How Can India Beat China in Manufacturing in a Simple Way

June 29, 2020

Indian entrepreneurs encouraged for manufacturing

Few days back, during corona lock down, I got a phone call from a young jeweler who is in manufacturing of artificial Jewelry in Jaipur. He was worried about future of his business. Besides lack of demand, he was also worried about the Chinese components required for his manufacturing. He informed me that the China is the only source for artificial gemstones required for setting in the jewelry.

India has a border issue with China and Indian citizens are in the mood of boycotting China and Chinese products. Hence, if he uses Chinese artificial gemstones, there is a fair chance of a boycott by Indians. I advised him to study if he can manufacture those artificial stones for domestic and international market. Also, I suggested him that this is a good time to explore because the whole world is thinking of an alternate of Chinese products.  Moreover, the time clock for “Make in India” has also stuck.

Later on, he replied me with a positive response. He informed me that he has searched for the required machinery and chemicals needed to produce artificial stones. As it needs a bigger investment, he has also been negotiating with some fellow businessmen to come together. It is a well known fact that Jaipur is an international hub for colored gemstones. Plenty of skilled labor is available in the market. Hence, it is a suitable venue for producing artificial gemstones.  

Few days later, encouraged with the later conversation with the young jeweler, I started a telephonic discussion with one of my relative based in Hyderabad. He is an importer of spare parts for mining machinery and equipment. Though not an engineer, he has skills in mechanical area. I suggested him of manufacturing few of the spare parts, may be one or two initially. In the conversation, it is revealed that Chinese parts are much cheaper and manufacturing is not viable in India. I further suggested him to explore whether one or two parts are possible and cost effective. He is now researching on the matter and may come out with a possible solution.  

Just now: India has banned 59 Chinese apps including Tiktok, Camscanner, UC browser, Wechat etc giving a tremendous blow to the App industry of China. All these apps have a large user base in India.

 Wonderful achievements in Indian manufacturing during Covid 19 

We have seen that India has successfully started manufacturing Personal Protection Equipment (PPE kit) post Covid era. The country was not producing even a single PPE kit in March 2020 and was fully dependent on Chinese import. However, in just two months, i.e. in May 2010, Indian manufacturers started producing more than 200 thousand PPE kits a day. Indian manufacturers are not only meeting the domestic demand but started exporting those kits, better in quality than the Chinese Ones. Surprisingly, India has become the second largest producer of these kits after China. Similar things happened with the production of musk. There was a crisis of mask in March and April and there was abandon in May itself.  

Video: Indian manufacturers ramp up domestic PPE kit production

Indian companies have manufactured ventilators, a life saving equipment, during this period. The government of India (PM care fund) has already purchased 60 thousand ventilators from ingenious manufacturers. Now, India is ready to export ventilators.  

The biggest surprize came from a tribe woman in Chhattisgarh. She started producing sanitizers using honey tree. Tribes use honey tree, commonly known in India as Mahua, to prepare liquor. The tribal woman prepared alcohol out of it and used it to make sanitizers. Sanitizer was in scarcity during the initial stage of pandemic.    

There are hundreds and thousands of products that Indian entrepreneurs can manufacture, feed the domestic market and export, too. 

Low cost Ventilator manufacturing in India

Low cost Ventilator manufacturing in India

Advantages for India

Geophysical advantages 

India is bestowed with the advantages of demographic division. The country has a huge population, the second highest in the world, truly diverged. Geography of India is blessed with all types of natural division. It has mountains, plateaus,  and plains;  rivers, forests, desert, seas and ocean. The northern region is cold, southern is hot and rest has a moderate weather. And we know that different geology and different seasons are needed to manufacture different products.  

Heavy rainfall in West Bengal and Assam supports jute crop. Hence, the jute industry is developed on the banks of Hooghly river surrounding metro city of Kolkata. Similarly, suitable weather of Bengaluru helped in developing precision industries such as the mechanical watches.  

Iron ore mines in Orissa and Chhattisgarh and coal mines in Jharkhand and West Bengal are the reasons behind gigantic steel plants likes of Durgapur, Rourkela, Jamshedpur and Bhilai.  

Video: Jute spinning and Twisting in India

Average age advantage (Younger population)

In 2020, average age of Indians is 29 where more than fifty percent of the population is below 25 and sixty five percent below 35. Whereas, China’s average age is 37 and it is 48 for Japan. The average age in the US is 38.2 according to The US had an average age of 29 in 1960, exactly equal to that of India in 2010. And the world has seen the progress of America after 1960s.  

Most of the developed and industrialized countries are struggling with an ageing population. Here, India is in an advantageous position with the lowest average age among the major countries in the world. India can leverage its young population to be a manufacturing hub. 

Advantage of various skills and expertise 

There are varieties of traditional skill sets in India. The country produces numerous varieties of handicrafts in different geographies. Jaipur produces marble statues whereas Bengali artisans are proficient in clay modeling and terracotta arts. Similarly, Varanasi and Thanjavur are renowned for their silk saris. Toosh and Pashmina shawls of Kashmir and Ladakh are splendid and fetch high value in international market. Who don’t envy wooden artwork of Barmer in Rajasthan?  

Semi automatic power looms in Bhiwandi, Ichalkaranji, Tirupur and Malegaon generate huge employment among the skilled loomers. Similarly, Khadi clothes from the competent workers of Andhra Pradesh are winning the hearts of fashion designers.   

Where Tirupur and Kolkata are the hubs for hosiery, Ludhiana is known both for hosiery and woolen. Delhi is known for manufacturing jeans, Mumbai for branded garments and Indore for fancy readymade. You can add as many products, as you wish, to the list. 

