Here are the steps, needed to take to make the ‘Make in India’ vision a reality | While the PMs ‘Make in India’ campaign has brought out a furore of positive sentiments,a recently released CII –BCG report says that while recent optimism and reform initiatives by the government are a good start there is a long way to go for India to rejuvenate manufacturing. The report titled, ‘Make in India: Turning vision into a reality’ takes a hard look at the government’s ambitious ‘Make in India’ campaign and entails how to transform India into a global leader in the manufacturing sector.
According to the report, after a prolonged economic slowdown and almost a decade of relative inaction though the outlook is now improving the fact remains that India is likely to miss the 2012 National Manufacturing Policy (NMP) target of 25% share of GDP by a significant margin. Of course this is due to the last five years of decline in Indian manufacturing. While setting the ambition for the manufacturing sector, BCG is cautiously optimistic, mentioning “a time of great expectations for India”.
It believes that while the NMP target set in 2012 needs to be revisited and likely revised downwards, yet a strong 10-11% growth can be achieved and that by 2030, such a growth would place India among the top three to five manufacturing economies in the world.
Jamshyd N Godrej, chairman, CII Manufacturing Summit 2014 and chairman and MD,Godrej & Boyce said, “Manufacturing is not just about looking at policy action but also what companies can do about themselves and the CII-BCG report reflects both of these aspects. The report is as much about learning and best practices which exist in different pockets and scale them up.”
The report also goes one level deeper into understanding which sectors will drive this growth– identifying sectors which leverage India’s core strengths (like textiles, which is well placed given India’s labour and raw material advantage), have potential for import substitution (like electronics) and those that can benefit from global shifts and off-shoring opportunities (like the furniture industry).
Presenting a roadmap for Indian manufacturing,with the end objective of achieving global leadership in manufacturing for India, Vikram Bhalla, senior partner, BCG India said, “While there is a sizeable amount of thinking within the government and industry today around the immediate fixes that are needed to revive manufacturing, it is merely the first in our pursuit of global leadership.
India today needs to start thinking about the next phases of growth, one of winning in the global market, which can be achieved only if our entrepreneurs and government adopt a longer term perspective, beyond a quarterly or annual performance cycle and think of the manufacturing industry as an eco-system which will grow as a whole, beyond just individual companies.”
One of the ways where India can win in the global market is by improving the ease of doing business to attract investments in the manufacturing sector. Agreeing, Ajay Shankar, member secretary, National Manufacturing Competitiveness Council (NMCC) said, “We may replicate best practices across states, which would help serve the ease of doing business agenda and help India move up the ranks, which can in turn be a huge step forward.” He also said that there is a necessity to create islands of excellence in infrastructure if new jobs are to be created.
“Single point clearances in the industrial parks/areas should also become a reality by getting a template of approvals ready for doing business in those areas to boost a surge in investment. Labour reforms seem to have a strong consent suggesting it is unavoidable. India needs to move beyond ease of doing business. Though the cost is high there is a need to see where we can improve our cost advantage and achieve new cost advantages, which would mean revisiting the old axiom of scare resource auction and price maximisation,” stressed Shankar Replicating best practices of states throughout the country seemed to find consensus among industry stalwarts. When we asked Godrej as to what attributes Maharashtra has that it can pass on to other nations,he averred, “Maharashtra has a lot of natural benefits. Mumbai itself presents a huge benefit as the financial centre that cannot be ignored. The state also has many natural advantages like roads, railways, airports etc. but most importantly it has the benefit of people.Entrepreneurship can do wonders here.”
According to industry experts, at present,the contribution of manufacturing to GDP is relatively low in comparison to other developed economies. However,our strength in manufacturing lies in stable macroeconomic fundamentals, enviable domestic markets, availability of natural resources, favourable demographics, focus on R&D, skilled man power, etc. Seconding,Ashwini B Malhotra, chairman, CII Maharashtra State Council 2014-15 and MD,Weik field Foods added, “To harness this potential there is a need for concentrated efforts to attract investments both from within the country and outside.”
Prospective foreign investors are indeed looking at India as a potential investment site based on factors like size of the market,availability of skills, governance and proportionate supplies of petroleum products and energy. “India today fulfils the requirement of market size, skills and governance which accounts for a bullish view on the Indian growth story and opportunities in the country,” said Banmali Agrawala, president & CEO, GE South Asia.
With manufacturing having taken centre stage in recent time, it has become “a high agenda point and popular perception in the country which was not the same earlier; way earlier,” stressed Naushad Forbes, VP,CII 2014-15 and director, Forbes Marshall.
Speaking about the relationship between manufacturing and economy, he mentioned that life can be transformed only with mass scale professional education and through employment generation in manufacturing. “Capital investment as well as extensive labour employment is required for manufacturing growth. CII plans to take its nine ‘Centre of excellences’ and work with 1000 companies during the year to have tangible impact in both quality and sustainability as eight out of 10 companies are impacted by this.”
