One brave entrepreneur is changing the manufacturing game. Ajay Sinha is shifting the focus from the traditional Chinese outsourcing to manufacturing in his home country of India.
Sinha made stuffed toys in China for over 10 years before he decided to try something different. An article from The Wall Street Journal states that manufacturing toys in India is nearly unheard of, but Sinha decided to capitalize on the abundance of Indian people who are willing to work and opened a manufacturing plant in Kakinada.
Production is slowly being pushed out of China and into countries with lower labor costs such as Vietnam and Cambodia. India, being the world’s second-most populous country, has an enormous pool of workers willing to operate the manufacturing machinery for even less compensation than other Asian countries.
American manufacturing companies are often overlooked since many have 20% higher structural costs than other global trading partners. Meanwhile, more Americans are working contract or freelance jobs, especially as more people take an interest in white collar industries over jobs in the manufacturing sector.
Additionally, it’s much cheaper to keep manufacturing overseas. Sinha has employed 500 women at impressively low wages.
Boston Consulting Group says that Indian workers are earning a paltry $5.36 per hour compared to the $14.60 hourly wage that many factory workers are earning in China. Although this wage seems low, the ever-growing manufacturing industry in India will be able to handsomely support wage-growth over the next decade.
Even though the wages are some of the lowest in the industry, Sinha isn’t taking advantage of these women — they are happy to take a job that pays them enough to pull them out of destitution. They earn monthly salaries and are offered benefits.
According to the article, many women said they have never had a formal job before and see this opportunity as a way to achieve independence financially.
Sinha opened his manufacturing company, Pals Plush, in a 16-square-mile special economic zone that offers exporters incentives from the government. Attractive offers such as tax-free imports draw many trading partners.
Many big-name toy companies like Hasbro have their eyes focused on India. Sinha is a trailblazer in this country’s manufacturing market, but many others plan to follow suit and reap the benefits of such cheap production costs.
Of course, it may take a few years to see a substantial profit; it costs a company to import all the raw materials before production can begin. Aside from that, Indian workers are still being trained and productivity is not as high as it can be just yet.
The future looks promising for both Mr. Sinha and the Indian production industry. Sinha is happy to bring business back to his home country to watch it thrive.
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