“India has opportunity to become manufacturing hub” [June 2012]

June 19, 2012 9:56 am

Reluctance to innovate and excessive dependency on imported goods to meet domestic demands are currently the bane of Indian manufacturing sector – Rajabahadur V. Arcot, VP and GM (South and East Asian operations), ARC Advisory Group
Growing Indian Economy Needs an Expanding Manufacturing Industry The Indian manufacturing sector has all the prerequisites to contribute to the country’s economic growth and expand. However, the industry needs to be more proactive in pursuing opportunities and take the path of innovation. It is equally true to aver that Indian economy to sustain its growth needs a performing manufacturing sector.
According to Rajabahadur V. Arcot, Vice President and GM (South and East Asian operations), ARC Advisory Group, “India is a country of 1.2 billion people and presently the economy is driven by the service sector. The service sector has helped the Indian economy to take off but in future the Indian economy can expect to sustain its growth only when the manufacturing industry gears up to meet the country’s demands for manufactured goods, products and equipment”. Manufacturing Industry is Extremely Risk Averse and Lacks Innovative Spirit Backed by the buoyant economic growth, the Indian industry has numerous opportunities to grow. However, currently the manufacturing sector in India is not doing much on the innovation front and does not leverage the power of enabling technologies to improve its competitiveness.
Manufacturing companies in India are not doing enough to emerge as leading players willing to compete with global peers on a sustainable basis. Today, the industry, lacking the innovative spirit and extremely risk averse, depends excessively on imported and proven technologies.
“We are yet to come to a stage where we believe in ourselves. The journey of Indian manufacturing sector started nearly 60 years back but 60 years is a long time; the rest of the world is not willing to give the country the time to catch up”, said Mr. Arcot. He further added, “Today our trade deficit is approximately around US$ 185 billion, which is largely because of excessive reliance on imports to meet the domestic demand for a wide range of manufactured goods and products. The innovative approaches will certainly help the industry to reduce dependency on imports.”
“The industry must be willing to compete along with the global players and for that to happen the industry must leapfrog and adopt right process technologies and integrate enabling technologies in all processes relating to product development, plant engineering, operations management, and maintenance,” Mr Arcot feels.
Focus on Factors that Help Gain Sustainable Competitiveness Blaming the government policy for lack of pace in manufacturing growth is a regular story as far as Indian industry is concerned. However, on a different note, Mr. Arcot averts, “Rather than looking at incentives, tax concessions, and such others from the government, the industry should gear up and change its outlook. The dependence on State policy measures does not help manufacturing companies to gain true sustainable competitiveness”.
“The government has already initiated certain measures to make the manufacturing industry’s contribution to 25 per cent of the GDP, which is currently around 16 per cent. However, the question remains – what are the industry initiatives? Creating production capacities is only aspect. Innovating new business processes, performing better than your competitors, achieving continuous improvements, and such others are the important hallmarks of successful companies.
There is robust consumer demand and this demand will keep expanding as the economy grows. The demand for goods that satisfy not only the basic wants but also the aspirational needs, such as white goods and consumer durables, would increase. The country’s manufacturing industry is not in a position to meet these demands and benefit from it and these are currently met through imports. With imports exceeding the exports, the country faces huge trade deficit, which in the long term is not sustainable. The industry has an opportunity to expand the manufacturing base and produce some of these things, which are currently imported.
Mr. Arcot also believes that at present, Indian manufacturing industry is too risky, averse and is not willing to take on the global competition. Taking an aggressive approach, Mr. Arcot asks why we should be importing power plant equipment and even simple gadgets and machinery from China. India has the capability to design, engineer, and produce the needed goods and products if it can have confidence in itself, shed its risk aversion, experiment with innovation. The industry should ask what it can do rather than ask what others can do for it.
Some Policy Initiatives are already in Place The government has initiated a policy to take the manufacturing industry to contribute not only to increase its contribution to the industry but also to add 100 million jobs. While India has highly qualified workforce, the country is also blessed with people who want to migrate from rural areas to urban setting. An expanding manufacturing industry can certainly absorb them but they need to be trained and re-skilled. The manufacturing industry must also create an environment that attracts the qualified workforce, which presently covets for the service sector. The government has also established the manufacturing competitive counsel; “Captains for Indian industry and the manufacturing competitive counsel should sit down together and see how they can work collaborate. Mr. Arcot adds, “I do not see this happening at present.”
Develop Growth Strategies The future looks bright for Indian manufacturing sector but the country’s economy can pick up and get into the sustainable growth phase only when the manufacturing industry expands to meet the domestic demands. Manufacturing companies must leapfrog and directly enter the era of smart manufacturing that is resource-efficient, sustainable, and extensively leverages manufacturing information technology, advanced automation, and analytics.
Rather than looking at incentives, tax concessions, and such others from the government, the industry should gear up and change its outlook. The dependence on State policy measures does not help manufacturing companies to gain true sustainable competitiveness
Taking a step forward in this direction ARC Advisory Group is organizing its forum Transforming Industry and Infrastructure through New Processes and Technologies in Hyderabad on July 5-7, 2012. The Forum will discuss how manufacturing information technology empowers continuous improvements in critical areas like asset management, production efficiency, product quality, safety, sustainability, and supply chain efficiency. Transformational technologies help companies retain vital knowledge, collaborate effectively with customers and suppliers, maintain operational excellence, achieve sustainability goals, and improve their processes to stay ahead of competitors. Transformational technologies also play an important role in achieving efficiencies during the entire plant lifecycle. The forum will bring together key decision makers and thought leaders from chemical, oil and gas; electric power including renewable energy; cement, metals and mining; and food and beverage and pharmaceutical industries along with suppliers of automation systems, enterprise solutions, and manufacturing IT solutions. The knowledge transfer will come from case study presentations, panel discussions, workshops, and peer-to-peer networking.
Note: The information provided and views expressed in this article are his personal based on his long association with the industry and personal recollections. He can be contacted at raja@arcweb.com.