Why India should invite foreign companies to manufacture in india

In 1989, Indian government invited General Electric [world’s largest company at that time] to setup its software office in India. Indian software industry was a very small thing at that time.

With government’s help and push, GE gave $10m contract to Indian companies and eventually partnered with 4: TCS, Wipro, Infosys and Patni. These turned out to become $100m contracts and these companies used them to build their brand and later become world class companies. In parallel, GE also partnered with Wipro to sell their healthcare machines and this once again helped Wipro grow as a great company.

GE’s entry gave a huge inspiration to Indian companies and helped them think big. Their outsourcing contracts to local players gave the latter their lifeline. GE’s branding helped local players get more orders. GE’s expertise taught them the best practices at a global scale.

The same could happen in manufacturing.Let’s say Boeing sets up manufacturing of aircrafts in India. The first result is the direct employment to Indian engineers along with taxes the government gets.

To make an aircraft 1000s of components are needed and many of these would be procured from local companies. Hundreds of local entrepreneurs would be building those factories generating massive number of jobs. Again they would paying taxes too.

These companies would be forced to make high quality products to suit Boeing’s high standards. They would also learn how to work with top global companies. Besides Boeing, they could start selling these high quality components to maybe GE or Mitsubishi or Samsung. Now, you actually start a high tech manufacturing exports.

Boeing would also hire many local executives. After a few years, some of them might quit to startup on their own. These would have a deep understanding of the aircraft business. That knowhow is invaluable. Now, you move up the value chain.

The result is a lot of jobs, lot of taxes paid to government and a whole ecosystem of thriving businesses.

Finally, when large companies setup shop in India they would have huge infrastructure needs. For instance, when GE came to India in 1989 they had to build up a lot of telecommunications. Eventually, these became the standards. Similarly large manufacturers might require new infrastructure that could become the standards and help a whole range of other people.