The Combination of Services & Manufacturing to Drive the Next Level Growth: Jamshyd N Godrej
Confederation of Indian Industry (CII) held its annual CII Manufacturing Summit, in collaboration with the Boston Consulting Group (BCG), its knowledge partner for the event. On this occasion, CII-BCG published a report entitled ‘Future of Indian Manufacturing: Bridging the Gap‘, where BCG assesses progress of the ‘Make-In-India’ thrust, compares states on their quality of manufacturing ecosystem, looks at global shifts, and lays down imperatives for the industry. CII-BCG also conducted a survey among the leaders of the Manufacturing industry, for developing the key themes in this report.
The report takes stock of the recent progress of the manufacturing sector and the Make-in-India initiative, an year down the launch. The outlook is broadly positive given the growth in IIP as well as clear uptick in the manufacturing FDI. The overall IIP grew 3.2% in the first quarter and 14 of the 22 sub-sectors showed positive growth. The buzz around Make in India has been positive and many large ticket announcements have been made. The report also notes the efforts on reforms related to land, labor, GST and procedural simplifications. However, only 20% of the executives surveyed feel that there has been an improvement in ‘ease of doing business’. Nevertheless, 42% of the executives feel that the government’s manufacturing drive has been effective, as against the 21% who feel otherwise.
The CII-BCG report highlights the declining attractiveness of China as a manufacturing base due to labor and yuan challenges, and emergence of new destinations such as Ethiopia and Vietnam which are becoming competitive. In addition, the report notes that the adoption of advanced manufacturing technologies is disrupting the advantages of low labor cost. According to an analysis by CII-BCG, the cost of industrial robots will decrease by an estimated 20% by 2022, while their performance has been increasing at 5% per year. These developments point to a clear imperative for the Indian industry to focus on innovation. The survey responses also corroborate this focus as 75% of the respondents indicated innovation as focus of their technology investments.
In a positive development, several states are upping their game to attract manufacturing investments. The report calls for continuing action by the State and the Central government on reforms, simplification and infrastructure build-out. In addition, it also highlights the industry responsibility to invest in creating long term capabilities and shun the urge to adopt “jugaad” methods.
Mr Jamshyd N Godrej, Chairman CII Manufacturing Summit and Past President CII & Chairman & Managing Director, Godrej & Boyce Mfg Co Ltd said, “Strength of services sector combined with the strength of manufacturing is the future. To reach our full potential though, we need close co-operation among a vast number of agencies especially between people involved in complex system of manufacturing. We have to understand all connections and complexities of its working.”
Mr Godrej further said, “We have some of the finest manufacturing companies based in India doing exemplary quality production. We have strength but the question is how do we build on those strengths and improve upon areas that need improvement. We have to realise that the industry cannot ask for protection. Because the more protective we become the world will react in the same way. Our strength comes from competitiveness and not from protection. India benefits from essentially being more competitive.”
Speaking at the backdrop of the event, Dr Arindam Bhattacharya, Senior Partner & Managing Director at BCG, said “Make in India initiative couldn’t have been launched at a better time. Global manufacturing is in turmoil with the low cost model of last 2 decades coming under pressure. China’s competitiveness is eroding. Brazil, seen as one of the most competitive 10 years ago is becoming a high cost country. In contrast, world’s largest economy, the US’s whose competitiveness had eroded has become one of the most competitive and is bringing back manufacturing capacity from offshore low cost countries. In contrast India’s relative competitiveness has remained constant. This turmoil provides a unique opportunity to become a top 3 manufacturing player in the world, becoming a top 5 country manufacturing exporting nation from current 15th position. Make in India has changed the mindsets – both inside and outside the country. Accelerated implementation of reforms being implemented in the fundamental build blocks of Ease of doing business, power/coal, infrastructure build-out, labour laws, taxation could ensure that this is not another missed window of opportunity for India.”