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August 12, 2015 5:45 pm
Indian makers are still the stuff of Modi’s dreams
http://www.ft.com/intl/cms/s/0/c35200da-40d3-11e5-b98b-87c7270955cf.html?siteedition=intl#axzz3in9rFRt4
A goal to increase manufacturing is overdue but the
obstacles are formidable
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A goal to increase
manufacturing is overdue but the obstacles are formidable
Workers place filled Coca Cola
bottles into crates in India
Make in India.
Even the term sounds slightly defective. For better or worse, that is the
slogan with which Narendra Modi, India’s made-in-Gujarat prime
minister, has branded his effort to transform the country into a manufacturing
powerhouse. The goal is overdue.
It may also be unrealistic. The country does not have a good reputation for making things. Even Indians shun their own products. Jugaad, the so-called Indian way of innovation, was born of scarcity. Mihir Sharma, a commentator, says his countrymen make things “held together with cello-tape and paan stains and prayer” — although high-tech goods, for example in aerospace, are actually of high quality.
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If the Indians make some things shoddily, they also do not make enough.
Manufacturing accounts for only 15 per cent of national output, against 32 per cent in China and 34 per cent in Thailand. (The figures were revised up slightly for last year because of new calculation methods).
Optimists say India’s time has come. Wages have quintupled in China in the past decade. The renminbi has sharply appreciated, notwithstanding this week’s surprise reversal. That has helped nations such as Mexico, and even the US, to claw back manufacturing competitiveness. If they can do it, why not India? It has savvy entrepreneurs, abundant raw materials from cotton to steel, growing domestic demand and 1m new workers crowding into the jobs market each month. In Mr Modi it has a leader bent on development. Surely those are all the ingredients required for a manufacturing boom?
That is the optimists’ case. So far it is unproven. This week, though, the manufacturing story received a fillip with an announcement by Foxconn, Taiwan’s contract manufacturer, that it would invest $5bn in a plant in Maharashtra state, creating 50,000 jobs. That might only be the start, said Terry Gou, the chairman, who said that in 10 years Foxconn could have a factory in every Indian state. As if that were not enough, Xiaomi, a Chinese smartphone manufacturer, added to the cheer by saying it planned a separate tie-up with Foxconn to produce handsets in Andhra Pradesh.
“To some extent one did feel that India had missed the boat,” says Arvind Subramanian, Mr Modi’s chief economic adviser, adding that the country had squandered an obvious comparative advantage, namely cheap labour. Given rapid mechanisation and a world awash with inexpensive gadgets, some say the golden age of manufacturing as a development tool is, in any case, over. Mr Subramanian says making things can be an important driver of growth but it will take time. The Foxconn investment could be a game-changer. If successful, it could alter the perception of
India. In a country where it is hard to get national legislation to stick, crucially it might also spur competition among states seeking to woo manufacturers.
The prime minister has promised to bulldoze the
obstacles. All he requires is a bulldozer
Outside certain industries, such as cars, it also lacks the ecosystem of suppliers that make clusters such as the Pearl River Delta so competitive.
Perhaps worse is the state of India’s soft infrastructure. Would-be factory owners cannot get hold of land or get rid of workers. Plants operate on suboptimal scale or use ruses to get around labour laws: only 16 per cent of workers are formally employed. Unreasonable laws are a breeding ground for corruption. So is an unreasonable tax environment, which can be as changeable — and devastating — as the monsoon season. Investors who wade through all this are not always thanked for their efforts. Delhi is seeking $100m in damages from NestlĂ©, accusing the Swiss company of poisoning Indians by allowing high levels of lead in its noodles. That claim seems unlikely. Regulators in the US, Canada and New Zealand have pronounced the same food safe to eat.
Mr Modi has promised to bulldoze such obstacles. All he needs is a bulldozer. There have been efforts to rein in retroactive taxes. The upper limit for foreign ownership in certain industries, including defence, has been raised. Not much else has happened. Neither land nor labour reform is getting far. Infrastructure is a work in progress. “Modi needs to get into the nitty-gritty,” says Gurcharan Das, an author and former head of Procter & Gamble India. If Mr Modi is to make Make in India a reality, he will need more than a slogan.
COMMENT:
The author of the article has adequately run down the demerits of the PM of India’s optimism and the pessimism due to the factors that is required to initiate a development boom in India.The below quoted paragraph taken from the article is self explanatory. It no doubt appreciates PM Mr. Modi’s intention but what he forget is the saying “ it is not the guns that matters but the men behind the GUNS that matters. Meaning he has everything but the people who matters are not available in this sector.
”Optimists say India’s time has come. Wages have quintupled in China in the past decade. The renminbi has sharply appreciated, notwithstanding this week’s surprise reversal. That has helped nations such as Mexico, and even the US, to claw back manufacturing competitiveness. If they can do it, why not India? It has savvy entrepreneurs, abundant raw materials from cotton to steel, growing domestic demand and 1m new workers crowding into the jobs market each month. In Mr Modi it has a leader bent on development. Surely those are all the ingredients required for a manufacturing boom?”
The readers would appreciate this fact after going through the article that Mexico and US could claw back manufacturing competitiveness because the they had determined man power to do it but alas! India lacks that.
I could not but conclude that when the Country is run under the leadership of a naturalized foreigner, however good or bad that foreigner might be personally would not be able to do anything good for the country because of cultural difference.
Berlusconi an Italian was a scandalous PM, and that is what happened to Indian politics because of cultural effect..
The past recent Congress Party rule has washed all good that the old congress political leaders did for the country.
If readers assess the India’s condition of becoming a Rapist country ( hit the law and order situation) , then the corruption in all the sectors of the government department including judiciary which once was above board and example for other countries.
All these happened in last decade. Mr. Modi is definitely unlucky to have taken over a rotten Land garbing system, Extremely corrupt Infantile genocide committal, and a Rapist country from the congress Party.
Therefore, it is apprehended if anything tangible good could happen within a short span of Mr. Modi’s rule. No Doubt if this PM continues with his unchanged determination definitely India would be able to do something tangible good for the nation in future..
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