Can Do, Must Do

Every time someone talks about the possibility, potential, and

need of local manufacturing in India, there are so many of us who say that it is

a bus that we have already missed. I am sorry. I do not entirely agree. And I

will not give up. Once again, let me explain why manufacturing is very important

for India. And if we do not work on it, we will be a country that will have

several big strengths, but one bigger weakness.

Why does China not accept that it has lost the R&D and services race, and stop all the big investments that it is doing in that direction

Just look at the number of end user IT and telecom products

selling in the country today. Cell phones, for instance, are selling in millions

every month. PCs, even though one would like to see higher numbers, are also

selling in multiples of thousands. And this number is only going to go up in the

months to come. That is about the end user equipment. Similarly, there are high

end equipments going to enterprise IT networks and service provider telecom

networks-servers, storage and security devices, switches and routers, modems,

structured cabling, and so on. While I agree that importing them is proving very

cost effective, the fact is that this is a short-term view.

If India is going to be in the growth mode for the next 15-20

years, local manufacturing will get advantage not just in terms of costs, but

even localized designing to suit Indian needs and faster delivery. Today,

delivery is a big problem with certain products, requiring several weeks to be

delivered. Similarly, repair and maintenance will be much easier and better.

Today, there is no concept of repairing in India-it is just use and throw,

even for many expensive products.

The snowball effect of local manufacturing will be enormous.

Today all the mobile accessories, even if they are of very low value, come from

China, which is a huge market. And if cell phone manufacturing takes off in

India, the accessories market will also come up. For example, many Maruti car

accessory makers are supplying to automobile companies in other parts of the

world too.

Beyond the great advantages that manufacturing will bring to

India and Indian companies, a report released recently throws up very

interesting findings. While the pessimists may want to write off manufacturing,

this report by Deloitte Touche Tohmatsu claims that Indian manufacturers are

doing pretty well as a business. For instance, Indian manufacturers are

registering double the gross profit and sales growth compared to their global

counterparts. Clearly, manufacturing is an attractive business to be in, even if

you are in India. While the global figures for gross profits and sales growth

are 7 and 8% respectively, Indian manufacturers are clocking 15 and 16%.

What is even more interesting is the fact that these

manufacturers are getting the edge not because of any other reason, but because

of the value they are adding to the entire business of manufacturing. The study

explains that the major drivers for such performance are product and process

innovation and manufacturing quality. That is big news, I think. Remember, a few

years back "Made in India" was not such a great tag. Today it is

becoming a driver for better sales and profits. And more than that, Indian

manufacturers are looking at adding value not in terms of costs, but in terms of

brining about innovation and improvement in processes and product design. This

is great news, and calls for a review of our thinking on local manufacturing.

And lastly, I would like to ask everybody one question-why does China not

accept that it has lost the R&D and services race? They are investing so

much in that direction. I think they realize that there is a huge potential

there, not just globally, but even locally. And in the long term, not just

manufacturing, but services and R&D will also be needed for competitive

edge. India should therefore not give up on manufacturing. The industry as well

as the government needs to work on this together.