दृष्टिकोण – Indra's Viewpoint

When I joined auto sector in early 60s after IIT, India had three domestic Indian car manufacturers, two manufacturers of commercial vehicles, and one of utility vehicles. All these six manufacturers had only few outdated products of foreign design through collaborations.

Interestingly by 2010, the domestic car manufacturers of that era are almost extinct. Out of two domestic commercial vehicle manufacturers, one has grown as a real global player in both cars as well as commercial vehicles. That is Tata Motors. Ashok Leyland has still not gone in car business. M& M is hesitant to go whole hog in car business and has remained with UV.

Fortunately, almost all top globally known manufacturers of cars and commercial vehicles have set up the manufacturing facilities in India and are offering the contemporary designs to the customers.

Domestic players till late 90s used to plan all the manufacturing and services in-house. I wish they would have started the outsourcing for the components and services earlier itself. Auto component industry started in big way only with Maruti Suzuki entering India. Maruti sponsored and assisted many Indian professionals to set up factories and become its vendors. It was certainly to Maruti Suzuki’s credit that India’s auto component sector has grown almost world class in every respect today and is exporting to all known auto OEMs of the world.

However, India has failed to have world class manufacturers of the machine tools, die and tools and other accessories, neither has it sufficient number of manufacturing system integrators for the industry. I wish some challenges me.

Not many of the ex-employees of the Indian auto companies got into setting up manufacturing, consultancy or engineering services in big way. Perhaps the domestic companies could have contributed effectively and encouraged some willing entrepreneurs among its employees to set up manufacturing facilities.

A new disturbing trend is the increasing huge import of cheap Chinese auto parts by the Indian OEMs. The OEMs instead of assisting the local vendors to come up to its expectations both on quality and cost are resorting to the easy path of import. At least the domestic OEMs must do that as its CSR for the country. That was the practice followed by Maruti Suzuki initially. Can the government make it mandatory to declare the import content of the vehicles for the OEMs? The growth of a world class wide spread manufacturing sector is national necessity, as it can only provide employment to the mass of young persons in millions joining the workforce of the country and take the country to prosperity.

The national Manufacturing Competitiveness Council had suggested of a 12% year to year growth of the manufacturing sector. As rightly suggested by Venu Srinivasan, the chairman and managing director of TVS Motor Company, “India should contribute five per cent of global manufacturing output; manufacturing should contribute 25 per cent of India’s GDP and India should be the R&D and design hub of global manufacturing.” Interestingly, ‘a one per cent growth in manufacturing could create jobs for 20 million to 30 million people, a growth other sectors were unable to provide’.

And for this to happen, many new green field projects in every sector must get set up and the government must permit more autonomy to PSUs such as BHEL to develop vendors and outsource its components and subassemblies instead of doing everything in-house. Another such area requiring government attention to encourage the manufacturing sector is the developing vendors for outsourcing the components of the defence projects. Is it not a disgrace that the foreign component in the “indigenous” Arjun main-battle tank hovers around 50% even after 34 years of development and the foreign components in the major indigenous twin-engine Dhruv Advanced Light Helicopter (ALH), whose design and development began in 1984, is still around 90%?

Is it not a shame that the country that can indigenously develop the cryogenic engines for the launch of satellites depends on the import of the engines for Tejas Light Combat Aircrafts under development?

Why can’t we learn even the simplest lessons from the Chinese and the way China has indigenized the equipment required by armed forces?

Should not all the impediments in cohesive working of DRDO and the armed forces be removed? Why are the armed forces not satisfied with the performance of the ALH or Arjun? Is DRDO not capable enough to develop the products as required by the armed forces? Why can’t the private sector be involved? If PPP can work in infrastructure, it can work wonder in manufacturing too.

There is some good news coming in media. As reported, ‘DRDO’s most productive laboratory, the Armament Research & Development Establishment (ARDE) in Pune, will become the hub for developing an indigenous 155-mm towed gun, with the partnering of private sector giants such as Bharat Forge and Larsen & Toubro.

