Manufacturing India: Some Despairs, Some Hopes

Indian manufacturing is at its lowest point in the last 10 years, but top executives think its long-term prospects are robust, according to a report released by lobby group Confederation of Indian Industry (CII) in partnership with Boston Consulting Group (BCG).The share of manufacturing in the gross domestic product was 15.1% in the 2013 fiscal year, the lowest in a decade. The UPA government had started well with setting up of National Manufacturing Competitiveness Council, and the last year came out its manufacturing policy with many good ideas to boost manufacturing sector. However, it didn’t pursue it the way it would have been done.One hardly notice any significant trends that can make this country a manufacturing power. India is far behind in manufacturing even in comparison with countries such as Thailand and Malaysia.

However, 70% of top executives surveyed by BCG still expect manufacturing to grow faster in the next five years as compared with the last five. Companies are also more confident about exports. There has been a 16% increase in exports compared to 2012, adds the report, titled ‘Powering Past Headwinds- Indian Manufacturing: Winning in an era of Shocks, Swings and Shortages’. The country targets to achieve its export target of $325 billion in the current financial year.

It is good that in the present slowdown, many companies are initiating strategies to export. As a good balancing practice, 30 percent of revenue should come from export.Some companies are on the way to do that. For example, more than two-fifths of Crompton Greaves’ consolidated sales come from the international business.

MNCs in India are also gradually realising the need of making India its export base. US-based auto maker Ford Motor is looking to make India its global manufacturing hub for small cars and low displacement engines. Ford India will export to 50 countries from the present 37 once the Sanand facility is ready. Ford is investing $1 billion at Sanand in Gujarat.

Swedish commercial vehicle giant Volvo plans to sell Eicher-branded trucks across various markets in south-east Asia and Africa using its sales network and has made India a global hub for sourcing medium-duty engines for trucks and buses. Volkswagen India is also exporting Ventos to Mexico.

Renault exported 6,358 units of its compact SUVs Duster to eight countries between April and September, and Ford exported 4,500 EcoSport units, according to the Society of Indian Automobile Manufacturers (Siam).

Even small Indian companies are getting into global market through acquisition route. In the year 2008, Symphony Ltd acquired Mexico based Impco Air Coolers, a cooler manufacturing company that patented the cooling technology called ‘evaporative cooling’ and one of the largest global manufacturers of industrial and commercial air coolers.

Some foreign manufacturing companies are also setting up or expanding their manufacturing facilities in India.

Shanghai Hitachi, a JV between China-based Highly Group and Japanese firm Hitachi AP, leading air-conditioner (AC) compressor manufacturers commissioned India’s largest air-conditioning compressor plant in Ahmedabad which has been set up at an investment of $72 million (Rs 450 crore).

American conglomerate General Electric Company (GE) is planning to make India a manufacturing hub, “but for the world.” India can be the best manufacturing destination in the world, especially in hitech items like aviation, gas and steam turbines. GE is setting up a manufacturing facility at Chakan near Pune with an investment of $200 million. The plant will locally manufacture a host of different aviation and turbo machinery components and wind turbines.

The Auto component industry has a lot of potential to expand its exports. It must diversify and focus on high value added items such as electronics component. Exports in 2012-13 were at $10 billion while imports were higher at around $13 billion. However, almost 80 per cent of the exports was to the global original equipment manufacturers (OEMs).

The companies in auto components are working hard for keeping itself competitive and building its basic strengths. Rane Brake Lining Ltd won the Deming Grand Prize 2013, the highest award in Total Quality Management. Seven from India to have won this prize.

One can easily see the future of manufacturing sector improving significantly with the Industrial Corridors such the Delhi Mumbai Industrial Corridor that is already under implementation. A proposal to set up the Amritsar-Kolkata industrial corridor is also under consideration.

The Delhi Mumbai Industrial Corridor (DMIC) “plans” to develop seven greenfield future cities in six states and integrate them with the Indian Railways’ dedicated freight corridor. By 2017, the 1,483-km dedicated freight corridor is expected to transport goods from the north to the ports on the western coast within 12-13 hours, a task which currently takes 12-13 days.

Bajaj Auto and Hero Motocorp are examples of success of Indian manufacturing sector. They keep on surprising the market with new policies and products.

The world’s largest two-wheeler maker Hero Motocorp shocked the market by announcing a five-year warranty across its motorcycles/scooters purchase (five years or 70,000 km in case of motorcycles and five years or 50,000 km for scooters) against the norm of offering a year or two of warranty on a two-wheeler. Rajiv Bajaj has kept Bajaj Auto on right track with blessings from his father legendary Rahul Bajaj.

While the launch of Manglayan and its successful progress towards Mars has been a moment of pride for India, it also tells a story of the strength of India’s manufacturing sector. A number of private and public manufacturing companies provided its parts.

Pune based Walchandnagar Industries Ltd (WIL) had manufactured the rocket motor casings and nozzles for the 44.4 meter Polar Satellite Launch Vehicle (PSLV) that carried the spacecraft Mangalyaan into the space. Many other critical components and hardware, nozzles as well as PS0XL motor cases were also manufactured at WIL.

A new generation of manufacturing companies creates hope in the future of manufacturing sector.
NTL is today the largest maker of electronic drivers and ballasts that run modern lights. It has around 5,000 employees. NTL also contract manufactures CFLs for Indian lighting brands.

Some Indian mobile phone manufacturers are working on the business model of Apple of US. Micromax is one that one day may be a top player for Indian consumers.

Interestingly, some Indian manufacturing companies are trying to get into China too.

CRI Pumps would manufacture and also market its select range of products in China and aim for a considerable market share backed by its strong manufacturing and advanced technology. CRI is the first pump manufacturer from India to have its 100% wholly owned subsidiary company in China intended for manufacturing and marketing specific products. CRI will manufacture few select ranges of High end energy efficient pumps in its China Facility.

And one can and must really appreciate the amount of wealth that comes to even poor due to industrialisation and manufacturing that creates employment.

Manufacturing must be the main stay of the country’s growth.

Finally, Indian manufacturers must appreciate the necessity of innovations and invest prudently for it. That only can make it compete with global players effectively.

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