Moneycontrol
Oct 06, 2016 11:36 AM IST IST | Source: Moneycontrol.com

Preparedness of manufacturing space in the wake of Make in India

Since its launch on 25 September 2014, PM Modi‘s ambitious ‘Make in India‘ initiative has been able to attract the world‘s attention to India as a manufacturing hub.


Since its launch on 25 September 2014, PM Modi’s ambitious ‘Make in India’ initiative has been able to attract the world’s attention to India as a manufacturing hub. The program aimed at driving new initiatives designed to foster innovation, facilitate investment, protect intellectual property, and build best-in-class manufacturing infrastructure in India has been able to attract the likes of global giants like Airbus, Boeing, Samsung, Xiaomi, Foxconn, Fiat, Hitachi, Amazon across varied sectors like defense, aviation, electronics, telecom, automotive and retail.


While everyone is rushing in to reserve their berth on the Make in India express, the success of the program will largely depend on our preparedness to provide the necessary infrastructure in terms of energy, technology, skilled manpower, land, simpler regulations to the industry to become a manufacturing super power nation. Hence, a more plausible analysis should be on the grounds of what is required to make this campaign work, which will eventually decide the fate of this campaign.

First and foremost, to run any manufacturing plant one requires energy and except for few states like Gujarat and MP which have surplus power, most of the states in the country are suffering huge power crisis. Industrial power in India is among the most expensive in the world. Manufacturing sector faces huge power shortage already, so instead of increasing the power tariff and crippling the already struggling sector, we need to focus on improving the distribution efficiency to prevent power loss. As we plan to scale USD 300 Bn Indian manufacturing industry to USD 1 trillion, huge investments are required in field of Power and energy to satiate the hunger of electricity of Indian manufacturing companies.


Secondly, Indian manufacturing companies still do not have technology to scale as 80% of supply chain is still running offline. From interacting with their suppliers to customers and distributors, Indian manufacturing companies are using minimal or no technology.

This results in weakly optimized negotiations, high resource utilization, man-hours wastage, excess inventory pile ups and stock outs which impacts the productivity of manufacturing companies. To enable technology in manufacturing companies and run 100% integrated digital supply chain, home grown software companies have to step up and provide platforms which are tuned to Indian ecosystems.


Furthermore, the core to Make in India campaign is to bring foreign MNCs to set their facilities in India, which will create employment opportunities for our countrymen. However, India continues to grapple with the problem of deficiency of skilled workforce. According to India Skills Report launched in the 3rd CII National Conference, out of 1, 00,000 candidates only 34% were found employable.

India currently ranks 99th in labor market efficiency among 148 countries. A foreign company will always be apprehensive to set its foot on our soil if we are not able to provide it with an employable workforce who can efficiently run its facilities. That being said, we want our laborers to be skilled, and as this happens, we will have to amend the restrictive labor laws which continue to paralyze the country’s business growth.


Another important issue that Indian and foreign entrepreneurs have to deal with is Land. Text books have for long emphasized on setting up a plant either close to the supplier or the customer, however, they never taught us that in India its not customer or supplier who influence where the plant is to be set, but the local state machinery and political parties who will decide whether you will get the land to set your facility or not.

Until recently, even giants like Tata faced the issues of getting land and setting up plant  (remember Singur!) but with Land acquisition Bill passed in the year 2013 the problem looks to find a solution securing interests of  both individuals and industries.


Another important parameter where India’s preparedness to boost its manufacturing sector can be gauged is the road-rail-sea-air infrastructure that is required to bring in Raw material to manufacturing plants and take Finished goods to rural, urban and international markets. India’s logistics infrastructure is less than desirable and predictable when compared to our counterparts in East and West. Initiatives like DMIDC are giving significant boost to certain industrial hubs and we have to be replicated and scaled across other geographies of India.


Moreover, we need to work towards creating a system around speedy approvals. Currently there are on an average 60 approval required to start a manufacturing unit in India. This is only to start the business, and imagine the humongous effort and processes which is required thereafter. A centralized policy on reducing the number of approvals should be implemented to make Indian manufacturing eco-system more Industry friendly.

While we are keen on attracting more foreign investment into the country to boost the country’s economy faster, the make in India Lion can roar out loud only when our infrastructure and policies are prepared enough to support and nurture the manufacturing sector grow and make India world’s manufacturing hub.

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