gaz filling station at a SRF factory

In September 2014, Prime Minister Modi launched his “Make in India” campaign. With labour costs rising in China, the campaign aims to encourage companies to switch their manufacturing and assembly to India. Long seen as an ICT and services hub, India hopes to build a reputation in the 21st Century as a manufacturing powerhouse. But where does that leave Europe?

Hourly manufacturing labour costs in India average about 25% those in China ($0.92 per hour as opposed to $3.52), and wages in both countries are many, many times less than in Europe. News that the world’s 4th-largest smartphone maker, China’s Xiaomi Inc., is opening an assembly plant in the Indian state of Andhra Pradesh is certainly a boost to “Make in India” (though analysts warn that India still lacks the investment in infrastructure that multinational corporations would need to fully make the switch).

Will Modi’s “Make in India” campaign benefit Europeans as well as Indians? Or is it a recipe for higher unemployment in Europe? To get a reaction, we spoke to Blaise Fernandes, Chief Executive Officer of Gateway House, an Indian foreign policy think-tank.

Fernandes argued that outsourcing a larger share of manufacturing to India would be a win-win for everybody, as increasing purchasing power in India would lead to a bigger market for European products, and a bigger Indian middle class would boost tourism in Europe:

To get another perspective, we also put the same question to Claude Moraes, British Labour MEP and member of the European Parliament Delegation for relations with the countries of South Asia. What would he say?

moraesOn the one hand, we’re in a global marketplace and it’s important for the EU to be trading with India… On the other hand, we need to ensure any trade relationship is balanced and fair for both parties. But, overall, I think it’s a good sign that there is a fluid trade relationship between the EU and India, given that India is a rapidly-growing economy compared with Europe.

Should European companies outsource to India? Or would outsourcing manufacturing to India only increase unemployment in Europe? Let us know your thoughts and comments in the form below, and we’ll take them to policymakers and experts for their reactions!

IMAGE CREDITS: CC / Flickr – ILO in Asia and the Pacific


34 comments Post a commentcomment

What do YOU think?

  1. avatar
    Mike Chambers

    That is a difficult question for any company. The costs of outsourcing to India or China are a fraction of the cost for the same services in Europe. This means that more and more jobs are outsourced. It also means that more jobs are lost in Europe.

    • avatar
      josh

      i agree

  2. avatar
    Christos Mouzeviris

    First they ask lower taxes for rich multinationals to “attract jobs” in European countries…. Then they outsource European companies to India and China… So Europeans both lose native jobs, AND have to accept higher taxes when the rich companies pay lower tax rates…. But hey, they got to buy cheaper goods made in India… So they should not complain!

    • avatar
      Yavor Hadzhiev

      Exactly! I mean, it makes no sense. Outsourcing is hardly compatible with any economic theory that aims to fight global warming and climate change that are threatening our future.

  3. avatar
    Κωνσταντινος Ζαχαρούδης

    India is on it’s way to increase. This means that in a few years Europe will have to search for a new cheap production are? Europe must understand that working this way, there will be no consumers for their products, even when produced cheaply in India or China. The only way would be heavey scientific research and new high tech products.

  4. avatar
    Saurav

    Unemployment is rising in Europe and job outsourcing to India may amplify this process but the current global economy runs through competition and collaboration. Job creation in India through outsourcing increases purchasing power of Indians- that eventually grow ‘Middle class Indians’ to spent holidays in Europe (As we saw this in Bollywood movie, Zindagi Na Milegi Dobara- where 3 Indian guys went for Spanish Road trip).

    -Through such tourism boom, European investment may grow bigger that helps to create jobs inside Europe.
    – Indian Outsourcing firm also requires, expertise’s (Business Analytics, Technicians etc.), where Europeans may come to India due to comparatively low work permit issuance time than for Indians in Europe. (This has been possible, When Mr. Modi arrives to India enabling ‘on arrival’ visa to India for foreigners from European Countries).

