SWOT Analysis: India vs. Vietnam

Image credit: Pexels

Target audience: Decision makers (CXOs/Directors) of manufacturing & allied firms, management/manufacturing consultants, business strategists, and curious people.

Reading time: 5-10 min.

Introduction: India’s and Vietnam’s exports are similar in monetary value ($ billions per month), though their economies vary in size, population, natural resources, etc.

Some facts about these countries:

Key Question:

How is it possible that India’s and Vietnam’s exports are of a similar monetary value? Can India really become a major manufacturing/outsourcing partner to the United States (USA) and the European Union (EU)?

We explore some possible explanations backed by relevant data sources to answer this question.

Firstly, how did India (a democracy) & Vietnam (a communist country) transform from a socialist economy (central planning based) to open economies (market forces based)?

India’s reforms were after the fall of her great ally USSR, in 1991, and due to their balance-of-payments crisis. [WSJ, WSJ, The Hindu, The Hindu, The Quint]

Image credits (sequential order): Roney John, Darshak Pandya, Rohit GangwarBishnu Sarangi

While Vietnam’s reforms were in response to the success of China’s economic boom through the economic reforms introduced by Den Xiaoping in 1978. [WSJ, WE Forum, WE Forum, WSJ]

Image credits (sequential order): Taryn Elliott, Arnie Chou, Hugo Heimendinger, Quang Nguyen Vinh

Secondly, the recent history shows that major changes through the Vietnam’s 1986 reforms and India’s 1991 reforms played a pivotal role in shifting them into open economies.

Vietnam’s 1986 reforms [Facts and details, The ASEAN Post, WSJ, WE Forum] :

  • Relaxed restrictions on Private Enterprises (socialist-oriented market economy)
  • Decentralization of the Government
  • Devaluation of the Dong
  • End of Price Controls
  • Encouragement of new Private Businesses (services & manufacturing)
  • Disbandment of Collective Farms and Issue of Land Titles to Farmers
  • Relaxation of Regulations for Foreign Investors
  • Streamline of Bureaucracy
  • Shutdown of Inefficient Government Monopolies

India’s 1991 reforms [Indiabefore91, Economic Times, Economic Times, Bloomberg, Business Standard, Scroll] :

  • Fiscal Reforms
  • Monetary and Financial Sector Reforms
  • Reforms in Capital Markets
  • Industrial Policy Reforms
  • Trade Policy Reforms
  • Promotion of Foreign Investment
  • Rationalization of Exchange Rate Policy

Thirdly, let us try to understand “How China achieved a supremacy in supply chain management and became the world’s number one destination for manufacturing?”

China has a developed herself into a country with efficient supply chains and possesses a large domestic market. This is still a key attraction for major American companies to maintain a strong presence in China, despite the trade tensions during the last few years. Chinese labour is less prone to disrupt manufacturing by strikes and protests. Even if a strike occurs, it is quickly subdued, as it is a communist country.

American companies who lead in critical/hi-tech technologies, which could be a threat to national security or affect citizen’s privacy if misused, are abandoning China (e.g., telecommunications, defence electronics). Today, an important project (KPI/Key Performance Indicator) of numerous American executives is to plan for a worst-case scenario. This includes a China+1 strategy, including countries with proximity to existing accounts or talent availability or new market opportunities or closer to American borders (Central/South America).  This approach is mainly aimed to reduce business disruptions (arm-twisting by one supplier source/country), and to reduce manufacturing costs. [Bloomberg, Bloomberg, Forbes, Forbes, Forbes, WE Forum, WSJ]

Fourthly, an unbiased comparison of India and Vietnam would help us understand these two economies better. For example, through a SWOT analysis:

SWOT Analysis




  • Mixed pool of skilled labour & experienced engineers [The ASEAN Post]
  • Strong social security system [WE Forum]
  • ICT progress [HBR]
  • Proximity to major Asian giants (China, Taiwan, S. Korea, Japan) and ASEAN (Association of South East Asian Nations, which also includes Philippines, Indonesia, Malaysia, and Singapore) [Google Maps]
  • Free trade agreement with the EU [European Union, EY]







