The Hindu Business Line : Made in India

NOWADAYS, willy-nilly, be it the economist, the technologist, the social scientist or the political pundit, everyone has to be a China watcher. China has already won the race in manufacturing. No doubt, India is a front-runner in the services sector.

This though is no consolation to the likes of Mr V. Krishnamurthy, the Chairman of National Manufacturing Competitiveness Council, who wondered, in a recent interview to a news magazine, why, for example, our ceiling fans should cost 40 per cent more than those made in China. He and others, brought up in the tradition of manufacturing, would like like to challenge the Chinese supremacy. Decades of poor shop floor productivity combined with impediments created by inadequate infrastructure have relegated manufacturing to second place. This when India boasts of annually turning out 4,00,000 engineering graduates against China's 4,90,000 and its long tradition and experience in absorbing technology in skill intensive industries such as automobiles, engineering and chemical industries. Now, perhaps things will take a turn for the better. Companies such as ABB, Honeywell, and Siemens (electrical and electronic products); Cummins, DaimlerChrysler, and Toyota Motor (auto components); and Degussa and Rohm and Hass (specialty chemicals) have shown the way by setting up manufacturing base in India, despite the quotidian litany of complaints of erratic electricity supplies, poor roads, and grid-locked seaports and airports, not to speak of government policies that discourage hiring.

Indeed, the next wave of global outsourcing in manufacturing will take place in just these kinds of industries, experts say, in addition to fabricated metal products, machinery, pharmaceuticals, and telecom equipment. Another light at the end of the tunnel is the emergence of reliable suppliers in some of these skill intensive industries. This has attracted firms such as LG, to make handsets in India.

Writing about automotive components, a Mckinsey Report estimated that a US-based auto components manufacturer could easily increase its potential return on sales by three to six percentage points if it shifted manufacturing to India and sourced 30-50 per cent of its requirements locally. Of the 800 Indian suppliers, over 600 companies have acquired ISO certification for quality. India has come of age in skills and strengths in process, product and capital engineering. For example, automotive steering systems for Maruti Alto were redesigned locally to achieve a 15 per cent reduction in weight. In another model of steering assembly, the lead time from drawing board to production was cut down from four years to just six months.

`De-automating' production processes to take advantage of skilled low cost labour in India is increasingly recognised as a sure fire route for US auto makers who are under tremendous pressure to cut costs.

Japanese automakers are realising costs could be 20 per cent lower if they shifted design activities to and purchase equipment in India. Low-cost programming and engineering skills of Indian workers have generated savings of up to 85 per cent where companies purchase second hand capital equipment and refurbish it in house. All these advantages are compelling many automakers to set up engineering and design centres in India. The auto components exports from India are registering an annual growth rate of 25 per cent and has crossed $1 billion. Yet, there are issues that need to be resolved if global companies are serious about exploiting India's potential.

They must make sustained investments to develop suppliers and strong Indian managers with skills and the authority to spot and solve local problems. If managers, after proper training in regulatory requirements, are delegated the authority of local supervision and autonomy there will be tremendous benefits in terms of speeding up the internal processes of design, testing prototypes, manufacture and introduction to markets.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

More Stories on : Outsourcing | Impressions

Stories in this Section
Farm credit package in the offing?

Made in India

Dollar deluge

Challenge of measuring service sector growth

Towards financial inclusion

RBI's Report on Currency and Finance 2004-05 — Banks must compete, consolidate and converge

The `real face' of free trade

`The US is not losing its competitiveness'

Some lessons in brand-building

The EPF rate

Black pepper