How can India beat China in manufacturing in a simple way

Indian entrepreneurs encouraged to manufacturing 

A few days back, during the Corona lockdown, I got a phone call from a young jeweler who is manufacturing artificial Jewelry in Jaipur. He was worried about the future of his business. Besides the lack of demand, he was also worried about the Chinese components required for his manufacturing. He informed me that China is the only source of 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 could manufacture those artificial stones for domestic and international markets. Also, I suggested to him that this is a good time to explore because the whole world is thinking of an alternative to Chinese products.  

Later on, he replied to me with a positive response. He informed me that he had 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.  

A few days later, encouraged by the later conversation with the young jeweler, I started a telephone discussion with one of my relatives based in Hyderabad. He is an importer of spare parts for mining machinery and equipment. Though not an engineer, he has skills in the mechanical area. I suggested he manufacture a few of the spare parts, maybe 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 explore whether one or two parts are possible and cost-effective. He is now researching 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) in the post-Covid era. The country was not producing a single PPE kit in March 2020 and was fully dependent on Chinese imports. However, in just two months, i.e. in May 2010, Indian manufacturers started producing more than 200 thousand PPE kits per day. Indian manufacturers are not only meeting the domestic demand but started exporting 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 masks in March and April and there was abandonment in May itself.  

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 surprise came from a tribe woman in Chhattisgarh. She started producing sanitizers using honey trees. Tribes use honey trees, 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 scarce during the initial stage of the pandemic.    

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

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. The geography of India is blessed with all types of natural divisions. It has mountains, plateaus,  and plains;  rivers, forests, deserts, seas, and oceans. The northern region is cold, the southern is hot and the rest has 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 the jute crop. Hence, the jute industry is developed on the banks of the Hooghly River surrounding the metro city of Kolkata. Similarly, the suitable weather of Bengaluru helped in developing precision industries such as mechanical watches.  

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

Average age advantage (Younger population)

In 2020, the 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 statista.com. 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 the 1960s.  

Most of the developed and industrialized countries are struggling with an aging 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 the international market. Who doesn't envy the 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 the IT sector. India has been shining in the global IT since Y2K. IT exports from India have 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 like 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 in 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 the potential, to reduce dependence on China and to make India a global manufacturing hub in the long run.  

India has failed to catch the manufacturing bus

China has caught it but India has failed to catch the manufacturing bus since the 1980s. Both China and India had similar levels of population that created a cheap labor advantage over Western countries in the EU and the US. India had the highest number of engineers, even more than that of China at that time. However, Indian policymakers failed to assess 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, the GDP of China is five times that of India, so the per capita income. Presently, the GDP of China is about $14.5 Trillion whereas that of India is only about $2.9 trillion.    

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

India can help distressed global supply chain

 As the US and the EU economies started recovering, they were facing problems in the supply chain. Most of these countries are heavily dependent on China for FMCG. India can start manufacturing those goods at a fast pace to maintain the supply chain. The US stores have been struggling to get supplies of petty things such as paper napkins, trampolines, sanitizers, and so on, as consumer demand has started soaring in retail stores. Online sellers are also facing stress. Being optionless, 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 sanitizers, etc at a faster speed and maintained the critical supply line. They, now, have the opportunity to think globally and grab their percentage in the global supply chain.

Reforms needed

Indian policymakers have to reform economic policy. They have to study Chinese development carefully during the period and come up 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. A few of the most relevant reforms required are stated below. 

Land Acquisition Act reform

The 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 prevents investors from building an industry. Not only are the Indian entrepreneurs, but foreign investors are also scared of the rule. Hence, a speedy reform of 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 industrialists. 

Labor law reform 

Labor law reform is the most important one. late G D Birla, the then biggest industrialist in India once said, " 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 the unemployment problem by looking into its vast and ever-growing population, it has to reform its labor laws.

Environmental law reform

Many 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 compared 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 prices are much higher in India. central and state taxes play a major role in determining petroleum prices. Governments have to reduce these taxes to provide cheap petroleum products to the industries. 

Enhancing savings to GDP ratio

Famous economist and Rajyasabha member Dr. Subramanian Swami argues that the Indian savings ratio is much lower than 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 a GDP growth rate of 10 percent.  

Shifting from service to product in software

Indian software professionals have been in software services since the 1990s. To date, they are reining the global IT industry. There is a large number of these professionals, 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 YouTube 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 it is not trying to create its own. It is shameful to see Indians in TikTok or Hello. India needs an Alibaba of its own.