according to a new IT research report.

In-Stat expects the South Asian country’s industry output to grow from $11.5 billion last year to $40 billion in 2010. That’s still well below China, which pumped out $272 billion worth of electronics goods in 2004.

India’s compound annual growth rate (CAGR) will outpace China’s, however, 23 percent to 21 percent, Elaine Potter, an In-Stat spokeswoman, told internetnews.com.

A number of factors will fuel India’s boom, including comparatively low costs for raw materials and skilled labor.

Local buyers also factor in. Although 25 percent of Indians live below the poverty line, there are approximately 340 million in the middle class with disposable income for computers and devices such as Global Positioning Systems.

But like any emerging IT hub, India must makes several moves to maximize its potential.

It has ”an infrastructure that needs to be improved at the earliest possibility, easing of foreign investment procedures, which is underway, and a restructured government tariff that now makes domestically manufactured goods more expensive than imported goods with zero tariff,” Bryan Wang, In-Stat analyst, said in the report.

Companies based in the North America, Europe and Asia could help with the infrastructure upgrades. Last week, AT&T said it was building out its network in India, China and as part of a $10 billion capital improvement plan.

And the increasing presence of data centers, research and development facilities and software labs could spur further investments in network systems.

The Indian market for equipment and services is expected to jump to $24.3 billion by 2006, up from $13.7 billion in 2001, according to telecom research firm Frost & Sullivan.

Nortel CEO Bill Owens said India is among the spots the company is betting on for future growth. Nortel is supplying telecom carrier Bharat Sanchar Nigam Limited (BSNL) with equipment for a GSM network.

Owens called the transformation of the country in the last few years ”remarkable”.

”We have to be in India,” he told shareholders at their annual meeting.

This article was first published on internetnews.com.