Hope is not a strategy... March 2018 issue

Meyazia 27 Square - commonly known as Arat Kilo - is a square in Addis Ababa, the economic and political capital of Ethiopia - As per the WEF World Economic Forum’s (WEF) Global Competitiveness Report 2014-15, India is still an economy that is ‘facto

Hope is not a strategy...

In the World Bank’s 2014 ranking of the ease of doing business in 189 nations, India was ranked 142nd. Some proof that our manufacturing sector and foreign investors have infrequent encounters
Steven Philip Warner | The Dollar Business


Welcome to 2015! Recall the thoughts that crossed your mind when the final minutes on the clock ticked away from 2014 – the good wishes that poured in, your silent resolutions, and determined belief that the new year will be a never seen before sum of fruitful days outside the bylanes of compromise. Never mind the selfishness for not having wished anything for ‘India’ per se, truth is – all thoughts and wishes exchanged during those last few minutes, can be identified with one simple, powerful word. Hope.

It’s the same hope that makes foreign trade stakeholders in India calm when they close their eyes imagining goods tidings – one of them being the new Foreign Trade Policy. The other, our nation’s new manufacturing war cry – ‘Make in India’. However, hope alone doesn’t guarantee that a developing economy is shepherded away from economic stagnation. There’s strategy that finally plays a role. And hope is not that strategy!

So what’s the prescription to making ‘Make in India’ an immediate reality?

As per the WEF World Economic Forum’s (WEF) Global Competitiveness Report 2014-15, India is still an economy that is ‘factor driven’. [Meaning: it’s low wages that is driving the nation forward.] Alongside nations like Burkina Faso, Burundi, Ethiopia, Lao PDR, Lesotho, Malawi, etc. [By the look of this list, some of these names aren’t worth remembering!] And this, when the same report classifies others like China, Sri Lanka, Thailand as ‘innovation driven’ economies! There are other reports that prove how India’s drive down the manufacturing highway is laden with problems aplenty.

Inverted tax structures across various industries – like pharma, consumer electronics, tyre, chemicals, capital goods, etc. – that run against the interests of manufacturers have to be eliminated with immediate effect. High interest rates is another pain point. With one of the highest interest rates amongst industrialised economies, Indian manufacturers are fighting a battle half-lost on home soil! Perhaps the government can ease monetary policy and cut interest rates to reduce the cost of capital for India’s manufacturers and enhance their efficiencies. Global experience suggests that public-private partnerships (PPPs) have always worked to develop a manufacturing ecosystem. It happened in Brazil, Singapore and China in the 1970s. And there is no reason why it should not work for India now! India’s government should therefore remove regulatory barriers for the sectors to engage in PPPs.

Creation of ‘manufacturing’ clusters around the country, enhancing infrastructure (critical sectors like power, aviation, roads, ports, etc.), reducing red-tapism, streamlining bureaucracy, strengthening commercial-legal framework, providing adequate protective environment for IP safeguards for foreign firms, altering our archaic labour laws, ensuring that innovation and manufacturing centres go hand-in-hand, and encouraging exports-based manufacturing across industries through added incentives are some strategic areas where the Indian government can work with purpose.

At a time when companies in India have started working on modern IT concepts like collaborative product development and demand-driven supply chain solutions, it is shocking that Indian policymakers have almost altogether forgotten next generation hi-tech industries that can fetch India glory. There is much to achieve on that front too! (Read this issue’s cover story titled, ‘India’s unfinished business...”)

Moving up the value chain, and beyond sub-contractual and tier III manufacturer-supplier-exporter mode is the need of the hour. We need to bother about what we make, rather than just...make. To not care what the colour of the cat is as long it catches mice is an attitude for pre-liberalisation days.

The strategy for the government is to create export-manufacturing opportunities. An export-led growth strategy will work for India as it did for other Asian economies. There is always enough room for exports-driven growth (what else has a 30% growth in German exports between 2009 and 2013, despite all the woebegone stories about the PIIGS proven?), and the world will accept a higher-quality cousin of export-driven China.

The Make in India campaign is more of an antidote than an original thought. Good news is, India is not without options. With the right strategy in place – and not expecting a hope-led show – we will have the right to claim prosperity in the manufacturing sector, as we did in services (remember the Y2K trigger?).

May 2015 prove a year of elegant objectives, and one popular for massive (but real) infrastructural projects. We’ve made it to Mars already. Let’s try moonshot this year. Happy New Year!