Make in India: Why India can't afford to go the China way in manufacturing

By: Sriram Ramakrishnan

West Bengal's fertile landscape was once dotted with buzzing factories and giant furnaces surrounded by worker bee colonies signifying its pre-eminent position as the vanguard of India's re-industrialisation. Today, industry is dying in Bengal and the landmarks of India's partial victory over poverty now languish, neglected both by the state and by the industrialists who built them.

Kolkata is now a city in transition, a phase in which its best young talent, desperate for jobs, leave the state while the rest of the citizenry groan under widespread misgovernance and, some would say, state-sponsored thuggery. In such a situation, the achievements of young Pallav Nadhani are quite remarkable.

In 2002, Nadhani became one of the first few Indians to create something unique and new in the world of software products. At a time when India's software outsourcing industry was known for its call centres and code writing, he not only fashioned a data visualisation product on his own, but also turned it into a successful business venture. FusionCharts' products have since been used by many around the world with Nadhani and his team especially proud of one customer in particular: US President Barack Obama. The firm now has 23,000 customers and 5,00,000 developers in 120 countries.

The scandal-plagued and ideas starved Mamata Banerjee government can take some inspiration from Nadhani's example as it attempts to revive West Bengal's lost industrial glory. What the state needs is not an ugly sprawl of polluting factories belching smoke and poisoning rivers but an intelligent use of intellectual capital that will give freedom for innovators to flourish and hi-tech industries to establish roots.

Only Saleable Ideas

But politicians are a different breed when it comes to common sense and practical ideas. They prefer grand visions, adventurous agendas where money can be splurged, support bought over and key special interest sections placated. Prime Minister Narendra Modi's 'Make in India' is one such grand statement. Nothing wrong with its aim.

Nobody would argue with the idea of a manufacturing revival. But what's important is the way in which this is sought to be accomplished. This government, like the previous UPA one, may make the mistake of listening too much to western businessmen and investors constantly on the lookout for cheap destinations for manufacturing given that China has now become expensive.

Manhole covers in New York prominently sport the 'Made in India' label, as if Indians are only known for making low-grade stuff. It makes sense for westerners to tout our manufacturing prowess.

However, we should not fall into that trap and allow ourselves to become another base for cheap manufacturing and to be dotted with sweatshops and polluting industries.
China has fashioned itself as a factory to the west and the results are there for all to see. Visitors are often wonderstruck by the grandeur and wealth of Beijing and Shanghai. But the true scale of China's environmental catastrophe is only now becoming clear. Mothers in Beijing are able to take their toddlers out for a stroll only with an oxygen mask, while lovers are more afraid of air pollution than leery louts when they venture out in the park.

India has its own share of environmental problems and they have only multiplied in recent years due to neglect, corruption and the excesses caused by crony capitalism. The World Bank estimated last year that environmental degradation was costing Indian economy $80 billion, or 5.7 per cent of its annual GDP.

AWHO study found this year that Delhi suffered from the worst air pollution in the world. Our attempts to revive manufacturing should not cause us to repeat mistakes of the past or those made by others.

Value Entrepreneur

Now, people like Nadhani are not examples of hi-tech prowess on the lines of an Apple or a Google. Rather, he is a smart entrepreneur who has used his skill to fashion products and services that he believed were necessary to the market. In the process, he has delivered value to himself and his employees. India has a number of such smart entrepreneurs. Many are in manufacturing and in software services and are waiting for an opportunity to make an impact with their prowess and technical skills.

Didn't Get it Right

In a 2005 discussion paper, Harvard professors David Clingingsmith and Jeffrey Williamson made some key arguments for India's deindustrialisation in the 18th and 19th centuries. First, the dissolution of the Mughal empire with its concomitant dislocations eroded the strength of the textile industry. This industry was hurt yet again in the 19th century due to British advances in textile production techniques and the global transport revolution that lowered textile prices. While agriculture recovered somewhat, the industrialisation did not start till the 1860s.

India is no longer a textile-dependant economy. Our challenges are bigger and our expectations heightened by an aspirational generation that wants a better quality of life. China can keep its factories. India should take the road less travelled if it wants to make the difference.