The Time is NOW for Indian Manufacturing

As a wildlife photographer and film maker, I often have to rely on importing lots of sound recorders, amplifiers, microphones, viewfinders for video cameras, etc, and realize that many of those can be designed and manufactured in India provided there is easy access to components and testing labs. If we are able to create free trade warehousing zones which stock components and act as a hub for supplying to other countries and allow some of those to be sold to the DTA (Domestic Tariff Area), I am sure our entrepreneurs will be able to buy and try those without investing in significant amount of time, shipping cost and energy. This will help them to create unique products tuned for the unique needs of the Indian consumer. This would also be important since the Department of IT has plans to lay fiber optic cables to each Panchayat and lot of public services are going to ride on it.

These issues sit on the top of my mind as I begin my innings as the executive director of MAIT. I believe this is the right time for Indian IT manufacturing also to take off.

The Challenges

The Tsunami in Japan reminded everybody that the tier-3/4 or below are still in Japan. The recent floods in Thailand, described as the worst in the century, reminds us that we are still dependent on suppliers in Thailand for hard disks and other components. Apart from the challenges of natural disasters and foreign exchange fluctuations, delays in supplies, the cost of logistics is a major factor. If the entire manufacturing ecosystem is close by, the transportation cost is reduced, flexibility is increased and makes the industry globally competitive.

Today, destinations in India compete with those abroad for attracting investments. In such a scenario, the infrastructure needs to be scaled up to the global standards. So the airportsas a lot of IT products and components are low volume and high-value items and hence airfreightedneed to be benchmarked with a Singapore or Hongkong airport to name a few. The roads need to be better.

Though the SEZ scheme was created after studying the zones in China, our SEZs are much smaller and often struggle to get uninterrupted power supply. The quality of power is also an issue. Few states like Gujarat have dedicated feeders to supply power to industry, however that is not the norm everywhere. The cost of power, cost of land as well as the challenges of acquiring land are also other issues. There are many State Governments where single window clearances are promised, however, there are still delays which add to the cost and uncertainty.

Need to Think Big

While interacting with a number of existing Indian manufacturers (SMEs), I realize that a number of them lack the ability to think big. For example, given the opportunities that are going to open up, a 70-crore manufacturer need to think about a 700-crore turnover, if not more. So if any of these existing businesses want to become a tier-1/tier-2 supplier to large volume MNC manufacturers, then it becomes difficult due to the huge scales involved. In such a scenario, I feel there is an acute need for large business groups like the Tatas, Ambanis, Birlas and others to engage in acquisitions abroad and quickly setting up manufacturing in key areas of the IT manufacturing ecosystem.

The Social Imperative

Indian IT Services sector has done pretty well and for sometime India has been known for its services economy. The relatively young populationoften fondly referred as the Demographic dividendacted as a major driver along with other advantages like cost. However, a huge economy like India cannot progress riding solely on the shoulders of the services sector. Though the services sector, especially the IT/ITeS area can function even from smaller towns, it can only fulfill the employment needs of a certain level of people.

The IT manufacturing, on the other hand, needs and employs people with 10+2 and/or 10th class pass people as a major chunk of its workforce. These group of people hardly find any employment in the organized sector, except in the various departmental stores. So, the IT manufacturing sector is doing a great service to the nation by employing the people who would not have found employment elsewhere and would have contributed to the various societal problems associated with unemployment.

Furthermore, the IT manufacturing employs predominantly women in its workforce, as women have better hand-eye coordination and are suited for fine finger work. A major benefit is that these women now contribute to the decision making process in their house as well as are much sought after for their advice on various issues by their neighbours. I am yet to see a government scheme that has as much impact in empowering women.

India with its huge consumer base is a net importer or ICT products and by 2020 the net imports is expected to be larger than even the oil imports. So encouraging manufacturing in this sector is of strategic importance for a country like India. And when we know that manufacturing is going to reduce our unemployment levels, increase women empowerment, it becomes imperative to make it a key priority area.

In the IT manufacturing in India, even the lowest level workers (operators) have a dream in their heart. They want to learn the entire manufacturing process and often offer good suggestions that can be immediately implemented resulting in cost savings and increased efficiency.

Protecting Manufacturers

The cost of manufacturing has increased in China and many manufacturers are moving into interior China to lower the cost. There are manufacturers who want to derisk and follow the China Plus One strategy ie. creating another manufacturing base in addition to China. The level of IPR protection in China is also a matter of concern to many MNCs. In such a scenario India with a policy of 100% FDI in manufacturing, IPR protection and other laws can become a viable alternative. So there is an opportunity to be tapped as well.

I am sure the government is working towards creating a budget that is forward looking and will help in nation building. Among other things, I am hopeful that the budget will help in creating a level playing field for manufacturers in India vis-a-vis those in other destinations abroad.

I believe manufacturing is an idea whose time has come. We have to take it to its logical conclusion. I have always been straightforward in explaining the positives and the areas for improvement with respect to Indian cities as manufacturing destinations. After one such meeting, the IT minister in Japan had written to me that they would come to India despite the infrastructural deficiencies. Indias time has come. We need to realize our strengths and focus on those to take the manufacturing to the next orbit.