In manufacturing, it’s important to ensure quality to gain an edge over Chinagbs17
NEW DELHI: Indian companies must harness the country’s frugal engineering and its proven research expertise in precision manufacturing to help achieve the federal objective of Make in India, according to panelists at the Global Business Summit.
Banmali Agarwala, president and chief executive officer, GE (South Asia), said increased government spending in sectors such as aviation, oil and gas, and transmissions has boosted demand, and drawing more manufacturing investments over the past three years. “India has huge domestic demand and is ideally suited to be prepared for the next wave of manufacturing,” Agarwala said.
Transportation, particularly the automotive industry, appears to be at the vanguard of the Narendra Modi government’s drive to make India a powerhouse in manufacturing, which has traditionally lagged services as a contributor to the overall output in Asia’s third-biggest economy.
From a relatively non-entity a couple of decades ago, India has emerged as the fifth-largest automotive market in the world, with more headroom for growth as rising incomes make cars and motorbikes affordable to an increasing number of Indians.
Kenichi Ayukawa, managing director and chief executive officer at Maruti Suzuki India Limited (MSIL), said automotive demand will remain strong. “China is a big but mature market with annual sales of around 20 million vehicles.
India has a population of 1.3 billion, but car sales stand at 3 million units. There is opportunity for both companies as well as investments in the manufacturing sector to grow manifold,” said Ayukawa.
Sudarshan Venu, joint managing director at TVS Motor Co, said that domestic demand dropped temporarily in the immediate aftermath of the demonetisation, but consumer sentiment is now upbeat even in the rural markets.
“What is and will continue to drive growth of manufacturing in India is that we have a young population and a highly aspirational population that wants better bikes, cars, or chewing gum.
Domestic demand will drive the need for Make in India,” said Venu. While India is poised to ride the next wave of manufacturing, the country must identify the specific sub-sectors to gain the economies of scope and scale, according to Karan Singh, the Bain & Company Managing Director. Besides the scale advantage that would lower costs, it is important to ensure quality manufacturing to gain an edge over China, Singh said.
Peter G Hall, vice-president and chief economist at Export Development Canada, said India has an added advantage of having one of the world’s youngest working population. Wage rates have started inching up in China, and while the US has been driving its agenda of local manufacturing, the country does not have the labour force required to sustain manufacturing growth. “Make in India makes perfect sense. Our government has identified India as one of the two countries that we have to prioritise to do business with,” said Hall.
But even as the private sector embraces the Make in India programme, it seeks safeguards to ensure their investments are protected. Ravi Uppal, managing director and group CEO of Jindal Power & Steel, said: “Today, banks are talking about non-performing assets and investors are scared to put money in long-gestation projects, given the risks. A hybrid model for investing in manufacturing in heavy industries, such as seen in the roads sector, will help.”