‘Make in India must be a lifetime objective’

It was precisely a year ago when Prime Minister, Narendra Modi, referred to ‘Make in India’ during his Independence Day speech. The slogan and its lion theme have since caught the fancy of companies in India and across the world.

Pawan Goenka, Executive Director of Mahindra & Mahindra, is as excited about ‘Make in India’ and the road ahead. After a long stint with General Motors in the US, Goenka returned to India two decades ago anticipating India’s potential of developing indigenous automotive technology. “Somewhere in the back of my mind, there perhaps was a thought of India becoming a globally competitive manufacturing nation,” he recalls.

Slow start Small wonder then that Goenka is hugely excited to see this initiative come in though he wishes it had happened ten years ago. As he puts it, though India certainly has made good progress in manufacturing capabilities, the world too has changed. The kind of opportunities for the country to become a globally acclaimed manufacturing nation, which existed a decade earlier, may not be there now.

“We had low cost of labour which could have helped if we had started many, many years ago. Today, that in itself is not enough and we are no longer truly a low-cost manufacturing nation,” says Goenka. One needs to look beyond labour rates and also factor in productivity, costs of infrastructure, land, power, logistics and gestation period - all part of the final cost tally.

Hence, labour cost is no longer the differentiator for India to stake a claim as a manufacturing hub. “We have to look at ‘Make in India’ differently and work harder at it. It will not happen simply because we want it to, but like in any business, we have to create a compelling value proposition,” says Goenka.

Long-tern goal Eventually the goal is for Indian manufacturing to be competitive in India and overseas for both domestic companies and MNCs which means that everything has to come together as part of the alignment exercise. So, trade policies, free trade agreements, import duties, indirect taxes, land bill issues, labour laws etc “have to come together with a single goal” if ‘Make in India’ has to work.

Goenka then cites the example of South Korea which is a top-class manufacturing destination despite its labour costs being among the highest in the world. This happened because the country invested in R&D nearly three decades ago as part of a national objective.

“It was an effort of a nation which focused on R&D to deliver long term value,” he says. It was a tough journey and today, South Korea’s R&D spend is nearly 3.8 per cent of its GDP while India’s is barely 0.8 per cent. This is not all. Nearly 70 per cent of India’s R&D spend comes from the Government while this is only 30 per cent in South Korea with the balance generated from industry.

“R&D spend will create value to manufacturing only if industry, and not just the Government, is spending. Unfortunately, R&D is not something that is going to give you immediate dividends but will take time,” cautions Goenka. More reason whythis must be a “lifetime objective” where the seeds need to be planted in the right places now.

“In my view, investing in R&D is a big thing because eventually there will be some country with a better labour cost than India. And if we do not own technology, manufacturing investment will go there,” he says.

According to Goenka, the other critical pillar in the ‘Make in India’ journey is to invest in brand building for the country as a whole. “This is not just about Incredible India, which is fine to attract tourists, but will not generate a manufacturing base which is the need of the hour,” he says.

Building a brand The truth is that India as a manufacturing nation does not have a ‘brand’. That is not the case with a German product that epitomises top-class engineering. Likewise, quality goes hand-in-hand with anything made in Japan while a Korean product is about value. “Building the brand is important because we need to decide what Indian products stand for. It is important for us to define the value proposition we are going to offer as a country and then work towards that objective,” says Goenka.

Clearly, all this only means that there is a long, hard journey ahead for ‘Make in India’ to emerge a reality. “I believe it is not too late, but since we are starting late we have to work smarter and harder,” he says.

Goenka also maintains that India has many things going in its favour. People here have a tremendous ability to think, innovate and move forward. “Often this talent is not fully exploited because of boundaries that we put around ourselves,” he rues.

Two, entrepreneurial thinking in India is much higher than many parts of the world as evident in the recent e-commerce boom. Goenka also believes large industrial groups have very high aspirations and are willing to take risks and participate in the ‘Make in India’ mission.

“They are ready to step out of their comfort zone, take risks and build the whole ecosystem on ‘Make in India’,” he says. It is these companies which need to partner the Government in this drive as a national priority and not merely to cash in on an opportunity.

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