Monday, May 18, 2015

Make-in-India:What Is Really Needed To Make It Happen?

Make in India, no doubt, is what is needed for a large country like India to become an economic power, if not a super power. So the vision statement promulgated by the new prime minister of India is indeed very apt. 

The make in India concept was actively promoted by the government of India only during the initial years of independence and it was Jawaharlal Nehru, the first PM of India who actively pursued it for self reliance. However, the thrust in those days were for public sector manufacturing which created a handicapped system which could not freely develop and progress due to administrative interferences in a predominantly administered industry. 

Then came the new wave concept of free trade and globalization which the Indian government half heartedly pursued and implemented. However, the policies on liberalization that India followed was not any thing with well defined policies. It caused India to develop and progress in an unbalanced manner. The private sector was allowed to compete with the public sector in a selective manner which killed and paralyzed the public sector which operated under severe administrative constraints. 

The casualty was the skilled work force of the public sector!

Large Steel Plates Made in India. 
But the Critical Machinery for Steel Making Are Not Made in India!

During the Nehruvian era, make in India was really happening in India. Had the momentum maintained, India would not have been in the poor state of affairs as it stands today.

Many economists and those who go after macroeconomic figures may not agree that India is in a poor state of affairs economically. There are many masking statistics that hide the realities.

The astronomical growth of the software and information technology enabled services did much of the masking. Economists and media got the opportunity to prepare and project distorted facts and statistical analysis the way they wanted.

That has blinded the policy makers of India and caused the gradual destruction and deterioration of India's core manufacturing abilities. India never had full grown manufacturing abilities right from the beginning. It was essentially passing through the learning period. But before the learnings and the trainings could reap the full benefits, the non-visionaries of India caused the whole thing to collapse or to proceed in a distortive manner.

The biggest handicap that India has is in the areas of producing sopisticated machine tools and equipment for secondary manufacturing. Core industries that were required for the development of secondary business activities were neglected.

Even some of the best public sector tools and equipment manufacturing companies were allowed to die their natural death by the policy makers, either by neglect or by helping their international competitors. Best examples are the Hindustan Machine Tools Ltd (HMT), the Heavy Engineering Corporation Limited (HEC), The Hindustan Steel Construction Limited (HSCL). BHEL, BEL, and scores others.

There exists a few core equipment manufacturers in India even now, mostly in the private sector. But the fields in which they exist are limited and many of them are lingering to survive due to their incompetence to produce competitively. It is the vicious circle for the core manufacturing sector. Lack of skilled labor makes the manufacturing non competitive which in turn causes the industry to lose business and income. They are compelled to reduce the work force or pay less remuneration to the workers. The industry no more would be capable of attracting the best talents or to motivate the existing work force. Even if they got the best people, they could no longer make use of them as the administered work culture did not really promote innovation. 

The resultant has been too obvious for those who understood the problems. The core industries of India that had taken roots initially got weakened. The foreign suppliers of core industrial equipment and systems for the non core indian business were no more facing any competition from the Indian soil. 

The secondary Indian producers were required to procure their equipment and systems at a higher cost whereever international competition was practically absent.

A High Technology Automatic Water Microfiltration Equipment 
Installed in an Indian Factory. But this equipment  is not 
exactly made in India but assembled in India!

Let us consider one example: Suppose that an Indian businessman wants to set up a food processing industry. Many of the sophisticated automatic packaging machinery are not competitively available in India and are either to be imported or to be procured from sources that get them from outside. The costs involved for investment in these machinery and the costs of their operation and maintenance would naturally add to the product costs. If this cost is higher, the margins of profit that is obtainable from the agro product would be less and would not be very attractive. The only advantage that this Indian agroproduct manufacturer may have would be the low labor cost. Many times, the higher equipment cost would offset the labor cost advantage.

On the other hand, because agro industry is not growing, there would be no incentive for any one to set up any agro industry machinery manufacturing facility in India. Once that is not happening, the core competency in this field remains poor within the country.

The Indian governments at the local, state and central levels add many complications further to the industry, especially the manufacturing business. There are contradictory and confusing laws on land, rentals, labor, environment, registration, licensing, taxation, and the like. The Indian governments are at odds with each other most of the time! The Indian judiciary too, would not be of any help most of the time!

Now extending this logic to all other industries, we can easily find that India is at a disadvantage as far as make in India is concerned for most of the industrial products. The vicious circle keep perpetuating and it would not be easy to break it so easily. 

The situation can be changed only by strong governmental intervention and support. Unless there is coordinated approach in the governmental arms, nothing can move forward, practically.

Obviously, a Make In India website or department, is not going to solve the situation. No big industry or nation with the technological resources would like to set up their shops and part with their knowldege and skills unless they gain adequate confidence in the ability of the government of India to deliver what they preach!

India has remained essentially as an equipment purchaser and not as an equipment producer. So far, India has been getting the sophisticated equipment made elsewhere and using those. Even the use of such equipment or technology has not been efficient due to the lack of incentives for the industrial managers for getting the best from their imported technologies or equipment.

Indians are good purchase masters. Every one is interested in shopping. But no one is ready to toil to make. Shopping or purchasing is comparitively much easier than designing and making. Purchasing activity make every Indian feel like kings. It is a common place practice that the suppliers pamper the buyers by gifts or commissions or other incentives for the buyers to become interested. Indians at all levels are very fond of those pampering! They enjoy shopping under such situations. They have been used to it. How could they possibly say no to it now?

