What is stopping India?

The India Hardware Summit 2003 organized by CII in Bangalore was dominated to

a large extent by three issues–the need to build a local market in India, the

imperative for a better infrastructure and easier policies along with the ever

-present Chinese threat. Unfortunately, however, the summit did not really

manage to achieve what it wanted–to chart out a blue print for converting

India into a base of hardware manufacturing.

"Everybody knows and agrees that India has the potential for hardware

manufacture. We have the potential to make our present hardware market of less

than $5 billion to around $62 billion in just about six years. The question,

however, is how to get there?" asked the CII Chairman of the Karnataka

State Council Vinay Deshpande, setting up the tone of the discussion. The talks

that followed were filled with views and counter-views on the challenges and

strengths that India offered as a hardware destination and several ideas on how

to overcome the hurdles in the path to increasing on its strengths.

"One of the reasons for the huge shift of manufacturing to China is the

presence of a huge local market. This has in turn given rise to a slew of local

brands. Today, 40% of the GSM, 90% of the TV and 60% of the PC market is

dominated by local brands in China. This has given rise to conducive

infrastructure, which has facilitated the entry of MNCs. India has not proven

its strength in that area yet and there are no strong local brands here. If

China can create a Legend or a Bird, why not India?" asked Texas

Instruments VP (APAC) Larry Tan.

"With a thriving market for cell phones, it is eminently possible to set

up manufacturing here to create Indian phones. Now we have to create a market

for electron micro systems and demand has to be created for chip

manufacture," added Deshpande. "Big-time manufacturing here is a

question of time. We are already competitive in high value, low volume

manufacturing and assembly and when we reach the volume numbers that makes sense

for manufacturing, we will see more set ups," said an optimistic Samtel

Color CMD Satish K Kaura.

While almost everybody agreed on the need for a healthy local market for real

manufacturing to come in, there was a slight discord on the role that the

government has to play in bringing a better environment for manufacturing.

"40% of PC costs are simply duty-centric and nearly 3% is added to product

costs when there is a delay in customs. Infrastructure has to be improved on and

policies have to be implemented to ensure lesser cost. The government needs to

play a catalytic role in ensuring that these are rectified," said Wipro

Infotech president Suresh Vaswani.

On the other side of the scale, TVS Electronics director Gopal Srinivasan

said, "Most of the work in the development of the manufacturing industry

has to be done by us industry players. The government can and has to be a focal

point, but 98% of the work has to be done by people like us." While that

being so, many agreed with the strong and emphatic statements of WeP Peripherals

MD and CEO Ram Agarwal when he said, "We are not vocal enough as an

industry. We have to become more vocal and protest against the blatant mistakes

made by the government. We have to start working with the government to prevent

such mistakes and move as an industry to capture the opportunity."

MAIT executive director Vinnie Mehta spoke of the referendum of demands put

forth to the government by the industry recently and the need for getting them

implemented. The demands comprise some of the issues plaguing the industry like

the huge duty imposed on components and capital investments, making local

manufacturing an impossible task in the face of the imminent WTO deadline of

2005.

China dominated the discourse of many of the speakers. Almost all of them had

a bit to talk on the various advantages that China had developed for

manufacturing–either through the government or by way of the industry itself–and

how it could be duplicated within India. Some others though, encouraged India to

look within and derive best practices from within, instead of trying to ape the

culture of another country’s industry, which was built on a different

foundation.

Echoing this thought, Srinivasan said, "We have to learn to compete on

the design skills, which we are already strong in. We also have to overcome our

phobia for China. We can do this by sourcing some materials from China and even

building selectively in the country."

Conspicuous in its absence was the lack of any in-depth discussion of the

2005 duty-free regime. Though some of the speakers touched upon it, the summit

as a whole did not offer any insights on the ways local manufacturing firms can

handle the competition post 2005, and this left a yawning gap in the subject

matter that was covered.

At the end of the day though, the summit might not have achieved all that it

set out to, as no solutions were offered. That apart, enthusiasm for the

prospects of the hardware industry in India does not seem to have dimmed much.

As every speaker exuded confidence and hope on the future, the emotion was

addictive and much of the audience picked it up.

Sathya Mithra Ashok in Bangalore