India Unbound

With ‘Make in India’ poised to take off, India Inc has to beef itself up for global competition, while assimilating technological drivers to scale up its competitiveness.

Make in India (MI) is not a government programme, beyond the terms of facilitation that any Union government can provide to boost industrial growth (in the manufacturing sector). This has been done through an invitation of policy changes to create interest and investment to meet the inevitable growth trajectory in business processes.

The Indian manufacturing industry will have to step up and compete on global standards for the production and consumption of goods and services, and the challenge is not unlike what India faces today in terms of going digital, on pain of financial exclusion.

Prime Minister Narendra Modi has emphasised upon MI along with a slew of thrust areas that include transforming to a Digital India (DI), that has received forced impetus two years on through the demonetisation gambit.

Similarly, Modi began a national inculcation of cleanliness that was driven through events with celebrities, to add glamour to the humble broomstick. On yet another plane, the Smart Cities concept seeks to create 90 futuristic urban centres (read habitats) of excellence through seamless transportation and top quality services for urban living.

Modi’s timing could not have been better, for it’s the MI bear hug that holds the potential to land Indian manufacturing on to the international leader-board of business. Akshay Shah, a Schwarzman Scholar at the Tsinghua University in China (that was established way back in 1911) has reported through researched economics that the Indian manufacturing and consumption of goods and services (read economy) has surpassed that of her erstwhile colonial ruler ù the United Kingdom ù for the first time in international history of over (at least) 100 years.

The obvious reason for brand India overtaking the UK economy ù is the consistent growth India has witnessed over the last 25 years (since it boarded the flight of liberalisation in 1991).

According to Shah’s narrative that was reported by a recent Forbes article that recorded this significant milestone, the UK was nudged out by the Indian juggernaut bolstered by the sheer scale of its economy.

The figures quoted by Shah are as follows: ‘UK’s 2016 GDP of GBP 1.87 trillion converts to $2.29 trillion at an exchange rate of ~GBP 0.81 per $1, whereas India’s GDP of INR 153 trillion converts to $2.30 trillion at an exchange rate of ~INR 66.6 per $1.’

More importantly, this gap ($ 0.01 trillion) is set to widen further with the UK set for a course of sub-two per cent GDP growth as against even the very conservative estimates of 7 plus per cent growth predicted for the Indian economy right up to 2020 and foreseeably, even further.

Interestingly, out of the 25 sectors that have been identified by the Union government and opened up to foreign direct investments, the automobile manufacturing sector offers the arena to tangibly forecast what India Inc could leverage, using its credibility to scale up the level of international competences.

The international automobile industry witnessed an alarming downslide on yardsticks of quality due to the single-minded obsession with profits.

The recall and imposition of multibillion dollar fines (approximately $30 billion upon Volkswagen for in-built defects in vehicle components that undermined stipulated pollution norms) and the more recent mass scale recall of airbags supplied by Japanese company Takata are just two cases in point. International automobile companies have been seriously faulted for their single-minded pursuit of profits to the detriment of consumer safety.

On the other hand, in the Indian automobile sector, the most flagrant controversy today rages around the charges and counter-charges by the Cyrus Mistry camp and Ratan Tata camp respectively on the business sense of remaining invested in loss-making manufacturing sectors like the Tata Nano brand of cheap car on sale that is more expensive to manufacture (than its on-road price).

While internationally automobile companies are cutting corners to maximise profits, Indian automobile majors continue to suffer losses on a popular brand. That crouching India has taken big strides into the international markets is undeniable. What will be crucial is if it is able to scale up as well as measure up to international standards. In the same automobile manufacturing sector, India does not boast of an international presence for much of its automobile side offerings, apart from the foreign acquisitions in recent times that make companies like Tata’s an international automobile manufacturer of brands like Jaguar.

However, while this is true, India is on the threshold of becoming a major manufacturing hub for automobiles. Mumbai Port Trust (MPT) chairman Sanjay Bhatia has been gushing about the increased portside logistics and physical movement of large quantities of automobiles with some pride at recent infrastructure conclaves.

The same holds for any of the remaining 24 sectors identified by the Modi government for foreign direct investment (FDI) of 100 per cent. These include automobile components, aviation, defence, biotechnology, roads & highways, oil & gas, renewable energy, textiles, thermal power, mining and railways, amongst others.

Take the case of the highly power-intensive forging sector for instance. The President of the Indian Forging Association, Murli Shankar Sambasivam, tells INFRASTRUCTURE TODAY that his firm Super Auto Forge has pursued renewable energy sources (solar and wind) in tandem with the Union government’s announced impetus policies for the two sectors respectively in 2001 and 2011.

As a direct consequence, Sambasivam says his firm has scaled up its captive power generation potential considerably. ‘While three years back we faced an erratic power supply which was at high cost for industry as well, we are currently using solar and wind energy to meet 60 per cent of our total power requirements. Even others in our industry have scaled up to 50 per cent through captive power generation of the alternative varieties,’ he says proudly.

He adds, ‘Till Maruti came in, our industrial abilities were limited to the Ambassador and Fiat cars. Maruti came in with new technology. Volkswagen will launch its latest brand of vehicle simultaneously in India and the world, the former having become one of its major centres of production today.’

Industry has to take note and board the bus, train or flight like Sambasivam did a few years ago and get into the midst of global competition while assimilating technological drivers to scale up its competitiveness. It already enjoys the benefits of cheap labour. Now, it’s time to wait for the demonetisation exercise to complete its churning so that Indian industry can take off in right earnest.