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Why India Lags Behind Vietnam's Manufacturing?

India, the country holds 5th position in the world economics. Still it lags behind Vietnam in plenty of stuff. And this is the reason why investors find Vietnam more attractive than India. Vietnam and India, both these countries have experienced economic growth from late 90's. This growth was a result of the reforms that these countries brought into the economy. For Vietnam it was the Doi Moi policy which started in 1986. And for India it was economic liberalization in 1991. Along with this, both the countries adopted a more open market based economy. India's growth is mainly due to the service sector, and also the manufacturing sector. But in the case of Vietnam, the manufacturing sector is the major contributor to the economy. Especially manufacturing of high end products like electrical machinery, equipment and electronics. Which gives higher income compared to manufacturing of other products. Now let's take the exports. In 2010 Vietnam's exports were only $72 billion, while India at that time had the exports of nearly $220 billion. Now in 2019 India's exports only grew from $220 billion to $323 billion. But in the same duration Vietnam's exports went from $72 billion till all the up to $319 billion. Which is almost as much as India. Vietnam’s total merchandise exports grew at an annualized average rate of 18 per cent in the last 10 years till 2019, as compared with India’s 5 per cent. During the same period. Vietnam attained a trade surplus of $47 billion, which again was a significant improvement over the trade deficit of $13 billion in 2010. Also today the per capita income of India is approximately $1700, which is very less as compared to Vietnam's $3000. So the numbers we have seen clearly speak for themselves. Vietnam has achieved a high employment rate in a very short duration of time, and this is mainly due to  higher exports. The reason behind this increase in export is that many foreign companies have established their manufacturing facilities in the last decade. Vietnam has evolved as an attractive place for foreign direct investments. As the country is increasingly providing well educated and cheap labour. Plus they offer a friendly environment for businesses. And reduction in taxes for foreign enterprises adds cherry on the top. Vietnam's recent trade agreement with European Union has given them an upper edge over India. Due to this agreement European producers can invest in Vietnam and can export further into other Asia-Pacific markets. Because of this deal Indian exporters could be losing market share to Vietnam in the EU markets. Another major concern to India is their transport infrastructure. We can easily understand the problem with this data. Here it is clearly seen that, in India it takes 7-10 days to reach a port. Whereas in countries like China and Vietnam it takes less than a day, because of their superior transportation facilities. Even though India's coastline is almost double that of Vietnam, it has not been successful in using it up to its potential. In addition Vietnam also has geographical advantage over India. As you know Vietnam is close to China. And China is the biggest manufacturing hub. So, the raw material for manufacturing and other resources are easily available to the companies. Apart from this, their crawling peg currency is more attractive than the volatile Indian rupee. And no question, Vietnam being a member of the ASEAN group of countries, adds another advantage. Along with all these advantages, Vietnam is better infrastructure wise. And it is easy to setup, and do business in here, than India. Now let's talk about the current scenario, Vietnam has handled the COVID pandemic soo well but on the other hand India is one of the worst hit of the pandemic. And due to the good handling, Vietnam's GDP in 2020 is plus 2.7%. Whereas India and most of the other countries are having negative GDP numbers. So, all of this could lead investors to choose Vietnam over India. But hold on this doesn't mean Vietnam is flawless. You see Vietnam is a communist country and has one ruling party. So the unchecked power could cause problems. Apart from this, Vietnam has been investigated for currency manipulation by the US. Similar charges have triggered trade war between the US and China. So this might be a bummer for Vietnam in the future. At the end we cannot deny that India has a huge market of 1.3 billion. They is also trying to get foreign direct investment by lowering corporate tax, and bringing in reforms like the production linked incentive schemes. Still this won't be enough, and India falls far short in terms of manufacturing. Vietnam has made itself capable, by simultaneously working on social welfare and infrastructure. India can rise within a decade, but this could happen only with good governance and consistent economic growth. #vietnammanufacturing #nextmanufacturinghub Instagram (Global Index): https://bit.ly/2YjIex8 Music Credits: https://www.bensound.com/