Opinion

Covid-19 lays bare our lopsided industrial model

Vinod Sharma | Updated on April 10, 2020 Published on April 09, 2020

The Indian mentality of buying the cheapest has led to over-dependence on China. This should stop. Businesses should go beyond looking at profits to accommodating labour and environmental concerns

Never let a crisis like Covid-19 go waste. A crisis, as unprecedented as this one, will not leave — until we have learnt the very important lesson that it’s probably here to teach us. We were so obsessed with speed, that we lost our sense of direction. It’s time to change direction.

Two weeks of lockdown, and: air quality index @ 40 at Lajpat Nagar, Delhi, a peacock spotted on the main road at Noida, sparrows back in the cities… Nature is in “reclaim” mode. The Covid crisis will hopefully soon be behind us. And we will be back to what we do best — back to “claim” mode. We will all head out, to our workplaces, review our business plans and dive in deep — to make up for lost time, correct the declining growth graphs, and push the pendulum back to where it was. Soon, nothing else will matter.

Does it have to be this way? Is there a better, more balanced “half way” possible? Not until, we change the currency of our success. As long as business is measured merely by growth in profits, countries single-mindedly chase GDP growth and a successful career continues to mean a disproportionate hefty bonus, we will continue to accelerate our decline down this vicious spiral. Measurement drives behaviour. Let’s use the time at hand to review these measurements.

Curtail dependence on China

Here are a few practical suggestions that may change the course of our journey. Governments and businesses should reduce their over-dependence on China, in fact, on any single destination. This will not happen unless we are willing to pay a strategic premium for locally/“non China” manufactured goods.

Our folly of buying the cheapest had led to the global over-dependence on China. . Supply chain de-risking is, therefore, up for strategic discussion. Diversification of supply sources and indigenisation has to become a strategic goal. This may mean abandoning our genetic tactical orientation to buy the cheapest. It will require taking our local supply chain partners into confidence, drawing a roadmap together and a fair amount of hand-holding.

The result will be a genuine competitiveness of the entire ecosystem. Maruti is a good, rare example. Their efforts at building a robust domestic supply chain three decades ago have stood them, and the rest of the Indian automotive industry, in reasonable stead. Most economies have at some point in their development path, leveraged nationalism to further the cause of their enterprises. The Japanese still prefer a Japanese car over any other, even if it is to hitch a cab ride anywhere in the world. The Koreans will prefer a Samsung over any other.

The Chinese brands ensure that almost all components in their products are Chinese. A market size as large as ours should be leveraged to both, attract large-scale manufacturing and investments in India and to encourage domestic participation in an economic revival. Learned economists, I’m certain will have a difference of opinion with this approach. I’ve a simple question for them. Will they be willing to invest in manufacturing in India today, when Chinese goods can be imported at zero duties, thanks to our “open minded” approach to multilateral FTAs and several agreements under WTO. Star rating of consumer goods to display the extent of localisation may be an apt tool to let consumers exercise their choice.

Responsible behaviour

Jobs will not fall into our laps — we need to create them as a society. Back to measurements. We now know that we didn’t get it right. What we thought was most important, wasn’t. We were habituated to “want” much more than what we “need”. “Profit” is not the only reason to be alive. In addition to the financial bottomlines, measurement of enterprises should now include social, environmental and ethical performances. An orientation that encourages responsible, conscious behaviour towards all stakeholders, one that rewards long term impact over short term gains, and above all societal behaviour that is partial to need over greed, can put us on the path to a virtuous cycle.

Within companies, the distribution of value added should be accorded a high priority. Robust continuous growth in profits is important. Equally significant is the distribution of these profits. The disparity ratio — CEOs’ income to the lowest paid employee — is a measure of a fair, sustainable company. Environmental impact is not just what we consume within our factories. The number of employees, the miles they commute, the public transport they use are all contributors. We could continue with partial “work from home” teams in office areas. This could mean a three-day week for several office goers, while their counterparts on alternate days, play supporting roles from homes.

Factory shifts don’t have to be eight hours. A 12-hour shift will mean two shifts rather than three per day. The third shift can hence be given a day off every third day. This will reduce our impact on traffic by one-third to half. Energy requirements within the office and factory will reduce. And the stress within the urban society, wherein we thrive on the mindless pursuit of speed and efficiency, will hopefully be relieved.

The biggest change will, as always, come from the change in our personal attitude and behaviour. Conscious consumption should be our guiding mantra. Our ability to buy should not be the key consideration to make purchases. The realisation that we are all connected, that our buying decisions also have a social, environmental impact is hopefully sinking in now. The lockdown may be extended. The pandemic has impacted our lives significantly. The resultant impending economic crisis is staring at us. But we are a resilient race. This too shall pass. As always however, we have a choice. If we fail to learn from Covid-19, there will be another, maybe a Morbid-25.

The writer is Managing Director, Deki Electronics Ltd, and Chairman, CII National ICTE Committee

Published on April 09, 2020

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