Roadmap to counter the Dragon in the factory
11 July, 2020 | newsx bureau
The current chain of events taking place at Line of Actual Control at the Tibet border among Indian and PLA soldiers has generated uproar against China's autocratic and expansionist regime. This ar...
The recent series of events occurred at Line of actual control at Tibet border between Indian and PLA troops has created outrage against the autocratic regime of China and its expansionist spree. People have started self-boycotting possible products of China and nationwide protests have taken place. The government also banned 59 Chinese online applications with huge user base & popularity. But can we afford to boycott without quality alternatives? We should be realistic and sincerely upon issues & challenges faced by our Industrialists, Entrepreneurs & Service industry.
Manufacture in China and sell it in India is the new trend because we have failed to build up the eco system for Research & Developmentand innovation in the country. Investing on R&D is assumed to be waste. We could not develop a single indigenous product in the software industry with a global brand value like Apple, Google, Facebook, twitter though we have the best IT companies and brains in the country. We have copied their products like Flipkart from Amazon, Ola or Uber etc. We need to understand the challenges and try to improvise and innovate at the earliest.
China has emerged as a manufacturing superpower in last decades. World could not realise how they got enslaved with cheap and bulk items with value for money. They have products for each pocket both in quality and price. Today China controls major items sold by top brands on likes of Apple, Sony etc. Each electronic device manufactured in world has a part manufactured in China. China’s cheap labour and speedy execution of projects made it Numero Uno of manufacturing world.
Post COVID-19 world is anti-China, thanks to Wuhan virus. It has demonised China and its approach to human life, values, ethics and work culture. The world is searching for options where it can have goods with quality, competitive price and timely delivery. Over 300 foreign companies have decided to shut their manufacturing units in China and move to safe and better place. Japan declared two billion $ relief package for companies to shift from china.
India is placed better to address the situation and grab this opportunity. We have cheap labour compared to the rest of the world except China, Vietnam or Bangladesh. We have better infrastructure now. We have a democratically elected Government committed for growth and welfare of people. Whereas what dictatorship can lead to can be witnessed in China. No human rights, no transparency, massive corruption, uncertainty in policies and hostile conditions.
If weevaluate proand cons of Indian business environment in an objective manner, our weaknesses and strong points as compared to China.We already discussed democracy and human right index is well above in India compared to China. Civil rights are enjoyed to the maximum or we can say at times it’s been abused.
Censorship on the media and other communication means there is almost no transparency. The recent corona pandemic is evident how China risked humankind by hiding corona virus. There is no concrete information about actual number of deaths by corona virus in China. Had there been free media thousands of lives and huge resources could have been saved.
The areas which needs to be addressed immediately:
- Policies are still not fully business friendly
- Corruption in middle and lower rungs of bureaucracy
- Slow processes of decision making, implementation and communication
- Absence of long-term policies [ policies may change with the change of a government]
- Politics in business related decisions. [ Location of new plant, political pressure for jobs etc]
- Specialised Banks for each sector
We don’t industry-friendly policies which can inspire new entrepreneur and industrialist to venture in to large scale production facilities as the market is still controlled by few business houses. They kill each opportunity for the MSME to emerge big. Intensive focus needed to mitigate challenges faced by the MSME industry. Draconian laws of British era still exist in Indian regulatory system, Environmental laws, Land acquisition and conversion of land for industrial purpose is biggest source of corruption and major road block in development. Files take month and years to be cleared despite capitation money being paid to officials at each Collectorate or revenue department. Digital Mapping of land and its conversion should be done online. Alternatively, Centre or State Governments themselves should identify land parcels in advance, purchase them from farmers or other sellers, obtain necessary clearances, build infrastructure [ like roads, power and water lines] and keep them ready for sale. In any case for so many business-like electronics, IT, Argoproducts,environment and forest clearances are unnecessary. It takes years for approval and promoter starts losing interest on the project even before project gets off the ground. This is because bank loan starts accumulating interest on it.
South Korean steel giant POSCO waited for so many years to set up its steel plant and has finally walked away because of such delays.
Bureaucracy is biggest hurdle in development as the decision taken at highest level fails to get implemented at ground. For example, in recent corona pandemic, govt of India has decided to reduce performance security deposit up to remaining project cost but it has not been passed on to agencies by departments, contractors are suffering serious financial crunches.
