Harish Damodaran

Why ‘Made in India' is just a slogan

Harish Damodaran | Updated on May 08, 2012

He has the ‘jugaad,’ but not the capital.

The largely bazaar origins of Indian businessmen explains their poor record at manufacturing innovativeness.

Ranbaxy Laboratories is no longer an Indian company. The Bhai Mohan Singh-founded Gurgaon-headquartered pharma major was, in 2008, acquired by Daiichi-Sankyo of Japan.

That still does not take away from its recent achievement — a major one of developing the first ever drug, Synriam, out of India.

Aimed at treatment of falciparum malaria, Synriam is based on two molecules, arterolane maleate and piperaquine phosphate. The first of these is a new chemical entity or NCE, originally discovered through a joint research project funded by Medicines for Malaria Venture (MMV), a Swiss not-for-profit organisation.

In 2003, Ranbaxy licensed this molecule from MMV and entered into a collaboration for its development as a fixed-dose combination product with piperaquine phosphate, which is already used in standard anti-malarial therapies.

It goes to Ranbaxy's credit that despite MMV pulling out of the project in 2007, it persisted in taking the drug through clinical trials. These efforts culminated in its final approval for marketing and launch last month in India.

Forward engineering

Synriam represents the first instance of an NCE being commercialised, even if not discovered, from India. To the extent that much of the work happened before Ranbaxy's majority ownership passed on Daiichi-Sankyo, one can call it the accomplishment of an ‘Indian' company.

Synriam also signifies the sheer distance travelled since 1969, when Ranbaxy unveiled its sleeping pill, Calmpose, a copy of Roche's Valium (diazepam) that the Swiss multinational had mistakenly not patented in India. Bhai Mohan Singh was the first to exploit the huge possibilities for reverse engineering of proprietary drugs and also successfully lobby for a process patents regime facilitating the same.

Ranbaxy's Synriam, Tata Motors' Indica and Nano cars, Godrej's ChotuKool compressor-free portable refrigerators and, much before them, Punjab Tractors' Swaraj tractors, are rare cases of products that have been largely indigenously designed and developed by Indian companies.

Traders by birth

Rare, because production has never been part of the DNA of India's business class, which arose mainly from the bazaar as opposed to the shop-floor, fields or laboratories. This had to do with the traditional varna system, where business was an occupational silo and businessmen predominantly recruited from the vaishya or mercantile order.

The varna vyavastha reinforced an almost neat divide between the trading castes or owners of capital, on the one hand, and those responsible for actual production — the shudras and the dalits — on the other. The resulting divide had huge implications for innovation.

Innovate our businessmen certainly did, but these were mostly restricted to the realm of marketing and finance. Their ingenuity was manifested, among others, in the hundi (an indigenous discountable and negotiable bill of exchange enabling seamless movement of goods and money across the subcontinent), fatka (futures transactions rarely resulting in actual delivery of the underlying commodities), teji-mandi (put- and call-option contracts), goladari (warehouse receipt financing) or even rotating savings-and-credit schemes like nidhis, kuries and chit funds.

While Indian businessmen were second to none in evolving the most sophisticated trading and financing mechanisms — a trait that reveals itself even today — not being directly involved in the production process meant they couldn't have, however, conceived of the moving assembly line or manufacturing with machine-made interchangeable parts.

The only ones who could have done that were the various artisanal, farming and other production-oriented communities. But what they lacked was the capital to convert any of their raw manufacturing innovations — jugaad — into reliable, marketable products. The mainstream vaishya business class, while having the resources, found it more expedient to allocate them for mercantile and speculative activities in the bazaar.

Bazaar Inc.

This fundamentally bazaar-centric disposition of India's capitalists was found wanting though, especially when they sought to make the transition to factory-based manufacturing in the post-First World War period. It fostered an inevitable dependence on foreign technology.

That legacy has continued even in recent times. It is most visible in IT/telecom equipment or continuous process industries like oil refining, petrochemicals and fertilisers — where the core technology providers are wholly foreign.

The picture is no less stark in sectors one would ordinarily regard as low-tech. The entire machinery going into modern rice mills installed in the country today, for example, comes from either Buhler of Switzerland or Satake of Japan. In dairy, too, the two major suppliers of pasteurisers, homogenisers, cream separators, powder plants and turnkey project services are GEA Process Engineering (Denmark) and Alfa Laval (Sweden).

Successful adaptation of imported technologies by Indian companies, if any, have been basically confined to the auto and engineering industries, or those that require only batch processing such as pharmaceutical ingredients.

Innovations in these areas have typically taken the form of process improvisations for making cheaper or rugged versions of the original product to suit local conditions. In pharma, companies like Dr Reddy's Labs have attempted to take reverse engineering to the next stage, of systematically combing through global patents of big-selling drug molecules to identify loopholes and create competing specialty generics.

But on the whole, it can be said that science has never been integral to corporate strategy in India the way finance or marketing are; there aren't too many businessmen who truly believe that research pays.

Thus, a Reliance Industries may engage the best brains for treasury operations, currency and interest rate risk management, or running its international fuel trading desks. But for its Jamnagar refinery, the entire engineering, procurement and construction management contract was given to Bechtel Corporation. Similarly, the technologies for hydrodesulphurisation, catalytic reforming and cracking came from Honeywell UOP, while the rest was provided by Foster Wheeler (delayed coking unit), Black & Veatch (sulphur recovery) and Linde AG (hydrogen generation).

Doing it here

It is against this background that one must look at a Tata Nano or Swaraj tractor, whose development involved no foreign licensing or technology imports. While Swaraj was a product of the late 1960s — when the industrial regime was itself supportive of such initiatives — the Nano is an even more remarkable case of indigenisation in a liberalised, open economy setting, allowing little leeway for intellectual property infringement either.

For the Nano, Tata Motors might have roped in Italy's I.DE.A Institute for its exterior design, just as Bosch may have supplied the engine management and brake systems or GKN the driveshaft that transfers power from the engine to the wheel. But the point is — these were all as per the specifications laid down by Tata Motors; it invariably entailed collaborative engineering between the company and the component makers in order to create just the ‘right' solution for the Nano. Tata Motors on its own filed 37 technology patents and 31 design patents relating to the Nano's development.

The Nano, Swaraj, ChotuKool and Synriam — to an extent, also the Scorpio sports utility vehicle of Mahindra & Mahindra — symbolise departures from the general bazaar orientation of Indian capitalists, which, we have seen, is an entrenched tradition having its roots in the ancient varna vyavastha.

Like all traditions, this one too — that separates the sphere of business from the factory floor or the laboratory — cannot be shaken off easily. It would probably require a new post- vaishya entrepreneurial class to bring about the change that infuses real meaning to Made in India.

Published on May 08, 2012

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