Can the Indian tiger take on Chinese dragon?
Indian Prime Minister Narendra Modi’s Make in India Week, which recently ended in Mumbai after a colorful start replete with mascots and film-star studded cultural shows to attract foreign direct investment, had a sinister signal — a huge fire broke out at a cultural show connected to the big event.
In a way, as some averred, the blaze, which mercifully did not cause any casualty, was a sign that the country needed to tread the Make in India path with more caution and less optimism.
Although the Modi campaign was meant to take on China and emulate its 2014 export miracle and India scored big victories that included a promise by Taiwan’s Foxconn to invest $5 billion in an electronics manufacturing unit, there are still critical impediments on the way.
Even with a doubling of India’s foreign direct investment to $59 billion last year, the country cannot rest on such laurels.
According to a study made by the Boston Consulting Group, the “proportion of manufacturing to gross domestic product has remained around 17% for five years, below the government’s goal to raise it to 25% …. Also, India has only created four million manufacturing jobs since 2010. And at this rate, it may only create eight million jobs by 2022, well below the government’s goal of 100 million”.
Professor Ravi Aron, a manufacturing expert based in America, said India could not possibly match China’s exports for two important reasons. India had poor infrastructure (bad roads, inadequate railway network and unsatisfactory telecommunication facilities) and its workforce is not as skilled as that of China. Not as disciplined either, I would add.
Sadly, India neglected its manufacturing sector for two decades, jumping from an agrarian economy to a service-oriented one. And 20 years is a long time for a vacuum to remain a vacuum.
China slowly but surely filled this vacuum with hundreds of its goods — all kinds of goods — that first made an appearance on India’s border areas. They were smuggled into the country through Nepal and Bangladesh, and Indians got a taste of Chinese products, which were not superior, but so cheap that they gave a real run for money to India-made stuff.
Over the years, Chinese products improved considerably in quality. They may not be world class, but they are far better than what they were five years ago. However, the biggest coup came in the form of pricing, Chinese goods were — and continue to be — sold for a song!
Two weeks ago, I was in the southern Indian hill resort of Kodaikanal where on buying a hat I found a ‘Made in China’ tag on it. I got it for a mere Rs 100 (roughly a dollar and a half), and when I asked the shopkeeper why he was not selling a hat ‘Made in India’, he quipped, “But sir, will you pay three times the price for a hat that will also be qualitatively inferior to the one manufactured in China?”
I was foxed. I had no answer.
Last year, I picked a beautifully designed emergency lamp from Fuzhou that cost me Rs 500. I can never hope to get one in India for less than Rs 1,800, and the finish is not great.
My young friend, Lalith Jain, who sells baby products in the southern Indian city of Chennai, stocks goods which he mostly sources from China.
“The finish is beautiful. The design is unique and the margins I make are decent, because they are reasonably priced in China, where I go every two months”, he contends.
Mind you, these are legally imported from China.
Today, so many goods in India come from China — from crackers to electric bulbs to electronics to garments to stationery. And they are in demand, because their quality is superior to what is being made in India — if made at all — and prices are far less expensive.
This is the kind of Indian market that Modi is trying to change. He is into a huge publicity drive to get the country’s manufacturing machinery into motion. Sadly, we are 20 years or more behind China, whom we consider our main competitor.
For all these two decades, India completely neglected its manufacturing sector, its industrial output, focussing instead on the service sphere, including internet technology. But with the IT in the doldrums the world over — and with much of IT India’s workforce depending on American or other Western establishments — the scene here is not happy.
Of course, India needs to kick start its factories, but it should peg its expectation at an achievable level.
As Aron quipped: “It should not be called ‘Make in India’ but ‘Make In Spite of India’ “.
His advice to the Indian government, “Scale back your ambitions and focus on the growing domestic market”.
And India has a huge home market (still growing) that needs to be provided with quality products at competitive prices.
Gautaman Bhaskaran is an author, commentator and movie critic, who has worked with The Statesman in Kolkata and The Hindu in Chennai for 35 years. He now writes for the Hindustan Times, the Gulf Times and Seoul Times.