India has an edge over Mexico, but is not the next China

Our Market Compass tool confirms that there is no single “next China”, capable of replicating its distinct advantages as a global manufacturing hub, including its big domestic market, large and skilled labour force, and infrastructure quality. However, other countries can offer compelling propositions as alternative manufacturing hubs for companies looking to diversify their production footprint and reduce their China exposure.

What you will learn:

• Our tool suggests India is a strong contender, as it is third overall in our ranking of manufacturing attractiveness thanks to its macroeconomic stability, abundant labour, and large domestic market. Holding India back is its low productivity per worker and poor education levels, but it still is the top-scoring emerging market.
• Mexico recently replaced China as the US’s biggest trade partner and is often seen as a key winner in the nearshoring trend. However, it only ranks 36th out of 41 countries in the Market Compass given its greater exposure to risk scenarios such as higher-for-longer rates in the US, its poor security environment, and depleted capital stock.
• Companies focused on accessing the US market, not concerned with FX volatility, and with the ability to offset security and labour costs may prefer Mexico. Alternatively, India may be a better fit for firms looking for low labour costs and relative macro stability.