Can the government pursue a prudent policy for manufacturing to get its right place in the country’s economy? L&T, M&M, Kalyani, Tata and some more are already in manufacturing in big way. Will the big business houses of Ambani, Birlas. Mittals and Adani join the globally competitive manufacturing that the country need badly? It’s necessary as the major manufacturing sectors of critical nature require huge capital and human resources.

All the impediments in manufacturing sector require the nation’s attention and action.
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PS: Many have different views for India’s failure in manufacturing; TN Ninan in Business Standard last week has tried to answer the question-‘Why can’t India score greater success in manufacturing, especially the export of manufactured products?’ in his own way. According to Ninan, the very success achieved in the export of services now prevents a manufacturing thrust.

I am in a happier mood these days. Let me assure, it’s nothing personal. But some reports about the manufacturing sector, my lifelong fad, are really exciting. It’s becomes a little more spicy when it comes with a simultaneous comparison with China and headlines such as ‘PMI rises in India falls in China’, or ‘China slows to cruising speed, India perks up‘ and ‘India zips past China in commercial vehicles’.

Interestingly, according to a recent Deloitte report, India has been ranked second, ahead of the United States and South Korea, in terms of manufacturing competence globally. “Perhaps more surprising is that India is now positioned at number two and will gain an even stronger foothold over the next five years. The country’s rich talent pool of scientists, researchers, and engineers along with its largely well-educated English-speaking workforce and democratic regime make it an attractive destination for manufacturers.”

I firmly believe that the potential of Indian manufacturing is just limitless.

Historically, India started well with government plans of manufacturing everything in the country from ships to airplanes, from missiles to nuclear plants. It went on for everything that one can think of: watches, machine tools, TV sets, cars and scooters. But it could hardly sustain and grow. It all came in public sector. Nehru was skeptical about private sector and the industrialists also didn’t do much to prove him wrong. And soon politics came behind every government policy. The worst was nationalization. Because of very poor course correction based on real time global situations, India missed the manufacturing bus that could have taken it to prosperity of the common people, as it did for China.

But manufacturing made a comeback in late 90s. It certainly started with automobiles and auto components sector. Today, India has manufacturing facilities of almost all the reputed two-wheeler, car and commercial vehicle makers of the world with equally strong domestic manufacturers such as Hero Honda, Bajaj Auto, Tata Motors, Ashok Leyland and Mahindra &Mahindra. Auto component sector has also grown to global manufacturing standard.

Other sectors, be it home appliances or heavy equipment are doing good business and are expanding the manufacturing facilities. However, unfortunately in many of the sectors there are hardly any significant domestic players. For example, in home appliances South Koreans are in lead with LG and Samsung at top. Indian manufacturers are falling behind or getting out because of the competitive strength of the global players. Further, many OEM Indian manufacturers prefer to get the products manufactured in China and to import. For example, all the domestic mobile phone companies are getting its wares from China or Taiwan.

India with its huge market is now the favoured destination of the global manufacturers including the Chinese ones. How long the government will keep them away on the excuse of security in the world going all out for free market?

As a very welcome trend for the manufacturing sector, at least some private companies are setting up manufacturing facilities to compete with the PSUs. For example, L&T and Bharat Forge will soon manufacture power equipment and compete with BHEL.

The government must not only open but encourage well established private companies to come in for manufacturing the items of defense requirements that is the biggest drain on India’s resources. Why should India keep on importing 80% of it? As reported, “a Rs 5,000 crore defence contract can sustain or create about 20,000 high-end jobs. For each high-end job, there are about four support jobs. So, India’s projected $80 billion arms imports over the next decade could create six million to seven million jobs within the country.”

It is strange but a fact that all the government departments today prefer to import everything from abroad as those responsible for procuring them get a fat bribe for it. And so the officers and politicians collude to do anything to maintain the status quo and not allowing local manufacturers to get into the business.

However, even after all these constraints India’s manufacturing sector has become globally recognized for its innovation, quality and cost too. It’s moving fast and booming too. And even ‘mobile phone companies are pushing through a big indigenization effort by bringing global component vendors to set shop in the country. The move is part of a strategy to make India a global manufacturing hub for mobile phones.’

Is it not a good reason to be happy?