    These are some of the examples, where both Europeans and Indians can able to grow their economies. That is why; it is the age of ‘Competition’ and Collaborations’.

  5. avatar
    Ch.

    Thats how globalisation works.
    Big companies outsource their supply chains to countries having cheaper production costs. Still they keep the well paid jobs at the home country.
    That is one step in the developement of emerging markets. I think it is often working better than developement aid.
    It is raising the wages in India longterm and reducing the amount of poor people – raising global demand.
    Want to read a good book about it?
    Read Lester Thurow’s “The Future of Capitalism”. It is written in 2004, but still (or more than ever) up to date!

  6. avatar
    Siegfried Kobler

    Il tell you who its good for, India. It creates jobs in India, it brings Euros,Pounds,Dollars, Swiss Francs etc. to India, it is only good for Europe if you think like a globalist, for a globalist it doesnt matter where something is made as long as the quality meets the standard, but the world is not globalist, the world is regionalist and even more nationalist, so yes its bad for Europe to outsource to India what could and probably should be done in Europe simply because of saving money, it destroys jobs in Europe, it damages European Industry, and a competitor possibly gets knowhow they would not have had without such a opportunity.Im not advocating stopping business with India, but we should focus on European Business.

    • avatar
      Naina Lorentzen

      Speak for yourself. The world isn’t nationalistic. There are some people who think this way, as for me and most people I know, we are globalists. This kind of collaboration helps increase collaboration between countries, giving buying power to India- neutralising economies. In turn developing Indo-European tourism and jobs for Europeans in India. No sir- this is where we are headed- into a global world without xenophobia and a disintegrated world view :) N it’s a damn good thing for everyone!

    • avatar
      Ericbanner

      Naina,really ? Most of the people you know are globalists are they ?.Well I dont know where you live but having ran my own business and employed people for 23 years I can say that everyone I know are definately NOT globalists.
      Please explain again how outsourcing to india helps the unemployed in the country where those jobs have been lost.How can increasing unemployment in Europe be helped by giving all and any jobs to the Indian subcontinent,how on earth can you be serious ?, Are you actually arguing that cheap goods and services from india helps the unemployed in Europe to survive because they dont have to spend as much as they would if they could buy those services and goods from their own country.Oh yes and actually spend more and fuel the local economy because they are actually in work,Imhave to say I find your logic seriously warped

    • avatar
      Naina Lorentzen

      Sorry but I think you are vague in your argument, the jobs that people have ‘lost’ are subjective to the field of trade or service. I am definitely a supporter of local trade- for eg:- when it comes to food- it should always be local and organic. We should also support local artisans etc.
      A thourough understanding of economy is very important in these matters. The more we spend within our local economies the more jobs there will be for people. Hence to create jobs we must stimulate more spending power and vice versa. So this argument is subjective.
      To answer your question. :
      I live in Denmark, I run my business all over the EU and India. I work with environmentally sustainable and *direct-fair-trade products which you cannot produce in Europe. i.e; I work with textiles and other materials which are basic and luxury. I support the local economies of rural villages- which in turn helps increase the economy of rural regions in a sustainable manner and maintain the ancient handicraft industry, keeping young rural artisans from moving to the cities and joining the slums thereby increasing disparity and global poverty.

      If I were to, lets say import raw materials from India and manufacture them in Europe, my cost of production would be so high that I would not be able to make any profits and hire any employees who get such high salaries thanks to my effective, efficient and economic outsourcing in India.

      I am now able to not just run my business and create ‘local jobs in the EU’ for people in a creative and strategic field, but also help the economy of rural India and create ‘local jobs’ for them, whilst changing the game in the product industry and bridging borders between countries.
      I honestly believe the work I am doing is creating a ripple effect across the world to actualise global cooperation for the betterment of mankind. In every way :) We’re pushing boundaries here. Infact we are breaking them.

      Hope I shed some light on this subject. Do you have any more questions?

