Using the muscle that one has
Rather than compete with China's mega-manufacturing, India can become the world's leading source of indigenously researched affordable manufacturing technologies. China would then turn into a profitable customer
Accounting for a combined world population of 36.3 per cent, India and China are literally two of the biggest competing nations today. Though the race against each other is close, China clearly has an edge. The International Monetary Fund recently ranked China as the number one economic superpower in the world. It calculated that China produced 17 per cent of the world gross domestic product in 2014, compared with 16 per cent GDP of the United States.
China’s ascent as an economic power is largely based on its massive manufacturing capacity. The availability of affordable funds, Government support and world-class infrastructure have helped sustain the country’s manufacturing growth. Sadly, this is where India has lagged behind.
Despite matching China in human capital, India is nowhere close to China’s manufacturing muscle. In fact, with China having to increase its minimum wages, the cost of labour is actually now more affordable in India. Yet, the latter’s struggles with basic infrastructure negate all cost advantage. Lack of sufficient electricity, water, transport networks and other essentials make the Indian pillars of manufacturing more than a little shaky. Add to that, restrictive labour laws and reams of bureaucratic red tape, and the manufacturing dream turns into a nightmare.
It’s true that India’s current Make in India campaign promises to radically change the manufacturing scenario by reducing bureaucratic intervention and strengthening infrastructure. But, even if somehow the playing field between China and India were levelled in terms of infrastructure and policies, India would still be unlikely to jump ahead. The situation would instead lead to a war of attrition. The two countries would compete to lower their labour costs while making products for the developed world — not the best scenario for either country.
How then can India compete with China to make its mark globally? Maybe the path to take is the one less travelled. Rather than putting all our resources and energy into battering heads in the manufacturing arena — which is clearly China’s forte — perhaps India should focus on its own muscle.
India and China match each other in their population. But where India trumps its neighbour is in its knowledge base. India is host to an almost 500 million-strong labour force, a large number of which comprises English-speaking scientists, researchers, and engineers. If India turns its focus on this incredible knowledge capital, it can leverage its huge potential for cost-effective research and development.
The trick lies in gracefully changing track and grasping the hidden opportunity. Rather than compete with China’s mega-manufacturing, India can become the world’s leading source of indigenously researched affordable manufacturing technologies. In turn, China would then transform from being a rival to a very profitable customer.
For example, at Alok Masterbatches Ltd, we have plenty experience in developing specialised chemistries for our Chinese customers. They, in turn, have fed those chemistries into their manufacturing cycle and have churned out better products for their expansive customer base. It has led to a win-win for both India and China.
As a bonus, research-based tools can benefit the Indian market too. Keeping in mind that India has a purchasing power parity of a mere Rs3, 300, we cannot afford exotic technologies. Our strength is in our numbers. India can develop affordable technologies for a captive market of more than a billion people by capitalising on our research and development competence. This will help fuel India’s existing manufacturing capabilities and give the population a better quality of life and access to safer, affordable and sustainable products.
On paper, investing in research and development efforts sounds great. But it isn’t as simple a decision. Most corporate houses struggle with choosing to divert funds into research and development because the investment might take a while to pay off. It is a long drawn process with no guaranteed results. Should one invest in research and development in the hope of creating something unique or should one play safe and pour funds into the existing portfolio? It is a catch-22 situation. Though the decision is tough, the logic is simple. Growth and change aren’t possible without some element of risk and innovation. Think of what the iPod did to the fortunes of the Apple. It was one product, but it spawned an array of ‘i’ products that have given Apple a cash reserve that is bigger than the GDP of many countries.
Sometimes, all it takes is one product. One step backed by foresight to spot an opportunity that will make a difference. The effort definitely seems worth the risk.
(The writer is Director, Alok Masterbatches Ltd)
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