  • Openness to foreign direct investment, relatively educated workforce, reputation for business-friendliness [WSJ]
  • Vietnam welcomes smartphone & toy manufacturing, as China chooses high-value goods production [CNBC, CNBC, CNBC]




  • Low transparency of certain policies (communist economy, possible currency manipulation, foreign investors fear loss of investments/assets, moderate upliftment of poor people) [WSJ, Bloomberg, The ASEAN Post, WSJ, WE Forum]

Finally, in response to the key question, India has not yet unleased its fullest manufacturing potential, due to various internal reasons. This explains why Vietnam’s exports are in the ballpark of India’s exports.

We should understand that manufacturing jobs would be lost in a lot of countries (both developed & developing), due to automation. Today, several developing countries would directly shift from agriculture based to service-oriented economies. The main reason for this trend is – salaries are higher in services industry and the work environment is much better, compared to manufacturing sector. Therefore, manufacturing value addition as a percentage of GDP has been on a steady decline over the past 40 years. [Statista]

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Image credit: Statista

Vietnam has fully unleased her manufacturing potential by tapping into hi-tech/electrical/electronic manufacturing over the past decade or so (Electrical machinery, equipment: US$126.9 billion, 2019, 41.7% of total exports).

Apart from this, Vietnam’s dependence on external trade is greater than 100% of their GDP. This clubbed with a steep rise in GDP per capita, makes Vietnam highly susceptible to macro-economic shocks. Investors should note this, as a steep rise in wages would make low/medium skilled manufacturing in Vietnam a questionable long-term project. Unfortunately, Vietnam is also a small country compared to India, and has a challenge with their fertility rates (below replacement rate of 2.1%). [World’s Top Exports, PwC, Statista, World Bank, World Bank, World Bank, Statista, VN Express, Macro Trends, Forbes, Business Korea, Business Insider, Source Today, Britannica, Nikkei, McKinsey, PwC, The Wire]

Therefore, investors choosing to enter Vietnam should consider specialised or precision manufacturing projects. They (investors) could setup R&D labs for hardware (alternate to Shenzhen, China), given their (Vietnamese) electronic manufacturing expertise and comparatively high labour cost (expected to rise).

Image credits (sequential order): Statista, World Bank, World Bank

Image credits (sequential order): Statista, World Bank, World Bank

Today, India is a suitable country for low to high skilled manufacturing, with most of the manufacturing being in the low to medium skilled zone. This is due to the low labour cost and generous governmental incentives. As they (manufacturers) upgrade their infrastructure, they can plan for hi-tech/electrical/electronic manufacturing in a phased manner (Electrical machinery, equipment: US$14.7 billion, 2019, 4.5% of total exports).

India’s exports are about 20% of her GDP, clubbed with a stable GDP per capita, provides an excellent destination for low/medium skilled manufacturing. This country also possesses abundant raw materials and high-quality mineral processing industries. Another noteworthy aspect is that India’s population growth has declined over the past few years. In addition, about 70% of the population would reside in urban areas by 2036, though the working population could decline a bit (~1-2%) by then. This would include one of the world’s largest domestic markets (300-350 million people, middle class population). With strong FDI inflows, and technology sharing, India can be a global leader in value added manufacturing sectors soon. Though there were some pitfalls in earlier policies & planning, today’s politicians in India are open to amend policies, laws, etc. to help everyone prosper (citizens & businesses). [HBR, World Bank, Statista, The Wire, Macro Trends, Bloomberg Quint, The Hindu, World’s Top Exports, Statista, World Bank, World Bank, Forbes India, WSJ, ASSOCHAM, Business Standard, McKinsey, EY, East West Mfg., India Briefing, Asia BriefingIndia BriefingMcKinsey, PwC, PwC, Bloomberg, Niti Aayog, Economic Times, The Wire]

On a concluding note, today’s rising India offers a lot to investors, given the overhaul of their infrastructure and policies. New entrants (international firms) should also note that contract manufacturing is quite common in India. Therefore, International firms and Indian players can explore this option to test waters initially, through small/medium pilot projects.

Image credit: East West Mfg.

Image credit: India Briefing