Systematic Integration of Economic Factors in Manufacturing: Evaluating India Against China

Abstract

An index called the Manufacturing Competitiveness Index (MCI) has been developed and used in the comparison of manufacturing competitiveness between India and China in the period 2016-2024. The index comprises three equally weighted variables – Labour Costs and Productivity, Manufacturing Scale, and Trade and Manufacturing Quality derived solely from the World Bank World Development Indicators. Each variable comprises one to three sub-variables, standardized on a range from 0 to 100 based on the min-max method and summarized to provide a single score for comparison. The analysis has demonstrated that there was a notable reconfiguration of the manufacturing competitiveness of India and China during the period. In 2016, China was more competitive than India, which scored 34.80 and 20.23 respectively. By 2024, India overtook China, earning an index score of 76.62 to China's 63.09, mainly due to India's spectacular growth in Trade and Manufacturing Quality (+97.18 points) and Manufacturing Scale (+94.36 points). The gap has been rapidly closing since 2020, amid the ongoing U.S.- China trade war, disruption of global supply chains by COVID-19, and Make in India Initiative. Accordingly, India is now seen not just as an alternative manufacturing base to China but a legitimate competitor for it. This paper aims to introduce a replicable index measuring manufacturing competitiveness into the existing literature and offer insights for multinational investors, policymakers, and academic researchers working on the global manufacturing sector.