Make-in-India:How China is Killing Manufacturing

I had been writing about the Chinese manufacturing since 2005 after I had visited US and read there a lot on the Chinese manufacturing during my stay of six months. Every developed manufacturing country then was tired of the Chinese fakes including India. Even the Baja Auto fakes were available in the Chinese market. This article however is based on an article that appeared in ‘India Today’. It has become more relevant after the ‘make-in-India’ campaign of Modi. It is also very important when a finance minister makes a statement on the country’s concern on its CAD. This article shows how Indian manufacturing sector has been spineless over the years.

Unscrupulous Indian traders are snatching the work from the hands of craftsmen, artisans, and weavers of India, are taking the samples from India to China, are getting manufactured the fakes in China, and importing them to sell to the ignorant Indian buyers. “The display at the small shop of Zhao Qingfeng, Yijie Crafts Company in the the Yiwu commodity market include the paintings and statues of more than half a dozen Hindu deities such a Tanjore-style painting of baby Krishna or the distinctive Saraswati-on-a-lotus portraits that are a common sight in many Indian homes. These paintings, crafted almost perfectly in Cangnan, one of the many bustling factory towns in Zhejiang province in China’s southern manufacturing heartland. From Cangnan’s factories, the gods and goddesses make their way to the sprawling Yiwu commodity market.

If there’s a “Made in China” product in your home, chances are it passed through Yiwu at some point along its Chinese supply chain.You cannot walk 10 yards through the Yiwu market without stumbling across a trader from India. Yiwu’s suppliers themselves say that trade with India, above all, drives their businesses. Every year, around 400,000 Indian businessmen descend on Yiwu, accounting for three out of every four foreign businessmen in the city. There are 250-odd Indian trading companies with permanent partnerships in Yiwu city, where around 1,000 Indians now reside permanently. Yiwu shipped $750 million worth of goods to India last year-more than any other country. Indian companies find it cheaper to send designs to a factory in rural Zhejiang and have products- whether a baby Krishna painting or custom-made furniture or children’s toys-shipped to Kolkata or Mumbai.” Is it an illustration of the success of the China supply chain or the failures of Indian manufacturing, or its murder by the India traders? The story goes further. It is actually common for Indian traders to be held in hotels as “collateral” while payments are due. There are traders from every corner of India patrolling the corridors of the Yiwu market, looking for bargains.

On a recent afternoon, spotted was a trader from Rajasthan procuring cartons of “authentic” Rajasthani jewellery from a Chinese entrepreneur. “All these foreign tourists who buy traditional jewellery in Jaipur,” the trader chuckled, “it all comes from Yiwu.”A trader from Chennai said there was now a factory in Zhejiang that was even producing “authentic” Kancheepuram silk sarees-Kancheepuram weavers had reportedly even been flown in to Zhejiang by an enterprising Chinese company for their brains to be picked -that were now being sold in Tamil Nadu to unwitting buyers (investigations into this company’s whereabouts did, however, prove fruitless).”

I want to ask if the ongoing business of these fakes is legal and if the government of India too encourages it. If not, why can’t the government take some effective steps to stop the business of these Chinese fakes? It’s done world over. Almost every developed country has experienced the menace of the Chinese fakes.

Today, electronic equipment comprises the bulk of China’s exports to India, but why it be followed by machinery, engines and pumps, organic chemicals, fertilisers, iron and steel, and plastics that have sufficient manufacturing know how and capacity in India? India has from April to December 2014 a trade gap of $37 billion. Surprisingly China imports from India mainly raw materials, though India exports a lot of sophisticated engineering goods to many developed countries too. Indian enterprises import because it’s easier. Over the years, the imports have gone on increasing. The government hardly showed any concern. Why should the Indian OEMs take the pain of developing vendors as Maruti Suzuki did it in initial period or when the government does not show any concern about the import of all sorts to any extent?

Today, as much as 80 per cent of power plant equipment for Indian projects is sourced from China, even though India has now sufficient manufacturing capacity and the quality is better. China is dumping them as those are available off selves because of over production. And further it is a known fact that the Chinese manufacturers provide all sort of illegal benefits to the Indian buyers that can’t be done by Indian manufacturers, particularly the PSUs.

In 2013-14, imports of products such as engine pistons, transmission drives and steering and body components totalled $2.6 billion and comprised 21 per cent of auto imports to India. India, on the other hand, exported parts worth only $300 million to China. Indian auto parts manufacturers have better brand image. Many of them are recipients of Deming Prize for quality. They export to many global auto manufacturers world over. But still they can’t export to China. The problem is more shocking for the aftermarket parts. “The aftermarket requirements of auto parts in India is estimated to be around $6 billion and over 36 per cent of this is counterfeit, mostly coming from China.” Here too the samples of the parts reach the Chinese manufacturers through traders who are importing the fakes. Why are the Indian OEMs quiet on this? The business of Indian spare parts manufacturers is dwindled.

Even a low tech item such PVC pipe and lightings are mainly Chinese in market. With demand for PVC pipes rising rapidly from irrigation projects, Chinese imports are handy. Why can’t the Indian manufacturers increase their capacity to meet the requirements? The large number of Home Town and Home Centre outlets of furnitures and fittings of Future Group are all imported from Malaysia. Why can’t the Future Group develop it from local sources if IKEA can do it? Why doesn’t the government raise even a finger?

Should not the government of India take some corrective steps for these skewed imports from China? How can the CAD be improved? How can the ‘Make in India’ happen? No amount of campaign can solve this dismal situation. The government must intervene.

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