The Indian government hopes that this month’s Commonwealth Games will trumpet more than Delhi’s swanky new infrastructure, world-class airport, subway system and freeways. It is hoping to showcase the rise of India as a global manufacturing hub. Between 2003 and 2010 Indian exports have grown more than threefold, from $60bn to $200bn, with manufacturing accounting for more than 70%, according to the country’s ministry of commerce. The UN’s latest Industrial Development Report, released in July, lists India as one of the top 10 industrial producers.

So just what is India producing? Well, it appears pretty much everything. At the lower end of the scale, the country’s textile manufacturers continue to compete with China and the rest of the world, but India is now starting to throw its weight around in more complex, engineering-driven or specialist areas. From autos to pharmaceuticals to energy, Indian companies are becoming global leaders, driven by some of the same factors that helped propel the country’s IT sector to a $50bn-a-year revenue earner: a low cost base, strong engineering talent and a regulatory regime that has, inadvertently at times, encouraged entrepreneurialism.

At the vanguard of manufacturing is the auto sector. India exported almost 400,000 cars last year and is now the fourth largest Asian automobile exporter. Pawan Gupta, South-East Asia head of global auto analyst CSM, says that India is “likely to be the number two Asian exporter of autos by 2016” and “the number one exporter of small cars worldwide by 2020.”

Best known in the West is Tata Motors, which recently zoomed onto the world stage by designing a €2,000 vehicle, the Nano, and by buying the ailing Jaguar and Land Rover marques. The Nano can already be seen across India, an egg-shaped, technological marvel, which when viewed through squinted eyes, could pass as a Mercedes A-Class. The Nano addresses a new market: cars for the billion people earning more than enough to own a motorcycle, who did not think they would ever own a car. Morgan Stanley predicts that production of the vehicle will hit 350,000 by 2012/2013 while Tata says that a Nano Europa should arrive on European roads by 2012.

At the other end of the market, Tata is still digesting its acquisition of Jaguar and Land Rover. New models of both are selling briskly – the Range Rover remains the best selling SUV in the Middle East and Jaguars still capture the fancy of automotive enthusiasts across the world – but Tata now must build on the hallowed brands. It has announced plans to build Land Rovers in India; and, will produce Land Rover and Jaguar models in China.

Less heralded outside India but equally successful is Mahindra & Mahindra. M&M’s SUVs are the Indian market leaders and are exported to a dozen major territories. Deepesh Rathore, managing director at IHS Global Insight India, sees M&M entering the US market next year. He adds: “Tata and M&M are the next Hyundai and Honda of the world. It may take a decade, but they will get there.”

This may be accelerated following M&M’s signing of a preliminary deal to take over bankrupt South Korean rival SsangYong Motor Company from its Chinese parent, Shanghai Automotive Industry Corp. Analysts estimate a 50% stake could cost €330m. Should Mahindra complete the deal, it would be the second Indian carmaker to enter the South Korean market, following Tata’s acquisition of truck maker Daewoo Commercial in 2004. Arun Kejriwal of Kejriwal Research & Investment Services believes more such purchases are likely: “Indian companies are cash-rich now, we may see more such deals going ahead.”

But Tata and M&M are more than just automobile companies. Tata is the fourth largest manufacturer of commercial vehicles in the world and its buses and trucks can be seen on roads throughout Africa, Asia and the Middle East while M&M, among the largest farm tractor manufacturers in the world, is exporting across the world, including the American heartland. In 2009, M&M even sponsored a NASCAR team to raise its US profile.

Then there is Maruti Suzuki, India’s top carmaker which has reported domestic sales up 29%, to 100,857 vehicles, in the 12 months to July. With the local market set to double within five to six years, Maruti Suzuki India Limited (MSIL) – originally a joint venture between the Indian government and Japan’s Suzuki Motor Corp., formed in 1981 – has decided to focus more on the domestic market and limit exports. “We need to rapidly develop our capacity to develop and design products. This is a priority and with the help from Suzuki, we are investing heavily in R&D,” MSIL chairman RC Bhargava said at the announcement of the company’s annual results. As part of the efforts to build R&D capability, MSIL is coming up with a world-class R&D centre at Rohtak, Haryana. To further consolidate its position in the Indian market, MSIL is also considering limiting exports to 15% of its total output to meet its growing domestic requirements.

