Manufacturing Failed by Big Industrial Houses

India could have got into manufacturing and excelled but for the big business houses failing it. After the liberalization in the policy in 90s, the big business houses with even significant manufacturing presence just walked out of the manufacturing to the greener and easier pastures of finance and services and followed US and the model of its business groups.

Both the business houses engaged in manufacturing of passenger cars left the game. Both Birlas and Tatas at one time were competing in manufacturing from electronics to heavy industries in 80s and 90s. With the huge resources available with them including great educational and research organizations, both could have become global players in electronics and even automobile. Tatas and M&M remained and grew in automobile manufacturing. M&M and Tata Motors are today third and fourth with almost every reputed automobile manufacturers, mostly on own, from all corners of the world are in the country. However, the Birla group manufacturing the famous Ambassadors and the Premier Group manufacturing in collaboration with Fiat are hardly of any significance today.

Perhaps the major contribution to India’s manufacturing sector comes from automobiles. India manufactures all types of it: two wheelers, passenger cars, commercial vehicles, tractors and naturally the auto parts. However, India is still no where an automobile power on its own. It has hardly the facilities to cope up with the new global class development. It lacks the building facilities for the toolings such die sets, capital goods of the manufacturing processes for the sector or the necessary R&D facilities.

Perhaps the new comers such as Ambani and Mittal didn’t have the zeal required for setting up manufacturing units, whereas both grew big in the industry that could have made them interested in manufacturing.

Is the demand base of 220 million tablets just for the students and the cell phones reaching a figure of almost 800 million not good enough to have its manufacturing in India? India does manufacture cellular phones but it is only those catering to the lower ends and most of the manufacturers are the MNCs. The electronics parts for the gadgets are almost all imported. Data wind, the vendor that has developed the low cost tablet, Aakash 2 claims to get it manufactured in India. Interestingly, even after a number of attempts India has not been able to get into the chip fabrication because of its very high investment, even though India is globally renowned for its semiconductor design. However, some entrepreneurs such as Saakhya labs, Cosmic circuits, Aura Semiconductor, Signalchip and Ineda Systems are also getting into the business of indigenous chips manufacturing

Few entrepreneurs such as Consure Medical, Forus Health, Bosense, or Diabetes are also trying their hands in manufacturing world-class medical equipment. It’s another big potential for the manufacturing sector. There are many other sectors that could have got into its share in manufacturing. If we look at the real estate sector from low end to the highest one with a flat costing few crores, there is huge potentials for manufacturing from high speed elevators to all those that go to a good living. However, with open economy, most like to import rather than getting it developed by domestic manufacturers. Can’t the associations of industries ponder over how Indians can get the most of the share?

And even the automobile manufacturing will have very soon a considerable portion of its cost in the electronics integrated in it. As per an estimate, ‘Electronics will account for 40 per cent of the vehicle costs globally in about four years (from 20 per cent today)’. Will India then only add the value of only assembling cost in vehicle manufacturing? Big business houses could have taken a lead in investing in the huge potential of the electronics industry because as per Assocham estimate India’s electronics market will grow from Rs 5trillion in 2012 to Rs20 trillion by 2020. For example, BITS Pilani, IITs and the huge R&D facilities of CSIR and DRDO could have assisted and encouraged entrepreneurs to set up facilities in the lucrative field of the electronics products and components.

One can hardly digest the capital and lack of talent as the excuses for the dismal performance of India in this sector. Surprisingly we keep on the credit for all the indigenous developments including the electronics when India built its satellites, missiles, rocket launching facilities and even the nuclear power plants with almost no import because of sanction against it for its nuclear test without signing a NPT?

If necessary, the country can have a separate ministry to develop the manufacturing sector in India as that only can sustain the growing working population and take the country out of poverty. It will also lead to innovation all along the supply line. If America Needs a Manufacturing Renaissance, India badly needs to catch up in manufacturing on priority.

Let it be realized by all the policy makers that no amount of success in service sectors can alleviate India’s curse of poverty

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