We do make a variety of goods from pins to planes, fertilisers to chemicals, but unfortunately, none of it is world class.
Government of India’s move to set up a manufacturing industry promotion board (MIPB) is a welcome step, particularly as our manufacturing sector has been sagging significantly of late. Since the MIPB will have various departments represented such as economic affairs, revenue, labour and employment, MSME, road transport and highways, heavy industry and public enterprises, science and technology and environment and forests, it will be expected to bring in improved coordination between the different relevant sectors. It is also good that concurrently, a board of approval, green manufacturing committee and high level committee are being set up with an intention of implementing the National Manufacturing Policy, the NIMZs and a speedy process of approvals and clearances.
However, the problem with the manufacturing sector may not end with the above actions. Because, the malady runs deeper. India’s industrial competitiveness has taken a nose-dive. UNIDO’s report placed India at 41st rank in terms of industrial competitiveness, far behind China which is at 26th rank. Several other countries, about which Indians generally tend not to hear much, like Ireland, Slovenia, Finland, Belgium and Austria make the top 15 cut.
Interestingly, Singapore -- known to Indians mainly for its financial services might -- makes it to the 1st position. Malaysia is ranked 18; Canada is at 22, Malta at 23, Mexico at 30, and Brazil at 39. Mexico, Brazil and Indonesia have taken to manufacturing in a big way and are the recent powerhouses of industrial activity. In fact, after China, these three nations seem to be the contenders in global manufacturing.
An international comparison is essential, since the revival of the manufacturing sector in India is intimately linked to the performance of India’s manufactured goods in the global markets. The manufacturing sector may be meeting the domestic needs to a large extent; other sectors of our economy would have been stunted had the needed inputs from domestic production not been there. Obviously, the slump in manufacturing is due to a sharp drop in the export of manufactured goods. For the exports to pick up, Indian goods need to be globally competitive.
We do make a variety of goods from pins to planes, fertilisers to fine chemicals, and lamps to industrial lathes. But in none of the products are we world-class. The basic requirements for being world class are: a top quality product at low enough cost delivered efficiently. How many of our manufactured products meet this requirement?
In how many product categories do we have global brands? The answer is: Practically none. We may make textiles and garments. Textile goods have been a large fraction of our exports and remain so even today. But, these are sold in low cost stores as non-distinctive items. Our engineering goods including the items of daily use or wear are sold more for their downright low price than for their quality. India makes a bit of everything, but nothing is outstanding. India badly needs at least one product that is an internationally respected and demanded brand.
The question is: How will setting up the MIPB help achieve this? Improved inter-ministerial coordination and the presence of NIMZs can enhance efficiencies and reduce costs; but, to what extent will it help build outstanding products? Radical improvements cannot come about by rearranging bureaucracy alone. In fact, there is a danger of providing a platform for conflicts within the government’s departments. The government and the collective manufacturing industry must zoom in on particular products. There is as much mental input as the physical input into the making of a world-class brand. Focused R&D and technology development are the vital ingredients to the global success of a manufactured product today.
Considerable fraction of the exports of our manufactured items consists of products of the medium scale and small to medium scale enterprises (MSMEs). While the MSMEs are the backbone, the quality of their produce has never been given the importance that is needed. The government would do well if it concentrates on this industry for R&D improvements, quality assurance as per global requirements, and efficiency improvements. For worldwide success, it would be better to spotlight our attention on a few identified products or product categories or a sub-sector and give it all the required resources – technical expertise, research, input materials, qualified and skilled manpower, and management wisdom, rather than spreading the efforts thin over a large and non-descript group of items under the umbrella of ‘manufactured goods’.
Focus, excellence, innovation, constant improvement, quality and consistency are the primary requirements. Cost and logistics and promotion are the other considerations. Take any country: South Korea, China, Japan, Sweden, Finland or Germany. They all have distinctive brands and distinct competitiveness. Whatever one does, one has to excel in it. One cannot be an ‘also ran,’ which is what we have been doing starting from screws to ship-making and ear plugs to earth movers.
From our own experience in the field of IT and IT enabled services we should take lessons for global success. This industry from India succeeded because when it started offering services, it was the best available in the world – offering services of a qualified and select band of engineers/professionals at a fraction of the cost incurred in the developed world. It was a business model of our making – fresh, highly useful and easy to use. That has been the USP of this sector. Manufacturing could take a leaf out of that experience.
Distinctive competence is the mantra today. MIPB’s efforts must be directed towards developing that distinctiveness. It may not be possible across the board; in which case, the Board must act selectively. It would really be a travesty if the MIPB ends up as just another tier of bureaucracy to coordinate the existing bureaucracy that has not been producing the desired results.
(The writer is a former professor at IIM, Bangalore)
