A number of my relatives run manufacturing plants in Tamil Nadu, a relatively developed state. My in-laws have also recently started importing from China (replacing their Indian suppliers) and I will tell you why costs are higher than in China.
- Power availability: You start a plant and realize that power availability is not 24/7. In Coimbatore and other industrial places you get power for like eight hours a day. That means the machinery lies idle for sixteen hours and that wasted capacity adds to the cost.
- Cost of power: In India, we subsidize the power to farmers so much (farmers are a huge political base to regional parties) that the electricity companies either have to go bankrupt or charge huge amounts for industries. Electricity cost is often higher than some developed countries.
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Source: Forbes – GAI