Ashish Dhawan Discusses India’s Electronics Manufacturing Growth

Ashish Dhawan, Founder-CEO of The Convergence Foundation (TCF), stated India’s success in boosting electronics manufacturing should convince all stakeholders of the country’s capabilities. “Many people said we can’t do manufacturing in India. We can never be as productive. Well, here’s someone who’s shown you! The fact that the 29th factory to serve Apple is coming up in India, all within 2-3 years, is incredible. We now have this faith that in electronics, we can make it happen.” Pointing out that India hasn’t claimed its rightful market share in labour-intensive exports, Dhawan added that the country’s demographic advantage, and labour costs that are lower than China’s, tell us that “we have every right to succeed, if we can get rid of our regulatory cholesterol, improve ease of doing business (EODB), create the right incentives, take care of the infrastructure needs, and really prioritise this.” Dhawan made the observations during a conversation with Rahul Ahluwalia, Founder-Director at the Foundation for Economic Development (FED.

Dhawan added that growth in manufacturing must be tied to the larger goal of generating employment, a very salient issue today. Going on to explain why automobile manufacturing may not create many jobs because OEMs have moved up the value-chain over the years to more capital-intensive production, the TCF CEO explained that we must prioritise sectors such as electronics assembly and apparel that are more labour-intensive and can create jobs. He also credited the government for being serious about improving competitiveness. “If the government was saying, we don't care about private business coming in, it would not have happened. All credit to whether it's the Centre or state governments that are saying: I really want to improve my labour, land, all the factors of production. Business is telling me that I'm not competitive and I need to be competitive. So they want good ideas. And they want you to work with them.”

On setting targets for manufacturing, Dhawan stressed the need to treat the East Asian ‘Tigers’ (South Korea, Taiwan, Hong Kong, Singapore and now Vietnam) as our benchmarks for success. “A state like Uttar Pradesh, which has two and a half times the population of Vietnam, does $20 Bn in exports, whereas Vietnam does $400 Bn in exports. UP is landlocked. But even if you take Odisha, it has no labour-intensive exports. All its exports are related to minerals and metals. And it's a state right on the coast, has lots of cheap labour, and yet has not been able to make a push. Even Tamil Nadu, which is very successful in an Indian context, is one-tenth of Vietnam's exports, although it’s 70% of the size of Vietnam from a population standpoint. So, our benchmarks must be the East Asian Tigers, and we have to go after the world market.”

Besides labour-intensive manufacturing, Dhawan argued that India must aim to become the skills capital of the world, the third lever of future economic growth according to him, besides manufacturing and services. “We already have the largest remittances of any country in the world. We have 15 plus million people who are abroad and sending checks every month back home; $120 Bn is now coming back. We think that can go to $300 Bn. And we can have another 15 million Indians going abroad. If you look at the OECD, the demographics are such that they will need people. Though there is a backlash against immigration, I think what they need is not full-time immigrants, but people who come on a 3–5-year contract work visa. That's what the Middle East does. The Middle East doesn't want people forever. Japan and Korea are doing the same. Germany is now pushing in that direction. We think the EU will start to do that. America will come last because it has its illegal immigration problem. But generally, in the OECD, 50 Mn jobs will open up in the next 20 years at a minimum. India needs to fill those.” Dhawan added that government-to-government or G2G arrangements, where India assures the return of its migrant workers, and accreditation of skill providers, are needed to do this on a much larger scale “because the western world needs everyone from drivers to cooks, to nannies, to care workers, to nurses, to doctors, you name it. We've mapped out 20-30 professions and are doing a very detailed study to look at the frictions in each of these areas.”