Thanks to COVID, now it has suddenly thrown India into the manufacturing arena. Due to the perception that China has not been too forthcoming with the origin and spread of the Corona virus, due to their recent show of strength on Taiwan and Hongkong residents and along Indian borders, and also more importantly, Chinese banks and investors trying to buy huge stakes in corporations of other countries, the world order feels they may be capitalizing on other’s misery. Lots of conspiracy theories abound and not getting too much into them as that is not the intent of this article, it is a welcome sign for India to capitalize its manufacturing prowess and prove itself to be a viable manufacturing alternative now over the next decade or so.
In 2014, the average cost of manufacturing labour per hour was $. 92 in India and $3.52 in China (Ref: GenimexGroup). When labour costs make up a significant portion of cost of goods, lower labour costs do indeed lower the per unit cost. Purchase cost is usually the most important factor when manufacturing overseas, but so is quality, delivery times, and ease of doing business, the three items that India has to improve on and impress the world on their capabilities.
UN data shows China is the world’s manufacturing powerhouse, followed by the United States and Japan and accounted for 28 percent of the global manufacturing output in 2018. Lower costs of living make China’s low wages manageable for the common manufacturing worker, and their factories are thriving by producing goods for the entire world. China’s gross domestic product per capita is almost five times that of India’s, and its manufacturing sector is ten times bigger. India is the second largest crude steel manufacturer in the world after China but our output is a ninth of what China manufactures. Even if India gains about 5 to 10% of the entire Chinese manufacturing portfolio, we stand to gain big. It did take China about 3 decades from 1980s to be called a Juggernaut in Global manufacturing.
India has shown the world they can manufacture high quality automobiles (Hyundai exports certain models from Chennai), can make good leather and textile products that are export worthy, and of course, we have in built expertise in creating the best in class satellites, rockets, fighter jets and heavy armaments, We Indians can also be regarded as the best intellectual designers and developers as evident by the fact that we as a community shine in all other countries where we live.
Now it is a question of self-belief and some quick government actions to turn the tide in our favours. Given the exodus of the migrant population to their natives due to COVID fears in Tier 1 cities, now is the time to use that population on less expensive towns and cities to start building factories and employ them at large, and this would also manage the explosion of the cities beyond its bounds that we are witnessing for the past two decades or so. Putting a manufacturing base in and around a major city would increase the labour cost and bleed the already broken infrastructure in the cities, and hence it is obvious to choose lesser known towns near good ports and good access to rail network to develop them as smart manufacturing hubs.
But let us not carried away as well – yes, we need Made in India to attain self-sufficiency in many aspects, but let us not miss the global bandwagon either – we should recognize and act to what the global needs are as well. Made in India should be rather Made By India and it has to be first Made For India before we go globally. We need to build capabilities first, be it in terms of training and skilling, where the Skill Development councils (SDCs) can help. But we also need to go a little deeper in changing some of the higher secondary education into a vocational stream as well consciously to make the labour market more skilful. Winds of change are blowing for the past few years with more and more seats in engineering colleges get vacant as there are lots of alternatives for students to choose from. IT companies like HCL and Google do not even need a college degree for their talents anymore. Once we build such capabilities, and once we start manufacturing credibly, slowly poverty and homelessness decreases thus creating wealth and better hygiene across all classes of people. When wealth starts spreading, better infrastructure gets built, goods and people gets transported better, spending increases and the economic divide gets to improve.
If you look at America after the industrial revolution, and Germany and Japan after the World Wars, it was manufacturing that got them to the top of the world last century– automotive being the biggest facilitator for this success across these three countries, and quick and easy transportation became their strong forte. The expertise mainly involves electrical, mechanical and electro-mechanical domains that made them world leaders in what they do. When you have an economy based on manufacturing, you would have credible assets unlike any software companies. You can even turn around perception of lower quality (the Hyundai Pony introduced in the USA was considered a lemon) when you start being a manufacturing country like South Korea did in the 1970s by giving exceptional products over time across the automotive and consumables products, be it the Hyundai or the Samsung now.
Quality can never be an afterthought, it has to be built-in and this has to happen from Day 1 – as India starts its manufacturing, this has to be infused into the working culture. Japan had a Deming to make them Quality kings after WWII. Also speed of execution is key – getting something quick to the market is the best way to climb up and show case manufacturing leadership. Given that we have enough automotive expertise now, this is the best place to start – build WORLD CLASS cars and trucks, driver or driverless, petrol or electric and showcase to the industry that each component that goes into them can be built with high quality in India for the WORLD. This must slowly lead to building good planes, ships and trains and work in the infrastructure to link cities to towns to villages.
Solar initiatives and battery technologies for all segments is something that India can showcase as a key strength and lead the world as well. Then comes the electronics segment where we have been laggards – it is time to establish some good Indian brands in the consumer product segment, be it smartphones or electronics and electrical appliances than can compete with the best of the world – yes, we can start being the manufacturing hub of established players but it is time we rise up and start building our own unique brands that we can be proud of. We have some good success stories from the TATAs-Voltas, and from Godrej in terms of HVAC and refrigerators that can compete with the best of class, but it is time to go much more.
In all these, manufacturing usually is the biggest culprit for all environment damages with its pollutions – we should start the blue print with all environmental effects factored in and again not look at it as a post manufacturing fix. Given we have a heavy responsibility here, and with some credible ethical leadership, we can make all these happen within the next decade. Hoping to see the Indian flag waving higher and stronger. We should be able to cover the entire spectrum, from a simple needle to a huge aeroplane in years to come.
We are from Business Intellects, a digital enterprise era consulting, training and recruitment firm based out of Bengaluru, India.