Can India achieve self-sufficiency in manufacturing? Indeed, it can. But it will be useful to examine the underlying implications and conditions of self-sufficiency. At one level, self-sufficiency implies independence from other nations, and at another, it could be interpreted as realising economic potential within the nation. In the latter case, self-sufficiency implies an inward focus on opportunities in India. What are relative sizes of the global and Indian opportunities in manufacturing? Here are some rough cut numbers from various sources: the total global manufacturing economy is estimated to be $27 trillion. Compared to this, the Indian manufacturing economy is estimated to be $3.2 trillion — a sizeable difference. Therefore, it would seem that even while pursuing self-sufficiency, it would be more opportunistic to aspire for the global market. Japan did this during its ascendancy, and so did Korea, later.

Besides, an inward looking self-sufficiency paradigm can be dangerous. Going by our history from Independence up till the early 1990s, when self-sufficiency was the foundation of economic policy, it can have a damaging edge if not supplemented with healthy market forces. Self-sufficiency during that period, aided by the licensing system, resulted in mediocrity in everything. The result was a loss of competitiveness as a nation and poor standards of products and services to citizens. Therefore, self-sufficiency should be founded on the principles of being world class. And if we can build world class, then why not world scale?

Reducing dependency

Building self-sufficiency, as defined in the above context, comes from commitments from the firms as well as government. At a policy level, self-sufficiency cannot and need not be all-encompassing. India cannot afford to do this. Discriminating choices have to be made as a nation, which is based on strategic factors.

There are some lessons from the classic “make versus buy” choices that companies include as part of their strategy. Companies do not “boil the ocean” and make everything that goes into their products. They make strategic choices based on criticality to their competitiveness, availability of vendors, supply chain risks and so on.

Of course, the factors that influence such choices at a national level would encompass a larger envelope of geopolitics, macroeconomic conditions, societal factors, natural resources and so on. Nevertheless, there is a need for strategic decisions that involves the choice of which type of industries we should focus on to become self-sufficient. Dependence on other nations in specific areas is not a bad thing, if the dependence has low risks and is otherwise beneficial for the nation.

Enabling self-sufficiency is about building a competitive edge for India that embeds the comparative advantages of the country, in specific products and services. This will ensure that the risk of dependence on other nations for certain goods and services would be mitigated by the reciprocal risk that these nations face by depending on India. Every stakeholder would want their domain to be focussed upon and included in the competitive advantage of India. This is not possible, or even desirable. All nations work on prioritising a certain set of products and services, as part of what makes them stand out in the world.

This does not mean that the others are cannibalised. It is about allocating scarce resources to limited options and to be the best in those.

Corporate efforts

While government policies and investments would certainly go a long way towards promoting the development of the competencies required, at the firm level, ambitions should match these aspirations. It has been fashionable to point out the lack of policy and efficiency in the government as a cause for lack of competitiveness at the level of the firm. Three fingers are pointing equally strongly at the firm.

When it is blatantly obvious that global opportunities for most products and services are exponentially larger than domestic opportunities for the same, it is intriguing why Indian companies have not built businesses that have global aspirations. It seems that an “India out” view is more convenient and maybe provides “instant nirvana” as opposed to a “global in” view, while building the strategy of a company. Do for India and sell outside opportunistically, as opposed to do for the world and also sell in India. The latter takes dedicated commitment over long periods of time to build each foundation of the company. Maybe this is too long a time horizon in the reckoning of companies. Maybe the calendars used to measure results contain highly abbreviated time scales.

That this is possible has strong historical evidence. The cases of Japanese companies after World War II and Korean companies after the Korean War, are undisputable examples. Their starting position were not significantly different from that of Indian companies after Independence. And now, Indian companies are on a far stronger wicket than then. With a concerted, collective and mutually trusting relationship between public and private, we would be in a strong position to build a nation that could be far different than what it is.

Among many things, one thing that is critical to keep in mind is the value of all this to the citizens of the country. It is tempting and probably also opportunistic to build the competitiveness of our nation and the companies in India, on the back of low labour costs. This is certainly a window that is open. But our strategy should be to close it on our own by building competitiveness that transcends low cost.

At the end of the day, we all go to work to improve our standard of living, and one element of this is what we earn. And we would be shooting ourselves in our foot if we build our competitiveness on the premise of earning less.

The writer is Managing Director, Elgi Equipments Limited

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