Prime Minister Modi recently highlighted the importance of ‘self-reliance’ or 'atmanirbhar bharat abhiyan'. He further stressed that the Coronavirus pandemic forces us to become ‘self-reliant’ or 'atmanirbhar'. These words could not have been more true for India’s manufacturing sector, and Make in India program in particular. It is the right time for India to become self-reliant for manufactured products. Will his government act and develop the necessary manufacturing infrastructure in order for India to become self-reliant in the manufacturing sector? Can we boost our manufacturing output from the current 403 billion US$ to 2 trillion US$ in the next decade? It’s a long and arduous journey, but the journey must start now.
As per the world bank data, India’s manufacturing output in 2018 was 403.05 billion US$ (current US$). Whereas China’s manufacturing output in 2018 was 4.003 trillion US$ (current US$). In other words, China’s manufacturing output is nearly 10 times the size of the Indian manufacturing output. With nearly identical population size, India can not afford to be lagging behind in the manufacturing sector.
It is very well established that construction, infrastructure, and manufacturing sectors are the biggest employment generators in any given economy.
The construction sector is a cyclical sector and is currently at its nadir with many stuck projects and consumer confidence at an all-time low. The infrastructure sector has its own challenges pertaining to land and capital. Therefore, focus on the manufacturing sector or enhanced focus on the Make in India initiative at this stage of time will not only give a boost to India’s GDP growth rate but will also generate formal employment at a massive scale besides making India self-reliant. The timing is crucial because of the following 2 reasons:
However, it will be a herculean task for other low-income countries including India to tap into this opportunity because of the lack of Preparedness. Therefore, the question that arises is how can India prepare itself to tap into this opportunity? This is possible by developing the manufacturing infrastructure in the country. Only manufacturing entrepreneurs understand the various elements of the manufacturing infrastructure which is completely different from the physical infrastructure such as electricity, roads, ports, railways, etc.
Before focusing on the need to develop the manufacturing infrastructure, we as a society need to distinguish between the ‘top-down manufacturing approach’ and the ‘bottom-up manufacturing approach’.
In a top-down manufacturing approach, a large company (domestic or multinational) sets up a plant and then ancillary units come up to supply different parts to this large company. India’s auto sector is an example of the top-down manufacturing approach. This approach is also known as capital intensive manufacturing. Robots and hi-tech machinery are deployed to manufacture products. Therefore, employment generation in this kind of manufacturing approach is limited.
On the other hand, in a bottom-up manufacturing approach, an entrepreneur comes up with an idea to manufacture a product. This idea could be about anything such as toys, electrical items, souvenirs, electronic items, common household goods, etc. However, an Indian entrepreneur does not manufacture these goods in India and instead source these goods from China. No wonder, our trade deficit with China is rising year after year. Why can’t an Indian entrepreneur manufacture these goods in India itself? The answer lies in the lack of manufacturing infrastructure that we just talked about.
Without proper manufacturing infrastructure in place, it becomes difficult for an entrepreneur to manufacture simple common household goods in India itself. So, what are the elements of the manufacturing infrastructure that India needs to develop in order to tap into this big manufacturing opportunity? Here is a list based on the ground experience of entrepreneurs working in the manufacturing sector in India:
Additionally, with this manufacturing infrastructure in place, companies across the world will be encouraged to shift supply chains to India thereby further boosting the Make in India program. The bottom line is, ‘we as a society will be competing on our strengths rather than the extraneous factors originating in China’.
As per the world bank data, India’s manufacturing output in 2018 was 403.05 billion US$ (current US$). Whereas China’s manufacturing output in 2018 was 4.003 trillion US$ (current US$). In other words, China’s manufacturing output is nearly 10 times the size of the Indian manufacturing output. With nearly identical population size, India can not afford to be lagging behind in the manufacturing sector.
It is very well established that construction, infrastructure, and manufacturing sectors are the biggest employment generators in any given economy.
The construction sector is a cyclical sector and is currently at its nadir with many stuck projects and consumer confidence at an all-time low. The infrastructure sector has its own challenges pertaining to land and capital. Therefore, focus on the manufacturing sector or enhanced focus on the Make in India initiative at this stage of time will not only give a boost to India’s GDP growth rate but will also generate formal employment at a massive scale besides making India self-reliant. The timing is crucial because of the following 2 reasons:
- Wages are rising in China since 2006 and therefore companies across the world are looking to develop supply chains in other low-income countries. As we all understand, Production is directly proportional to capital and labor, therefore, there is a massive opportunity for shifting supply chains to countries where labor rates are relatively low.
- Coronavirus pandemic can be a trigger point for companies across the world to look for an alternative other than China.
However, it will be a herculean task for other low-income countries including India to tap into this opportunity because of the lack of Preparedness. Therefore, the question that arises is how can India prepare itself to tap into this opportunity? This is possible by developing the manufacturing infrastructure in the country. Only manufacturing entrepreneurs understand the various elements of the manufacturing infrastructure which is completely different from the physical infrastructure such as electricity, roads, ports, railways, etc.
Before focusing on the need to develop the manufacturing infrastructure, we as a society need to distinguish between the ‘top-down manufacturing approach’ and the ‘bottom-up manufacturing approach’.
In a top-down manufacturing approach, a large company (domestic or multinational) sets up a plant and then ancillary units come up to supply different parts to this large company. India’s auto sector is an example of the top-down manufacturing approach. This approach is also known as capital intensive manufacturing. Robots and hi-tech machinery are deployed to manufacture products. Therefore, employment generation in this kind of manufacturing approach is limited.
On the other hand, in a bottom-up manufacturing approach, an entrepreneur comes up with an idea to manufacture a product. This idea could be about anything such as toys, electrical items, souvenirs, electronic items, common household goods, etc. However, an Indian entrepreneur does not manufacture these goods in India and instead source these goods from China. No wonder, our trade deficit with China is rising year after year. Why can’t an Indian entrepreneur manufacture these goods in India itself? The answer lies in the lack of manufacturing infrastructure that we just talked about.
Without proper manufacturing infrastructure in place, it becomes difficult for an entrepreneur to manufacture simple common household goods in India itself. So, what are the elements of the manufacturing infrastructure that India needs to develop in order to tap into this big manufacturing opportunity? Here is a list based on the ground experience of entrepreneurs working in the manufacturing sector in India:
- Involvement of startup entrepreneurs in the policymaking process for the manufacturing sector
- Development of the tool-room technologies across India
- Development of the concept of ‘manufacturing society’ to grant approvals at a faster rate and to achieve economies of scale
- Financial support to manufacturing entrepreneurs
- Enhanced focus on the technical skill development programs across India
Additionally, with this manufacturing infrastructure in place, companies across the world will be encouraged to shift supply chains to India thereby further boosting the Make in India program. The bottom line is, ‘we as a society will be competing on our strengths rather than the extraneous factors originating in China’.
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