According to an article in the Economist, Pune in west India, has won the steely hearts of Germany’s car firms. Inside a $700m Volkswagen plant on the city’s outskirts, laser-wielding robots test car frames’ dimensions and a giant conveyor belt slips by, with sprung-wood surfaces to protect workers’ knees. It is “probably the cheapest factory we have worldwide”, says John Chacko, VW’s boss in India. In time it could become an export hub. Nearby, in the distance it takes a Polo to get to 60mph, is a plant owned by Mercedes-Benz. Zubin Kabraji, of the Indo-German Chamber of Commerce, says Pune hosts 262 German companies, up from 130-odd in 2008.
India’s own Bharat Forge, with $1.3 billion of sales, makes car parts, with 70% going abroad. Its boss, Baba N. Kalyani, says local entrepreneurs are “doing a damn good job”. Industrial hotspots such as Pune, Chennai in Tamil Nadu and the state of Gujarat are not the only evidence that manufacturing has momentum in India.
India’s share of global merchandise exports has doubled to 1.5% since 2000. Exports have shifted towards engineering products, which now make up a fifth of the total.
Indian labor may even have grown relatively cheaper. A 2010 study by the U.S. Bureau of Labor Statistics found that, at just under a dollar an hour, India’s labor costs (including social-security costs and taxes) were similar to China’s and just 3% of American levels. Since then the Indian Rupee has fallen by a third against the renminbi and a fifth against the dollar, making things even cheaper. And those data only included elite workers in the “official” sector—an unskilled laborer might get four dollars a day. Unadjusted for productivity, Indian labor is dirt cheap.
What this means:
For many American and European companies, a “China + 1” sourcing strategy needs to consider India as a serious option, in the case of technologically complex products.
Last updated: December 26th, 2025
