In a group discussion recently, this question came up. How the hell car making in India is easy whereas toy making is so difficult? How come India is able to produce cars and bikes of great quality and yet why can’t India manufacture simple plastic toys? Despite the launch of the Make in India project in 2014, why are our markets flooded with Chinese toys?
For most people including the general public, media, economists, bureaucrats, there seems to be no answer to this dichotomy. However, a person working in the manufacturing sector understands the reasons behind this.
Firstly, for the general public, media, economists, bureaucrats, the overall perception is that manufacturing is one sector. However, this perception is so far from reality. Manufacturing comprises subdomains. However, it’s unfortunate that these very economists and bureaucrats then go on to make policies for the manufacturing sector as a whole including the framing of Make in India policy. It is evident that these economists and bureaucrats have no understanding of an extremely hard and technical subject such as manufacturing.
For the sake of simplicity, manufacturing can be divided into 2 subdomains namely top-down manufacturing and bottom-up manufacturing. The Make in India policy could not differentiate between these 2 approaches as well.
Car manufacturing comes under the ambit of top-down manufacturing whereas toy manufacturing comes under the ambit of bottom-up manufacturing.
In a typical top-down manufacturing approach, a large company, let’s say an automobile company looks at the demand for cars and the size of the sector in India. Having gathered this market insight, this automobile company then decides to manufacture the cars in the country. This company brings in capital, technology and sets up a plant and starts manufacturing the cars. This car manufacturing company sets up the entire plant including the tool-room, production line, assembly line, etc.
Once this car company sets up operations, the component manufacturing companies come up to supply different parts and components to this car company. Different parts and components such as brake system, clutch system, gear system, suspension, piston, flywheel, nuts/bolts are produced by many component manufacturing companies. As the demand for cars grows and the overall size of the car industry becomes large, then other car making companies set up plants. The component manufacturing companies supply parts and components to all these car manufacturing companies. The whole ecosystem evolves and the country becomes a car manufacturing hub. All of this happens not because of the Make in India policy, but because of the demand and the size of the Indian market.
India’s total manufacturing output in 2018 was nearly 403 billion US$. And approximately, 50% of this total manufacturing output came from the automobile sector alone.
On the other hand, in a typical bottom-up manufacturing approach, an idea originates in an entrepreneur’s mind. The idea could be anything. The idea to produce toys, souvenirs, sculptures, plastic goods, etc. Kindly note, no big company will produce these simple common household goods. Only an entrepreneur can take the plunge and test the idea. However, as soon as the entrepreneur decides to produce these goods in India, then, he or she is faced with the challenges of Tool-room, production, assembly. An entrepreneur does not have resources or money to set up all these facilities. He or she needs access to these world-class facilities. And there are no world-class facilities in India. Under the Make in India initiative, the policymakers could not identify the need to provide support to entrepreneurs.
In a top-down manufacturing approach, a large company could set up all the facilities such as the tool-room, production line, assembly for its operations. This requires a huge amount of investment. However, in a bottom-up manufacturing approach, the entrepreneur does not have access to all these facilities. Only the state or the government of the day can facilitate the development of these world-class facilities in partnership with private players. And since India lacks these world-class facilities, an entrepreneur becomes a trader instead of becoming a manufacturer. He or she starts buying these simple common household goods from China and then selling them in India.
Therefore, when it comes to the top-down manufacturing approach, the demand and the overall size of the market matters. A large company will gather this information and set up operations. The state or the government of the day does not provide any support other than granting approvals. Well, this large company does not actually need any state support. This company has all the resources, money, technology to produce goods, be it cars, washing machines, mobiles, bikes, etc.
However, when it comes to the bottom-up manufacturing approach, the entrepreneur needs access to world-class facilities. And this is where the state or the government needs to step in. However, since there is no support in India, the entrepreneur becomes a trader. And Indian markets get flooded with the Chinese goods including the simple plastic toys.
Therefore, the question is, can India produce toys in India? The answer is yes, provided, instead of economists and bureaucrats, manufacturing entrepreneurs are involved in the 'Make in India' policymaking committee.
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