But it is not just Indian automobile companies using India as a manufacturing base: Toyota, Honda, Volkswagen, Hyundai and Nissan have all tapped India for their small-car manufacturing operations; Ford Motor Company plans to double capacity of its assembly plant in Chennai and to build a new engine plant to launch eight new models over the next five years and export the small Figo car to around 50 countries; and Suzuki, which has long had an Indian base, is also using its local partner to export across the world.

Automobile manufacturing is not the only specialist sector where India has become a significant destination.

Exports of pharmaceuticals are expected to exceed €8bn this year as India flexes its dominance as a global manufacturing base for generic drugs – the beneficiary of ageing populations in the developed world and rising global health care costs.

A report by Religare, a domestic brokering house notes that India has the highest number of US Food and Drug Administration (FDA) approved manufacturing facilities outside the US. In fact, India has more FDA approved facilities than the next top five countries combined, and Shailesh Gadre, head of Indian pharma firm Gencoval Life, says India could have more FDA approved facilities than the US within a few years.

Jai Hiremath, vice-chairman and managing director at Hikal, one of the leading Indian pharmaceutical manufacturing and R&D service providers, adds: “India has rich intellectual capital, expertise in re-engineering of processes, and high-quality manufacturing facilities to become a leader in pharmaceutical manufacturing and R&D. Many Indian firms are investing in technology as part of their global R&D strategy. Indian generics will dominate the world like the IT sector.”

Recent M&A activity shows how just how hot the Indian pharma sector is. US giant Abbott Labs recently paid $3.7bn (€2.8bn) for Piramal Healthcare’s domestic formulation business. An Indian Knowledge@Wharton report noted that Abbott Labs paid eight times the turnover, twice the value Japan’s Daiichi Sankyo placed on Ranbaxy Laboratories, India’s largest pharmaceutical company, when it bought a controlling stake in 2008 for $4.6bn. Meanwhile, Indian companies such as Dr. Reddy, are also actively acquiring firms in Europe and the US.

Another growth sector for India is energy. The standout manufacturing company for the last three decades has been Reliance Group, the sprawling conglomerate famous for its warring billionaire brothers. While Anil Ambani, is hanging out with movie stars, building a media empire, older brother Mukesh Ambani is building a global energy giant.

Reliance Industries Limited (RIL) is branching out, building on its traditional Indian petrochemical base. In 2008, it inaugurated one of the world’s largest refineries, in the Indian state of Gujarat, which was built in a record 36 months and now refines more than one billion barrels per day. RIL has also invested billions of dollars in shale assets in the US.

In the growing alternative energy sector, India also has a champion in Suzlon, now the world’s fifth largest maker of wind turbines, with orders spanning the globe from the US to China.

However, issues remain before India can further accelerate growth. Archaic labour laws, which restrict hiring and firing of workers, and constricting regulations still hamper the growth of Indian manufacturing; the lack of uniform VAT across the country slows transport within the nation restricting manufacturers ability to build scale; power and infrastructure remain bottlenecks, with major parts of the country still not receiving 24-hour electricity; and roads are often backed up with trucks and ports with ships, both waiting days just to offload and load their goods.

The good news is that the Indian government is pumping more than €800bn into infrastructure over the next five years. The new New Delhi airport is world class, and a comprehensive subway has been built ahead of time. More power capacity is to be added in the next five years than in the first 63 years of independence. And uniform VAT is slowly being implemented across India.

If Indian manufacturing grows as it has done during the last five years, exports could touch €400bn over the next decade. With one in every third person in the world between the ages of 18 and 30 being Indian, manufacturing growth is a must for employment. Unshackled of government interference and outdated laws, Indian may challenge China yet for the position of factory to the world.