While the industry seeks change on part of the government to make a significant difference in the competitiveness position of manufacturing in India, CII has already done pioneering work in fields of quality,productivity, maintenance, green-co ratings,cost effectiveness and other areas which have facilitated in a large extent to the transformation of the Indian industry.
CII also plans to work more closely with SMEs and MSMEs who are significant contributors of growth. Godrej averred that even though the role of MSMEs has not been significant enough in the present years, growth of it will add significant value.“There has to be a realisation for the SMEs and MSMEs that there is a supply chain and they are integral to the supply chain. Unless they are efficient, contribute significantly to the overall development and engage themselves on every manufacturing level, they won’t be useful for the manufacturing process”,stressed Godrej.
K Venkataramanan, CEO and MD,Larsen & Toubro emphasised that smaller and medium companies were held back from achieving scale as they have mainly witnessed severe crisis following the predicaments in the growth curve. “There is a need for an ecosystem for sustainable SME growth as without SMEs large industries cannot achieve competitiveness.”
The SMEs have always been supplying to large companies on the basis of price rather than the value of the product. “This mentality has to change,” said Godrej. The supply chain has to change on the basis of innovation with major emphasis on value.And in order to make a huge difference in the supply change it is imperative for the SMEs and MSMEs to contribute towards the manufacturing process. “No company or industry today can totally depend on themselves; they have to depend on suppliers.
It doesn’t matter where you are in the value chain, what is of importance is that you add value”, emphasised Godrej.The Indian manufacturing sector is on the threshold of embarking on a path of sustainable and steady growth. The Prime Minister has also conveyed strongly the message of environment preservation, through the’Zero Defect, Zero Effect’ policy. Towards this end, the Government has taken a series of initiatives aimed at improving ease of doing business and created new opportunities of investment in areas including defense,railways, smart cities, industrial clusters and parks, freight corridors, etc. Suneel M Advani, vice chairman, BlueStar mentioned how this will be helpful in bringing about the necessary change.
“Manufacturing in India as a brand needs an ecosystem comprising of ease of setting up units, availability of credits, etc. which makes it a choice for entrepreneurs in India.If we focus on productivity, then the manufacturing activity will become competitive as per the global supply chain.”
What is also resulting in manufacturing getting a make-over is the fact that the industry is embracing digitisation.With two key words of ‘digital’ and ‘bigdata’ sweeping the world today, the major question to be considered is how the future of Indian manufacturing will be influenced by this trend?
Talking of how digitisation would impact quality, G Katragadda, group chief technology officer, Tata Sons said, “When it comes to manufacturing we are very good at producing limited quantity parts. In order to maintain the quality over years and for a million parts we need to get better at a few things. One is to definitely look at the digital strategy. The second is as simple as documenting our processes in a thorough detailed manner.”
Stating an example, he asserted, “If one is cutting a composite fabric and there is only one tool one often does not feel the need to document it. However, in a systematic approach to ensure quality in the long term it is necessary to document everything because one cannot assume who will be on the shop floor two years from today. Hence,digital and better documentation will bring in immense benefits moving forward.”
He also dismissed two myths associated with digital manufacturing – one that it is meant for large companies only and two that it will result in loss of jobs. “Going digital does not depend on the size of the company. “If you are using a number of equipment then optimising the flow and digitally tracking various sensor outputs to optimise process parameters such as temperature,pressure, etc. is important whatever be the size,” stated Katragadda.
India compared to the global world is still at an infancy stage in terms of adopting technology at the level which it could.Agreeing Satendra Singh, head, manufacturing operations, Nokia Solutions, India said, “Though this is true you cannot discount the fact that India had to make a lot of efforts in digital manufacturing when it started off. In industries that are technology intensive, going digital is partly a necessity.
Efficiency is the norm of the game and having a lot of digital imprints in the manufacturing segment is very useful. One needs to look at the return on investment in anything that they invest in.”There are certain industries like the automotive that are heavily automated. However,if you look at the broader thought process,as a country we need to be much more strategic in our thinking on power generation for example. Seconding, Katragadda adds, “So the more you automate the more energy you require. Therefore, there has to be a thought process around how much we automate and how many jobs we create. I think job creation will happen if you increase manufacturing either digitally with lower jobs at manufacturing level or otherwise.
The biggest benefit that India has is its people and it is necessary to leverage on this to grow further.”Despite the surplus of labour, availability of quality manpower – at operating levels, management levels has continued to be a challenge for all manufacturing companies. Addressing the talent challenge is a critical one for manufacturing companies to resolve as they scale up. Industry veterans mentioned that most emerging markets face similar and/or dissimilar challenges –the key is to spot the opportunity. Manufacturing is linked to demand and if there is demand one can combine talent and competitiveness to create a win-win situation. They also agreed that there is a need to create excitement amongst people to boost manufacturing as a career opportunity.