    • avatar
      Yavor Hadzhiev

      Naina. You are a really intelligent (social) entrepreneur. But you are probably one of the few exceptions out there. I don’t think large companies usually do business as you do.

    • avatar
      Ericbanner

      Naina, it seems to me that you ,by virtue of your effective efficient and economic outsourcing you are very effectively supporting the workers in india,they must be delighted !
      I agree we should spend in our local communities and that is what I do every single time I buy something.You it seems are happy to make your profits off the back of cheap labour at the expense of jobs in your own country.
      Your support for sustainable and fair trade products is fine ,but it seems again only for the benefit of those in india or wherever.

    • avatar
      Naina Lorentzen

      Thank you Yavor :)
      Eric, it seems you have not fully understood my argument or you would not have said what u said. So let me try and explain again.
      Outsourcing or any business practice can be utilised in a manner that is beneficial to a chosen few or it can be good for everyone. When I say every single one is benefitting, I do mean that. If you do some research on direct trade- just google it- it is a practice where we don’t just provide the artisans with wage that is unto the fair trade standards- but it’s actually double of that- which is dependent on the area they live in and the cost of living expenses- i.e- their buying power. For example :- For one meter of fabric I would may a worker Rs. 600- and zero carbon foot prints and total comfort- as they hand spin in their own home- not disrupting their lifestyle in the least bit. They would make as much as they feel like and get paid accordingly. An artisan- in this case- mostly women, would average anything between Rs. 15-30000/ month- Tax free(exempted) – which if compared to buying power of the EU citizen in Denmark would be close to €2000 after after :) – Not cheap labour- you see. We have so much respect for them. We go live with them, sleep on their porches in the himalayas.

      I am creating jobs for so many here in Europe and will do more in the future for running this company. There is no one in my company who is higher or lower. We work as a partnership. There is no social heirarchy between the least paid worker and the highest paid. Like I said- I cannot take away jobs from anyone in Europe- because if I could not outsource I would not have a company and I would not be able to provide jobs- and through my company- we wholesale to many companies in Europe- where people have jobs thanks to companies like mine.
      Do not support companies which disrespect life and the environment. We have such immense individual power here.

      This is the only way forward- and it’s what will make a better economy and a better lifestyle for the EU and the entire world.
      We are in a dire need as a civilisation to step out of our tiny borders only caring about ourselves and worry about the 2-400 million orphans, the 60 million refugees and even our next door neighbour- Sorry but we live in a globalised world. Thank goodness, and I do believe we are heading in the right direction, also the wrong by being nationalists and disintegrated.

      Be smart about your choices and think about what you truly mean- and do an in-depth research about the subjects you speak about and keep an open mind to other peoples research.

      Any other questions or comments?

    • avatar
      Naina Lorentzen

      I also want to add that if people in India keep increasing their buying power – They want to buy european goods- hence increasing the number of job prospects for Europeans- This is the ABC of a globalising economy. If all goes as I plan- the structure and need for a company like mine, should be obsolete in our lifetime. Then I know I have achieved something. But rest of the philosophy I will not get into – as it will go OFFTOPIC :)

  7. avatar
    Marcel

    Time for tariffs. Protect local industry. To hell with what corporations want, they’re all liars and cheats like VW, DuPont, Johnson & Johnson and Wall Street. They only want cheaper labor, easier to fire people etc…

  8. avatar
    catherine benning

    Why would it be good for Europe? Any ideas?

    It has so far been the ruin of many European peoples lives. Their jobs taken over by rat infested villages in India that get paid what one European was paid in a year. No wonder these corporations want to expand it to more robotic child workers so they can cream off the billions to their bank accounts off shore.

    What should happen is, the produce made there should lay unpurchased in shops unless they are mahufactures, designed or grown in Europe. The crap they import is sub standard. The clothes are a laugh no matter how much you pay. The food is full of denghi fever and anything else that hides beneath the pretense of cleanliness. Most of it grown with GM additions whilst they tell you it’s organic.

