The worst affected has been India's toy industry.
Till the mid 1990s all of India's children's toys were manufactured in India. 80% of the toys were manufactured in the industrial suburbs of New Delhi. The toys were of atrocious quality, unsafe, and the best of these cost on an average 10 days
wages of a working class family.
India's first collaboration was with Mattel toys of USA under the brand name Leo Mattel.
Earlier the cheapest toys made in India were made either of wood on by cottage industry handicrafts artisans or made of pressed metal on basic ball presses and hand soldered. The mechanisms were spring and clockwork driven. Plastic toys were crudely made from hand made dies using recycled plastic.
License manufacturing with Mattel and. later with Fisher ( UK ) where toys were manufactured from virgin plastic on precision EDM dies brought quality and economy. Also for the very first time Indian children had access to battery powered miniature motor driven toys. However these toys still remained out of reach of the majority of Indian children.
Then the imports from China flooded the market with quality and low cost toys that were affordable and safe.
The toy industry in India collapsed and even the license manufactured products found it difficult to compete.
Indians are furious at this even as they hush up their children's howls by stuffing a Chinese imported toy into their shopping bags.
Few know that malaise is deeper than just imports. India's toolroom industry has languished after first being given a flying start by the Soviets and the Swiss. If a nation cannot make millions of different types of press tools, dies, molds and fixtures, quickly and cheaply it will never be able to manufacture complex and diverse components from different materials.
China along with all the industrialized nations has achieved self sufficiency in tooling. Once again the toy industry is but indicative of the overall status of China's mechanical engineering capabilities. A country that can make billions of precision stampings for miniature toy motors can make billions of disintegrating links for quick firing machine gun ammunition belts.
Bright, Thanks for the history on Indian manufacturing. One of the most basic and needed item for a country like India are guns and ammo. Now this is not as rudimentary as making plastic toys. You do need someone who knows metallurgy. Many Eastern European countries managed to do a decent job making usable guns and ammo. This is critical for the survival of a country if war breaks out and you want to have more than a week of ammo. That they failed to make this after seventy years of founding the country speaks volumes about their capabilities. Below is my conjecture based on my experience so take it for what it is.
I worked with a lot of engineers in Silicon Valley that are of Indian origin. About half or more are Brahmins, rest from other upper castes. I have not seen a Dalit, though some of them are Christians and many Christians were converted from Dalit. It is also just as likely that upper castes converted during the rule with the British as many have British last names. All of the engineers here from India come from the extreme right end of the bell curve. Human capital wise, the Brahmins seems to have similar endowment as East Asians. It only goes down from there. Since Brahmins, 5% of the population, contributes 50% or more of the elite engineers in Silicon Valley, one can see the quality of the other castes. Since the bright ones are all over here, what remains in India is of significantly lower quality on average, Brahmin or otherwise. This is born out by the fact that many low level managers in the States move back to India to head up large divisions. Many of those, after years of back in India, are moving back to the U.S. This speak of the lack of opportunities in India. The opposite is happening in China.
For manufacturing, you need a well educated blue collar work force. Machinists, welders, pipefitters, etc. In India, the only group that has enough human capital(same as the Chinese), the Brahmins, could, in theory, kick start their manufacturing. After all, 60 million people is nothing to sneeze at. Unfortunately, Brahmins and other upper castes grew up very pampered surrounded by cheap labor. They are waited on hand and foot since birth. As a rule, they do not like to get their hands dirty. In the U.S, where maintaining a house requires one to work with the hands, vast majority of the Indians that I know will pay someone else to get it done. There is nothing wrong with that, but speaks to the character of the people. The Chinese, rich or poor, are much more likely to get their hands dirty and try to fix something broken in the house. I would assume that among the upper castes, physical labor is frowned upon.
For the middle and lower castes that actually don't mind doing some of the work, much more than half are not even literate by official standards. The official standard of literacy for India is absurdly low. All you need to pass is to sign you name in one of the many languages which was inscribed in the Indian currency. So you are talking about maybe a few percent out of these that can qualify for manufacturing jobs. This is corroborated by the one PISA test India participated with two provinces in 2009, where they finished second to last. If you take that group and filter out the ones able to read instruction manuals and follow instructions, they would be a few percent, maybe 10%. These two provinces are considered above average in India.
Due to the abysmally low literacy for the country as a whole (I think still 40% illiterate by the absurdly low official standards), the few who are smart enough to qualified to be welders etc, found more rewarding jobs in other stations of life. In a country rife with red tape and dysfunctional corruption, the relatively smart ones (Not that smart by Western standards) found ways to extract a good living from this system. Since the same few smart ones also runs the system, the system is not likely to change. In other countries, revolt from the lower castes might have been possible, but the religions of India generally teach the population to be content with whatever misery that comes life's way.
Add to this the democracy, where no one is held accountable for the lack of results, nothing gets done. When the quality of the voters is low, democracy fails.
This system has been there for 70 years. It is deep rooted and unlikely to change. A few engineers who made their fortune in Silicon Valley tried to go back to India to "fix" the system. None made any dent. In India, without a platform and big sponsors, who are already part of the system, you don't get very far in politics, however honorable your intentions. The local politicians always talk big and deliver nothing.