Expertise in Information technology

India has a huge trained and skilled workforce in IT sector. India has been shining in the global IT since Y2K. IT exports from India has been skyrocketing. Indian IT skills are recognized by the global business leaders.What more, Indian IT professionals are heading the top internet and software companies likes of Google and Microsoft.  

India is way ahead of other countries both in quality and quantity in the software industry.  

Atmanirbhar Bharat (Self Reliant India)

Narendra Modi, the Indian Premier recently, has called for Atmanirbhar Bharat. The invocation of the popular leader is taken hand on hand by the citizens of India.  The cabinet of ministers, government officials, universities and bankers are also prompted to support the mission. It seems to be a flagship program of the central government besides “Make in India”. The program has a potential, not only to reduce dependence on China, but to make India a global manufacturing hub in a long run.  

India is failed to catch the manufacturing bus

China has caught it but India has failed to catch the manufacturing bus since 1980s. Both China and India had similar level of population that created a cheap labor advantage over western countries in the EU and the US. India had highest numbers of engineers, even more than that of China at that time. However, Indian policymakers failed to access the potential of globalization and missed the opportunity. 

 Den Xiaoping, the Chinese president came out as a visionary, reversed the Chinese policy of intrusions, and started a new era of Sino-American friendship. Until 1990, Chinese GDP and per capita income were similar to that of India. However, drastic changes in Chinese economic policy gave them an edge. Now, GDP China is five times that of India, so the per capita income. Presently, GDP China is about $14.5 Trillion where is that of India is only about $2.9 trillion. 

What can India learn from the US, China, and Japan to raise its GDP to $5 Trillion?

On the other hand, India’s footprint in software and other BPO/ KPO sectors is clearly visible in global scenario. 

India can help distressed global supply chain

 As the US and the EU economies started recovering, they are facing problems in supply. Most of these countries are heavily dependent on China for FMCG. India can start manufacturing those goods in a fast pace to maintain the supply chain. The US stores have been struggling to get supplies of petty things such as paper napkins, trampoline, and sanitizers and so on, as consumer demand has started soaring in retailing stores. Online sellers are also facing the stress. Being option less, they are looking to China for a faster supply. Why India can’t be an option?  

Though the political leaders in the US and the EU are continually batting against China, the traders are looking into the same country for continuing supply of consumer goods. Even the public sentiment is against China. However, they are left with no choice. Indian entrepreneurs have shown their ability and courage to manufacture PPE kits, ventilators and sanitizers etc in a faster speed and maintained the critical supply line. They, now, have the opportunity to think global and grab their percentage in global supply chain.

Reforms needed

Indian policymakers have to reform economic policy. They have to study Chinese development carefully during the period and come out with a strategy. It also needs a political will to compel government executives to implement those policies and guidelines determined by the policymakers. A path breaking correction is needed to grab the new opportunity. When I talked to several industrialists and entrepreneurs, they told me about what the reforms needed. Few of the most relevant reforms required are stated below. 

Land acquisition act reform

Land acquisition act in India is an old one. It was made looking into the agriculture based economy. The time has changed a quick reform is needed. Acquisition of a piece of land in India is a tough job, even for a government. It takes years to get a piece of land to establish an industry. This cumbersome process resists investors to build an industry. Not only are the Indian entrepreneurs, foreign investors also scared of the rule. Hence, a speedy reform in the act is expected and the Union and state governments have to act on it.

It is good news that the Indian government has created a land bank by already acquiring some thousand hectares and ready to give to the industrialist. 

Labor law reform 

Labor law reform is the most important one. late G D Birla, the then biggest industrialist in India once told, ” It is easier to divorce wife than to fire a labor”. The same stale laws are still haunting the entrepreneurs. It is ridiculous that an entrepreneur cannot fire an employee whether he or she is productive or not. However, an employee can switch easily without any bar. Many times micro, small and medium enterprises suffer from the switching of their employees without notice. 

Political parties, always, make hue and cry over labor reform issues. They have to look beyond the vote banks. If India has to solve unemployment problem looking into its vast and ever growing population, it has to reform its labor laws.

Environmental law reform

Many a times, environmental laws create hindrances in establishing an industry. We have to reform environmental laws conducive to sustainable development. The country has to reduce unnecessary burdens of clearances. 

Lowering tariff for electricity and oil price

Electricity tariff in India is much higher in India in comparison to other countries especially China. Moreover, India is a country where an industry has to pay more than a domestic consumer for electricity per unit. Similarly, oil price is much higher in India. central and state taxes play a major role in determining petroleum price. Governments have to reduce these taxes in order to provide cheap petroleum products to the industries. 

Enhancing savings to GDP ratio

Famous economist and Rajyasabha member Dr. Subramanian Swami argues that Indian savings ratio is much lower to that of China. Where India has a ratio of 29 percent, China has it in its favor to 36 percent. He writes that if India can raise it to 36 percent it can reach to a GDP growth rate of 10 percent. He has written this in his article in the Sunday Guardian on June 27.

How India can overtake China in economic growth

Shifting from service to product in software

Indian software professionals are in software services since 1990s. Till date, they are reining the global IT industry. There is large number of these professional, educated, trained and experienced. However, India has failed to bring world class IT products. Why can we not create products like Google, Facebook, or Twitter? Why did we fail to create a simple platform like You tube or even a Vimeo? Why Indian IT entrepreneurs are not looking to build a company like Microsoft, Oracle or Cisco? India provides the highest customer base for most of these companies but not trying to create its own. It is shameful to see Indians in Tiktok or Hello.  India needs an Alibaba of its own.

Driving India to a $5 Trillion and $10 Trillion Economy: Modernization and Digitization 

Written by Darshan Kothari

Founder of Vardhaman Infotech - Blockchain & AI development Company. Developed world's first KALQ Keyboard. Thiel fellowship runner up. Love reading books.

June 29, 2020


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