Saturday, August 18, 2012

India & Manufacturing

Economist in its recent print issue talked about the role of manufacturing in India, and how it is evolving. A few silent points (the bold & underline is my emphasis):

Manufacturing is still just 15% of output (see chart), far below Asian norms. India needs a big manufacturing base. No major country has grown rich without one and nothing else is likely to absorb the labour of the 250m youngsters set to reach working age in the next 15 years.

This is a major issue, and both the Politicians (when they get the time from their own bickering and profit racketeering) and Private companies need to address the infrastructure issue that would form the foundation for world-class manufacturing. The work environment is equally dangerous with rioting and killing of people at plants. 

Yet not all is farce and tragedy. Take Pune in west India, a booming industrial hub that has won the steely hearts of Germany’s car firms. Inside a $700m Volkswagen plant on the city’s outskirts, laser-wielding robots test car frames’ dimensions and a giant conveyor belt slips by, with sprung-wood surfaces to protect workers’ knees. It is “probably the cheapest factory we have worldwide”, says John Chacko, VW’s boss in India. In time it could become an export hub. Nearby, in the distance it takes a Polo to get to 60mph, is a plant owned by Mercedes-Benz.

With all the growth woes, and challenges, the manufacturing firms that are prospering are doing do on the basis of technology:

What is happening in Pune is more sophisticated than epic feats of metal-bashing. While VW’s plant is more labour-intensive than its German equivalent, it still relies more on computers than humans. Local firms, such as Bharat Forge, have been shedding unskilled labour, investing in technology and building brands and distribution overseas. “Indian firms that are technology-focused are extremely successful,” says Mr Kalyani. But “commodity manufacturing is unsuccessful. It is the opposite of China…We have archaic labour laws. Nobody in their right mind is going to set up a plant employing 10,000 people.” His ambition is to make his firm another Siemens or General Electric.

I just returned from a trip to India and yes I was in Delhi when the major power failures happened - yet I remain optimistic. With time the conditions will improve. As always I am long on India! 

No comments:

Post a Comment