Last December the government of the Indian state of Karnataka announced that Taiwan’s Foxconn – the world’s largest contract manufacturer of Apple iPhones – was adding $1.67bn to its initial investment of around $600m in production facilities in Bangalore, heart of India’s Silicon Valley. The news caused a sensation: was Prime Minister Narendra Modi’s bid to make India a new global hub for electronics manufacturing succeeding?

India is benefiting from the ‘de-risking’ trend, which has two components: businesses are seeking to reduce their exposure to the risks of trade with China, while governments are trying to curb its geopolitical rise. The media suggest conditions are ripe for China to be replaced by India. In 2022 India became the world’s fifth-largest economy (in purchasing power parity terms), overtaking the UK. It is also the fastest growing: following GDP growth of 6.7% in 2023, the International Monetary Fund expects it to achieve 6.5% in 2024, compared to 4.6% for China. Many see India’s successful moon landing last August as symbolic of the country’s economic success. But while governments and media enthuse over the idea of India as the ‘new factory of the world’, the reality is less rosy.

Insufficient skills

Last year India became the world’s most populous country, with nearly 1.42 billion inhabitants. Its economically active population is also the largest at 970 million; according to the United Nations it is set to top one billion by 2030 and continue growing until 2050. India is the world’s youngest country, too: 40% of the population are under 25, and the median age is 28 (compared to 39 for China). More than ten million young people enter the job market each year, at first sight a huge attraction for foreign investors.

However, many Indian workers are insufficiently skilled. Especially in rural areas, millions of children leave education with no qualifications, and vocational training is inadequate. India has more young (…)

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