Joining Make in India and Acting East

By Roopen Roy Jul 21 2015

As we aspire to harvest demographic returns from our young population, we should be mindful of the flipside. High rates of unemployment will create social disquiet and threaten our growth story. If these pockets of lack of economic opportunity, are clustered in specific regions, we are asking for social unrest. We must plan to spread the fruits of reform across all segments of our society. The bounty of development must reach the remotest corners of our country.

If we cut to the chase, creation of employment for our young population must remain at the front and centre of our agenda for development. We all know that employment cannot be created on a large scale without expanding our manufacturing base and encouraging our entrepreneurs to invest in job-creating industries. “Make in India” is envisioned exactly with that objective in mind. It is a reality, though, those investments in the form of FDI and domestic private capital in manufacturing will mainly go to the advanced states with good infrastructure and developed industrial clusters. In order that all parts of the country develop, it is critical to direct investments from government and state-owned companies thoughtfully and strategically to backward states as well.

Make in India is a comprehensive framework. The notion that make in India will convert our nation into a sweatshop of low-paying jobs, is a misdirected argument. We have a large market and a young, trainable talent pool. These are the two key ingredients of make in India. We have many fine examples of make in India already. We have to multiply, scale and coalesce them into a gigantic value-creating and employment-generating locomotive.

Of course, we have to improve ease of doing business and connect with the global value chains to accelerate manufacturing activity. But our strategy should be different from the Asean countries with small markets like Thailand. We have a huge and growing market. It should enable us, like China, to play a game that is different from just manufacturing low cost auto parts and rubber tyres. Take the example of Suzuki. It is not the largest car manufacturer. It is #4 in Japan after Toyota, Honda and Nissan. But Maruti Suzuki has become the #1 manufacturer of passenger cars. It is even exporting to third countries. That is what we should aim when we make in India.

There are other variants of make in India that will generate employment. Take the case of Huawei, a Chinese company that focuses on creating products for digital connectivity and information pipes. It employs 3,000 engineers in its R&D centre in India and co-creates products for the global market. That is also the power of make in India. Let us look at GE’s R&D centre in Bangalore. Through frugal innovation, it creates products that have unbeatable price-performance curves. That is also make in India.

Then why are shy to talk about the elephant in the room: China? Why is it that Apple products are made in China and China is also one of its largest markets, yet, China creates little value for itself? Indians are providing talent to global software companies, but we have not produced either a Microsoft or an Oracle. So, why do we not learn from Airbus? France and Great Britain fought a bitter war with Germany in which, millions died on both sides. But in the 1960s, they banded together to form Airbus to compete with Boeing. The rest, as they say, is history. Why can China and India not come together and form an Airbus like consortium to create the next Goggle or Fanuc? Why can Japan and India not come together to co-create a green society based on hydrogen fuel to replace gas and coal? Why can we not cooperate with the US and Germany to co-create products to make in India.

Make in India has a broad enough spectrum to embrace low-tech job generating manufacturing and hi-tech innovation. Manufacturing is the key to growth, development and poverty reduction. We must use this programme strategically to uplift the under developed parts of our country: the east and the northeast.

Foreign investments will not line up to invest in weaker states. The government and state-owned companies must assume a vanguard role in investing in manufacture and infrastructure to kickstart a virtuous cycle. Only then will the private sector and FDI follow. The rejuvenation of the IISCO steel plant in Burnpur by SAIL and the establishment of a large gas-based power plant in Tripura are examples of how the public sector can make a huge difference as harbingers of transformational change. Similarly, the speedy implementation of connectivity projects in the northeast and infrastructure projects like the deep-sea port in West Bengal will be catalysts of transformation not just change.

While some Indian economists have written off the regions east of Kanpur, we should not allow the doomsday astrologer-economists to make self-fulfilling prophecies. The point is to change the status quo. If the east and northeast remain underdeveloped, weak and impoverished, our nation would be distracted by disquiet and turbulence.

The eastern and northeastern regions have a few advantages. They are close to a large and vibrant hinterland that is growing faster than the rest of the world — China, Asean, BIMSTEC, BMIC corridor — whichever way you cut the cake. Improving connectivity is opening up new opportunities. Who imagined a decade ago, that gas from Tripura would be converted into power and wheeled to Bangladesh next year for the mutual benefit of both countries? Who thought that businessmen from China and Bangladesh would actively scout for investment opportunities in eastern India? As connectivity improves, the east will emerge as an important piece of the growth jigsaw puzzle. It is, therefore, time to join the dots of make in India and act east to usher in an era of rapid but sustainable growth.

(The writer is managing director of Deloitte Consulting, India)