India Makes It in Manufacturing

A country that can design, manufacture and launch Agni V, RISAT-1 and Missile defence system has obviously the manufacturing skill and potential to get into the global market as a great manufacturing power. But why then India remains laggard in manufacturing to contribute a share to GDP comparable to other Asian countries? While a considerable number of private manufacturing companies associate to these high tech projects, a huge potential still remains.

Mc Kinsey has been in the consulting role for India’s manufacturing sector for many years. In one report, ‘When to make India a manufacturing base’ in September 2005, McKinsey considered India lagging behind the rest of Asian counties in manufacturing. Multinational corporations never took much initiative to make India its manufacturing base. And perhaps the main hurdle for getting into globally competitive manufacturing businesses at that time was the poor level of infrastructure such as power, road, and port.

In March 2012, McKinsey analysis finds that rising demand in India, together with the multinationals’ desire to diversify their production to include low-cost plants in countries other than China could help India’s manufacturing sector to grow six fold by 2025, to $1 trillion, while creating up to 90 million domestic jobs. It advises on how multinationals can win in India. By 2015 the market for manufactured goods from low-cost countries will more than double, to nearly $8 trillion a year. China will probably capture much of the growth. But as McKinsey estimates, ‘up to $5 trillion a year will be up for grabs as global companies seek to diversify production and sources of supply beyond China, both to address rising factor costs there and to chase domestic demand in other countries’. And India must grab that potentials at all cost.

For quite some years, India at least wishes to improve upon the manufacturing sector. It reflected in setting up of National Manufacturing Competitiveness Council that finally culminated in recently accepted National Manufacturing Policy.

With my association with auto sector, I can vouch for the progress made by the country in manufacturing sector. There is hardly any auto sector globally known company, be it in the business of commercial vehicles, passenger cars, two-wheelers or even tractors and naturally the components that are not present in India with its own manufacturing facility. Many have made their India facility as the global hubs for certain platforms of vehicles. While the older traditional locations such as Pune, Chennai, and NCR expanded its manufacturing facilities to world class standard and added product development centres, new manufacturing clusters are also growing. One such is coming up in Gujarat around Sananda that started with Nano manufacturing facility.

Power equipment manufacturing that was the monopoly of BHEL has also seen addition of some big private manufacturing players such as Larson and Toubro, and Bharat Forge. I don’t know if these can stop the onslaught from the Chinese power equipment manufacturers from getting the major orders from the new power plants.

It is interesting to note that foreign companies keeping on considering India in their priority and expanding the manufacturing. Recently, ZF Steering, General Cable and Piaggio did that.

The government has kick-started domestic electronics manufacturing by pegging its huge orders to value addition done in India. As estimated, the import of electronics will be second only after crude oil. India’s electronic industry must get a boost up with the government encouragement.

Innovation plays a key role in determining which countries and companies can succeed in global manufacturing looking two decades down the road. Over the years, India has significantly improved its innovation capability, be it Tata Motors or Mahindra and Mahindra or Godrej or many other small and big manufacturing companies.

However, the government can further provide the boost to manufacturing by going aggressively in opening sectors such as defence and railways. A transparent system in government ordering and procurement may indirectly help manufacturing in a big way. The unscrupulous vendors from the countries such as China oil the people in the government and even the defence services to block locally produced manufactured goods. The recent story of Tatra and BMEL shows the loss to the nation’s manufacturing by preferring to continue with screw driver technology instead of phased local manufacturing.

It’s unfortunate that the big industrial houses as well as young entrepreneurs still hardly show preference for the setting up of manufacturing businesses. The world is getting into Third Industrial Revolution through digitization of manufacturing as reported in ‘The Economist’: ‘Instead of bashing, bending and cuttng material the way it always has been, 3D printers build things by depositing material, layer by layer. That is why the process is more properly described as additive manufacturing. Additive manufacturing is not yet good enough to make a car or an iPhone, but it is already being used to make specialist parts for cars and customised covers for iPhones.’

India still remains laggard in keeping itself contemporary in manufacturing. Indian technocrats must excel in manufacturing.

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