    Turn your back collectively on outsourced imports and see how quick they return to the European work force. India doesn’t need us to buy their she ite, there are enough of them to keep their rockets in space, without the poor of Europe to keep them going.

    Here is a little resource material. From one who likes the idea or did. Seems its changed its mind. I wonder why?

  9. avatar
    Yavor Hadzhiev

    I wonder what will be of us who live in Europe if we keep losing factories and agriculture to the rest of the World… Will we be just consumers? Poor and unemployed consumers, paradoxically? Then there are security issues too… Our economies will be too dependant on other countries. If something goes wrong in them, then we will probably suffer. On the other hand, the search for higher profits makes some companies move their factories to places where workers have no social protection and many other rights that the European Social Charter contains. It does not make any sense to say that child labour is unfair and contrary to human rights, and so forbidden in the EU, but importing products manufactured by children, and even enslaved children and adults, in other countries is fine and allowed.

  10. avatar
    Yavor Hadzhiev

    It is a sort of a sum zero at first glance. But if the Chinese tertiary sector is growing, China will adapt, and in the long run, as Ch. says outsourcing to India may create jobs for many Indians. But it can only be good to a certain extent. As we saw in Europe, the tertiary sector was only able to absorb a certain number of redundant workers from industries and agriculture that was in some way outsourced.

    Regarding the I wonder what will be of us who live in Europe if we keep losing factories and agriculture to the rest of the World… Will we be just consumers? Poor and unemployed consumers, paradoxically? Then there are security issues too… Our economies will be too dependant on other countries. If something goes wrong there (such as a war, a natural disaster, etc.), then we will probably have shortages of supply.

    On the other hand, the search for higher profits makes some companies move their factories to places where workers have no social protection and many other rights that the European Social Charter contains. It makes no sense to condemn and forbid child labour in Europe, as it is contrary to the most basic human rights, but to allow the import of products manufactured by children, and even enslaved children and adults, in other countries and regions of the World. Business cannot continue to be conceived as immune to Human Rights.

  11. avatar
    Naina Lorentzen

    I think we need to re-think economy here- what many people here are suggesting is that Europe goes back to the industrial age? That to me is ridiculous. I also sense the fear here is a lil’ far-fetched and not based in reality.
    We need to completely shift our perspective, progress as the human race in another way – a way that is further away from producer-consumer consciousness of money exchange. Not in a utopian way. But a realistic and rational way
    If I may be so bold as to say a creative way of living.
    Let me elaborate. – For those missing jobs- should be given opportunities to create jobs. There are many ways one can do this:
    1. Entrepreneurship is a fantastic way. It should be funded and well promoted.
    2. Get more into the ground- Figure out creative local solutions for food production- such as permaculture, biodynamic agriculture.
    3. Try changing your way of thinking from worker class to a creative thinker and find solutions for the environment.
    4. Become more family oriented and humanitarian. Incase u r in a place where you are unemployed- you have someone to crash with who loves you :) – The individualistic system of European culture is clearly not working in an economic way for anyone. Hence we end up with homeless, scared people with no support, or lil governmental support.
    – This will take care of your economy, food problems etc.
    These are just 3 examples of infinite possibilities we human beings are capable of.
    As i said be smart and informed about every choice you make, I do not see any reason for anyone to be without work. If all else fails- go off the grid. Type in goole- how to make off the grid properties.

    I personally love all aspects of the solution as of now.
    Globalisation is a natural step. As long as the consumer is focused on the transparency of the company. Thats the most important.

    • avatar
      EU reform- proactive

      Hi there,- thanks!

      The name ‘outsourcing’ has many shades, different meaning to big or the small corporations, but creates fear in many minds. Using friendlier expressions like sustainable economic expansion or growing one’s business by identifying opportunities when they present themselves and taking calculated risks etc. would not be that offending. The dirty word “Outsourcing” is mainly remembered in connection with the big eat the small (understood by closing factories & productions, sell out at home- fire all people, take your money & relocate to China, India etc.- to get personally richer, or enrich the venture capitalist shareholders- without any concern for anything and anybody!

