Indian manufacturing industry needs to grow fast to tap into the world's China+1 outlook: AM Naik

AM Naik, non-executive Chairman of Larsen & Toubro will step down from his post on September 30.

Indian industry to take advantage of the global 'China plus one' sentiment and the Indian government should come up with a long-term strategy with a time-bound plan for implementation, said veteran industry leader AM Naik (81), who will be stepping down as non-executive chairman of the Larsen & Toubro (L&T) Group on September 30.

"I think India has spent (the last) 50 years not very wisely, we should have spent a lot of time on building manufacturing like China and becoming self-sufficient in defence," Naik said in an exclusive interview to Moneycontrol, adding that Indian industry missed the boat on sectors like the smartphones and aeronautics.

"China manufactures 70 percent of smartphones. India has just started. But India still depends on China for components. We must have a strong ancillary base to support the final product," Naik said.

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He added that China has been able to add aircraft manufacturing capacity in the last few decades while India has not created a manufacturing base for the aeronautical industry till now and depends on imports from the US, France and Russia.

"While some indigenisation has taken place, a lot more must happen. The government has invested heavily in Hindustan Aeronautics. But the question is why in the past 50 years Hindustan Aeronautics has not been able to do what China did in less than that—manufacture planes, including commercial planes," the industry expert with 60-plus years of experience said.

He called for a think tank to make decisions on when India needs to move away from imports and set up manufacturing capacity indigenously.

Naik added that in order to not fall behind in other sectors, Indian industry needs to act fast and set up large-scale manufacturing. "I am a restless man. I believe things should happen faster. There is a need for speed and scale," Naik said.

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Following the outbreak of the Covid-19 pandemic and the disruption of global supply chains across the world, most large manufacturing companies have tried to adopt a "China plus one" strategy by diversifying their investments and manufacturing facilities and looking for alternative countries to set up a manufacturing base.

He pointed out that while the scale of manufacturing has increased in India in the consumer goods, automobile, steel and electronic appliances sectors in the last few decades, the government should come up with long-term strategies to increase manufacturing scale for all sectors.

Naik highlighted that under the current government, central policies have helped boost manufacturing capacities in India.

"I have struggled my whole life with respect to government policies; there was always something or the other... There have always been challenges, but I think as time has passed, and particularly in the current prime minister’s time, when he started talking, Atma Nirbhar Bharat… What I was talking about alone is now the voice of men," Naik said.

Naik added that L&T has been championing self-reliance in the key sectors of defence, nuclear power, space research, power and infrastructure.

He called for Indian industry to not be afraid of international competition and pointed to L&T's foray into the information technology space as an inspiration for the growth of manufacturing in the country.

"If you talk about international competition, where have we not had international competition? IT is 95 percent international and we started from zero. Look at all infrastructure, our hydrocarbon business is at least Rs 50,000 crore over the year which is outside India," Naik said.

Naik, widely known as AMN, has been a part of L&T for more than 60 years. Throughout his tenure, he was instrumental in the company’s fortune and in its transformation into a global conglomerate.

Naik said that India has the potential to transform and grow any manufacturing industry in the country. "We have to have talent, which is so good and so devoted, that they can transform the company in terms of the applied technology, or creation of new technology. We need to have the right leadership," Naik said.

He pointed out that going forward, the government needs to help the industry expand in the green energy segment.

Naik throughout his tenure has been a champion of increasing manufacturing capacity in India to compete with global players.

In July 2022, a grouping of 18 economies, including India, the US and the European Union, unveiled a roadmap for establishing collective supply chains that would be resilient in the long term.

The roadmap also included steps to counter supply chain dependencies and vulnerabilities. This can be seen as a part of the overall China-plus-one strategy.