How can India become the next manufacturing hub?

India is one of the world’s fastest-growing major economies, but its exports of value-added products are relatively low. About 50% of the total exports are from commodities and low-value addition items, while in China and the US the value-added products contribute to more than 75% of their total exports. 

Opportunities for innovation in manufacturing

• Innovation in sourcing: New components, new suppliers, or an improved deal with the existing suppliers
• Innovation in the manufacturing processes: Process innovation is aimed at garnering competitive advantage through reduced costs, improved quality, and reduced time-to-market.
• Management innovation: Innovation in management processes and principles that will eventually change the practice of how and what managers do which will have a long-lasting impact
• Innovation through technology:  It is through the Technological innovation that new technologies are introduced into production and consumption.

Why do Indian firms not innovate?

A large percentage of Indian companies do not have the policy or human resource capabilities to invest in innovation. India fares much more satisfactorily when compared to other nations in terms of research and development (R&D) spending. 

• R&D: There aren’t that many of the big and modern firms that are investing a huge amount in R&D and most firms in India don’t have the capability to do R&D. This means that the Indian firms lack the ability to take a careful look at their basic plant layouts and can’t create long-term plans. They don’t even have an HR (Human Resources) policy to channelize their innovative strategy.  Also, the focus should be on increasing productivity and not simply focusing on R&D or single-mindedly increasing employment.
• Other aspects like upgrading quality, adoption of better practices and products, and licensing technology from abroad needs to be addressed.
• Employment: The goal of public policy can’t just be to employ people. You must have a long-run strategy of employing people in progressively better jobs and it requires raising productivity and an innovation agenda at the level of the nation. However, it certainly is not feasible for a country or a company to do everything by itself. India even today gains a lot from borrowing technology from abroad, which then enables it to leapfrog some existing technologies, such as the case with 4G adoption or the implementation of BS-VI fuel norms.
• Identifying an opportunity: Many firms have trouble identifying an opportunity; in the sense that they don’t have the managerial capabilities. SMEs (small and medium enterprises) are constantly in a situation where they are putting out fires, they don’t have a five-year plan, and they don’t have somebody keeping track of what new technology has come out of someplace that they could bring to the firm.

India will become a manufacturing hub for electric vehicles by the year 2025

The Union Minister for Road Transport and Highways and Micro Small and Medium Enterprises, Mr. Shri Nitin Gadkari had expressed confidence that in the coming five years, India would become a manufacturing hub for electric vehicles. Gadkari said that the government is trying to extend the best possible concessions to this manufacturing sector, and the government has lowered the GST on the electrical vehicles to 12 percent.

Mr. Shri Nitin Gadkari has said that with the limited availability of quantity petroleum fuel, the world has to now look for cheap and alternate sources of energy. The adoption of electric and biofuels would be a good option. He also hinted towards the ensuing vehicle scrapping policy and said that it will give a fillip to the auto manufacturing sector.

Shri Gadkari recalled the London model of public transport, where public and private partnership is working very well. He said that a similar approach should be adopted in India also as it will be beneficial for the civic administration as well as the poor commuters. He specified working on a pilot project which would deal with the development of an electric highway on the upcoming Delhi-Mumbai Green Corridor.

The minister expressed full confidence in the capabilities of the automobile sector. With consistency and self-confidence in this economic crisis, the manufacturing sector can gather good market opportunities. Now vocal for local movement is catching up and it is high time that India tweaks the formula of ‘Make in India’ to ‘Make for India’. The minister called upon indigenization of the industry and support for Prime Minister’s ‘Atmanirbhar Bharat Abhiyan.’

Is India at an advantage in attracting the Foreign Investments?

Undoubtedly, India is at an advantage because due to the COVID pandemic many American companies that are operating in China are rethinking to transfer their business elsewhere (some companies planned to shift even before the corona pandemic) and India is seen as a favorite business destination and India has already started its preparation to take advantage of this great opportunity.

Uttar Pradesh, which is the most populous state of India, has already in the process of developing an economic task force to win over firms who are keen to shift their business from China. India is quite very keen and it is coming forward to harness this opportunity.

There is an urgent need to develop strategies that foster innovation: Innovations typically involve long gestation periods and investment, thus to ease the process businesses could adopt a three-pronged strategy for innovation:

• initiatives that are likely to impact the organization in the long term,
• quick wins and
• continuous incremental improvements for the existing products.

This would broaden the scope and mitigate the risk of putting too many resources into one initiative. An innovative strategy that includes incremental innovations and continuous improvement will help in liberating minds throughout the company. It will make people quite more receptive to change; when big breakthroughs happen.

The manufacturing sector should think that rather than making products for foreign markets (which is in fact a cumbersome process) India should focus on producing commodities for our vast Indian population which otherwise cannot afford the expensive imported goods.