Most of the Indians are not willing to do the hard work that is required for designing and manufacturing sophisticated equipment and systems. Indian industry leaders are also not prepared to take that challenge because they consider that not very lucrative. Even if they produce, marketing would not be easy in a competitive environment and they are not prepared to take that challenge.

The competition for getting the purchaser's benefits have been so tempting that almost all the laws and rules made in India, knowingly or unknowingly, kill any quest for pioneering any new innovations. Indian working class and working engineers have already become technical clerks and are becoming alienated from the new technological developments in the core sectors. They simply lack the opportunity to prove their mettle!

It is not practical for the Indian industry and the Indian workforce to start their production acts from scratch with full self sufficiency. They need to be exposed to the current trends elsewhere in the world. Unless they get experience in the current available technologies they would not be in a position to march forward in a competitive world. How do they get the contemporary experience?

The Indian administrative system is one of the colonial era. The world has changed much. But the Indian administrative system remains the same. There is absolutely no skill and expertise mobility across various functional levels. The Indian system works like frogs in the well and in water tight compartments. While managerial and administrative understanding and competency remain much faulted, there is no dearth of novices posing as 'I-know-all' experts in key decision making areas.

Indian adminstrators and policy makers do not even understand the basic differences in the experience levels of engineers in the academy, industry, research and across the various engineering disciplines.

India produces millions of engineering graduates now, only to be employed in non core functions. I do not say that all of them are required for core engineering fields. But, when core engineering work remains non challenging and non remunerative, it would not be prudent to think that they attract the brilliant brains.

Inside of a commercial aircraft of foreign make operated by one of the several Indian airlines.
India has high potential for airline business, but Indian made aeronautics is a distant dream!

Graduate and post graduate engineers are not technicians. They are brains behind engineering designs, concepts and management. But on the work site, it is the skilled technicians that translate the ideas to actual work. Therefore it is essential that these two fucntions go hand in hand and in synchronization. India has been neglecting its skilled technical work force. Most of the existing manufacturing systems have migrated to other countries like China without any one really realizing.

To reverse that now is a herculian task. Given the easy going nature of Indians, the task becomes all the more difficult. 

The growth and development of the aeronautical industry in the world is a saga of industrial innovation and creativity. The Hindustan Aeronautics Limited (HAL) has been in existence in India for the past many decades. Could it do any thing substantial in these many decades? If not, why? Indian planners and policy makers should think about it?

What is the solution to come out of this? Would it be possible for India to do it? Only time would tell.

I have some simple suggestions to make this happen:

First and foremost, let the Indian government do some thing for the Indian engineers in the industry to work freely without administrative restraints that hold back their creativity. Allow Indian engineering entrepreneurs to manufacture new experimental projects  for some years without meeting international standards. If you insist on meeting international norms for any one field of application, that means you want only international players in this field! They may or may not come to prouduce here. Even if they come they come under their terms and only where they find the advantage. International players would come to set shop in India only in those areas where they find things advantageous and not in all cases. Government should encourage existing industries where ever they really did import substitution by some incentive such as tax rebates. 

For example, industrial users procuring Indian manufactured equipment for their use should be given some incentives.

Let the government give a few years tax holiday for those core Business to Business (B2B) industries for enhancing their work force. Giving some corporate income tax rebates for those manufacturing industries who pay better renumeration to skilled employees in the workforce could also be thought of.

Allow industries to set up skill training institutes. Allow them to function autonomously without the interference of the state and central governments including the HR ministry. Certificates of training provided by training institutes attached to industrial units should be treated at par with the academic institutions.

Allow industries to provide advanced training and award diplomas to graduate and post graduate engineers. 

Allow industries to recruit their engineers only from those with advanced industrial training.

Let the industry be allowed to recruit academician engieers and let the engineering academy recruit from experienced industry engineers. Remove the compulsory requirements of PG and PhD for engineers from industry to move to engineering teaching and training fields.

The government should think of enhancing professionalism among engineers by motivating working engineers to share and interact among their fraternity through professional bodies. Government should provide statutory recognition to professional bodies of engineers such as the Institution of Engineers (India)

The government should think of creating a separate service similar to that of the IAS, for giving top governmental leadership to the complex industrial set up of India. Let it be called the Indian Technical Administrative Service (ITAS). Let them be drawn from the technical streams of the Indian government such as the defense, the PSUs, the Railways and the like without them being subjugated to the hegemony of the IAS.

There could be more such things the government can do. For the make-in-India campaign to become a success, the skilled work force of India is the key. The government should create an atmosphere where the work force of India deliver. No nation would be able to set up their shops in India and operate those for mutual benefit unless the Indian work force enhance their competency and skills.

I request my learned readers to suggest more ideas in this context. 

Some day some of these ideas might evolve in to actions! Who knows?

1 comment:

  1. There is another reason why the manufacturing industry failed in India and it is those militant trade unions patronised by the political parties. For any industry to succeed, they must be freed from political and governmental interference. They must be free to hire and free up any resource as per their will and of course within the framework of environmental and labour laws. The labour laws too are archaic and need a change. what India needs now is a very good , stable growth in agriculture and manufacturing industry and that will employ the maximum.

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