‘India shouldn’t compete with China on low-cost, high-volume manufacturing’

David Frigstad, Chairman of global growth consulting firm Frost & Sullivan, visits India twice or thrice a year. His recent visit coincided with the launch of the clean India drive by Prime Minister Narendra Modi. “It inspires me to see a leader outside with a broom. I was interested in Modi’s efforts to make it more business-friendly, to end tax terrorism and of course the beautification campaign. Despite all odds, the person at the top is committed to change. It is exciting to see innovators, investors and the Government coming together now,” he told BusinessLine in an interview that dealt on issues ranging from priorities for the Modi Government to innovation and the comparison with China. Edited excerpts:

What’s your view on the new Government?

It is unprecedented that today countries are battling for economic development and fighting for employability. So, when the Indian Prime Minister talks about creating a manufacturing foundation for the future, it is an unbelievable opportunity to connect the information technology prowess, which is already developed here, and develop manufacturing. This is an unbelievable opportunity.

How are investors abroad reacting to the new Government?

Recently, at a seminar in Malaysia, the big topic of conversation in the crowd was on Modi’s commitment and the inspirational leadership from the front. It is hard to change the system and laws but there is incredible enthusiasm among economists, investors and leaders about India’s market potential and this whole thing about manufacturing. India’s role in this is a big game changer because Mexico, America and Europe are looking to take factories back from China and bring them home. The Governments of Singapore, Ireland and Turkey are leading the race fighting to create jobs at home. It is not about manufacturing but what to manufacture, getting the right skill sets and linking education with Government support, policy and tax strategy. It is very complex but Governments are starting to see their role to (make) things happen.

What does it mean when India joins the manufacturing club?

It changes the market dynamic dramatically. India’s unbelievable asset is the IT infrastructure and it is going to dominate manufacturing going forward coupled with plenty of labour and an affinity for education and the Internet of Everything. We are not too far away when India will see connectivity and education as basic human rights because the technology that you make is cheap.

What’s the advantage India has?

India is strong in sectors like aviation, defence, healthcare and automotive. Some of the great disruptions in the planet are sparked from India like IT outsourcing, which was the most disruptive thing we have seen in our lifetime. It was totally innovative and it destroyed thousands of companies but built some global companies like Tata, Wipro and Infosys. My favourite example of innovation is the Arvind Eye Hospital that does cataract surgery at a fraction of cost when compared with global markets, including the US. That’s incredibly innovative product that will destroy the global healthcare industry.

So what stands in the way of development?

While infrastructure is developing at a high speed bureaucracy is the biggest impediment. It is sad to hear somebody say it is difficult to set up a plant in India and it is even sadder to see half the product coming from China when you visit a shopping mall.

Which will win – ‘Make in India’ or ‘Made in China’?

Right now it is China that’s winning but it has many problems. It is not clean and transparent. China is pro-business and setting up a company is easy and they move fast when they want to do something. It is very impressive. There is capital structure but there is problem in Intellectual Property that will hold back investment. There is lot of incentive to come to India.

Is it fair to compare India and China?

It is a bad comparison. The two are competitors. It does not matter. But India should not watch China at all. You don’t want to compete on low-cost high-volume manufacturing. That’s not where the world of employability is going to be. It certainly worked in the last decade for China but it is not the future. India should look at industries providing high-paying jobs. The IT industry is a huge step in the right direction followed by pharma and bio-tech.

What should the Modi Government’s priorities be?

It is important for a political leadership to invest in the future and develop inspirational ideas about where they want their citizens to be in 20 years. Since you have a majority rule now, it is a great opportunity to have a 20-year plan on areas like infrastructure, education, human rights, clean water, energy, connectivity and healthcare.

The Japanese, Malaysians and Singaporeans did this very well. It is important to create an aspirational goal of where India should be in the next 20 years. And, then start working backwards with ten-year, five-year and one-year plans. It could be a good idea to have a roundtable with top Indian CEOs and (some from) outside India to get their inputs on what’s slowing down investment and to look at what slows down entrepreneurialism.

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