      Or when governments/politicians are (shrewdly) advised by the hated banksters to sell off state assets (recklessly to the connected few) acquired (over generations & considered common goods) like rail, roads, water, electricity…….eventually the sun & the air as well- if THEY are not stopped in time!

      “The individualistic system of European culture”: not sure about that- rather too much historical communism/socialism/centralism (former east) & extreme political promises (present west) by politicians (to remain in power) has affected peoples entrepreneurial spirit negatively. Demand on a good life, free time, fewer responsibilities & good sleep is treasured more than sleepless nights! All natural gifted and talented entrepreneurs will always rear their heads & be successful- in whatever system they are in. Self-reliance is the best motivator! Governments must provide balance to accommodate all types- of either the less- or the more talented people and provide a secure environment & livelihood for all.

      Once the “outsourcing philosophy” or “comparative advantage” completes its full circle (one day)- when salaries in China & India adapt & increase e.g. by 50%-100/year (as is happening)- than outsourcing will not be viable anymore and replaced by “on shoring” or possible repatriation of production- if demographics & pricing allow or demand it. 85% of humankind will probably be living in emerging markets in ~10+ years. China and India will be producing ~40% of global graduates by 2020. The UK struggles to turn out just 8,000 IT graduates a year. It is reported that life expectancy is increasing on average of one year in every four years. The east produces ~5x more graduates per capita then Europe. Questions & more questions! Scenario planning is essential.

      Even in China, India etc. a possible oversupply or collapse of their economic model can be followed by unemployment & hardships- probably inevitable. A world below ~5 bio people surely would be a more preferable place to manage and to live- than one with 20 bio or more! Sorry to say, let sardines flourish & feed in the sea- not on land! Poor globalists & banksters who bet on an ever increasing world.

      Prime Minister Modi made an interesting point recently: the “4-D”:
      “Demographic dividend, Democracy, Demand, Deregulation”! Interesting- what is suitable for India may not be for Europe or the US though! Just a steppingstone in eternity!

  12. avatar
    catherine benning

    Here in this DM article today you will read the real agenda all these European politicians have in mind for our collective futures. Take a good look and be sure you understand fully what this creep is saying.

    We, in the UK, have no alternative but to leave the EU, for unless we do we have to put up with these wimps for another five years. Look at the state of this guy.

    What they fail to realise or accept is, the British public can and will send a message to their MP’s en masse to let them know there is no confidence in this government. And even though it is now a five year term, just as the European politicians have it and pushed on us in the UK, we can and will be rid of them.

    A mass protest calling for a no vote of confidence in their leadership, through our MP’s can see to it they are thrown out of office mid term.

    Somehow the message has to get through to the UK publicf.

  13. avatar
    jthk

    Production cost is only one consideration. The consumption market it major concern of enterprises. How the purchasing power of India can compare with that of China with so high the saving rate?

  14. avatar
    jthk

    When China’s purchasing power parity top all economies and India is about 41% of China. Switching production from China to India does not make sense. When China’s middle class population is 10.7% (total pop. 14.2 billion) and India is 3% (total pop. 13.6 billion), which country has a larger middle classes population is clearly visible. When China has 102 cities with over 1 million people and India has only 46, business knows very well where to do their production. Having said this, we need to be realistic, labour cost is not the only factor business has to consider, the market, purchasing power, transportation, skill, management, technology and raw materials, energy, etc. need to consider too.

  15. avatar
    jthk

    The supply should be determined by the demand. In such, Chinese demand is very different from that of India’s. When socioeconomic conditions of both countries are very different, business and the market can tell better than politicians. Politicians ought to be realistic and tailor-made policy suitable for their own country’s capacity and pace.

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