In short, policies should be well thought out and must be for long term, should not be influenced by changes in the government or ministry or officials. Polices should be such that there are no scopes for corruption or delays.
Though an autocratic regime is believed to be more corrupt, in china the corruption is limited to the top rungs of Chinese Communist Party only. Autocracy helps them in implementation of policies and projects in real-time. Fear of being severely punished works well with such way of governance. Contrary to this India has seen a non-corrupt regime at Centre in last 6 years. But mid and lower level is still the same, its big roadblock to policies and programs of the government. For example, Banks are told to lend to SME, MSME sectors to support it to revive. But banks are hell-bent on not doing it. They follow same old line of no work is better than to be held accountable. They fear of being booked by ED or CBI for any wrong lending. PSU bank and government enforcement agencies must understand that they are also doing business and some cases resulting in NPA doesn’t necessarily mean corruption.
One classic example is Dholera SIR, the brainchild and dream project of PM Modi. A huge 72 square kilometre area has been developed with world-class infrastructure near Ahmadabad out of the proposed total area of 920 Square kilometres. It was conceived when PM Modi was CM of Gujarat,
over 6 years since he became Prime minister but not a single industry has moved in. A sum of over Rs 5000 crores already spent on development so far. It’s time to invite those 300 companies moving out of china to Dholera SIR. They can start manufacturing within a year with ready to move infrastructure in place. Present Modi government has been talking about so called “Plug and Play model” for new business, Dholera SIR is ideal location to execute this Plug and Play model.
The lower and mid-segment of government must show accountability towards timely implementation of the government schemes from time to time. Technology can play a big role to settle this issue. As the world is making new norms post COVID work culture, we should focus on online meetings for quick approvals, disbursements of disputes if any. Unnecessary movement of physical applications and paperwork should be avoided. The human interface only can reduce corruption and speed up the work.
Specialised banks for each sector
The rapid growth of china is largely attributed to planning of finances to new enterprises. China has separate bank for each business sector like Industrial bank of China is for industry-specific. Agricultural Bank of China is for agro-business only. Infrastructure bank of china is for infra projects lending. This makes the officials expert in their respective field and easy to understand customer needs. In India, all our private or public sector banks are doing all the businesses and they don’t have expertise in any specific business. They struggle to learn new type of project or consumer demand comes to them. We have our own ILFS or NABARD or NBFCs but they too are mired in red tape and corruption. We should improve and upgrade work culture of these lending institutions to make them more business friendly. Large PSBs should have “desks” or single widow systems for specific businesses.
Presently our yearly imports from China are about Rs. 5 lakh crores. Bulk of them comprise of following segments:
- Telecom equipment
- Organic & Inorganic chemicals, intermediates, bulk drugs, agro chemicals, dyes etc
- Textiles [ including manmade fibres and yarns]
- Air conditioners & Refrigeration equipment
- Automobile batteries
Government must approach concerned trade bodies for above businesses to seek implementable solutions from them to replace these imports in time bound manner. Most of the items mentioned above are already being made in India. Some of them can be imported from other countries for time being [ Refer case of Hero Motor Cycles, they cancelled their orders worth Rs 700 crores from China for auto components and planning to buy with little higher price from Germany but will eventually make them in India]
In short term our objective should be to meet domestic demands for these products. While doing this, we can address issues of quality and prices. This will enable us to globally compete China and should focus on “suppliers of first choice” because of anti-China environment across the world.
We are able to produce best of engineers and managers for the global businesses. Time is ripe for us to harness this talent to counter this Chinese challenge.
Key take aways
* Encourage all government departments dealing in revenue, environment, and pollution control to go digital and online to speed up the process, transparency, avoid harassment to industrialists.
* MSME sector must get close attention of Top decision-makers. They are backbone of economy and employment. About 50% of export earnings are from MSME sectors also employs 55% of our work force. While political leadership has realised importance of this sector, bureaucracy is yet to respond positively to this critical sector.
* One nation one tariff for electricity. It varies from Rs 2.5-7.00 per unit.
* The manufacturer is confused, by the time they start production with pre-existing benefits announced by the incumbent government, the government changes and new policies come to force. They should have a protection pact for a minimum of 25 years.
* People should be encouraged to establish units in their own locality/ state and must be given incentives for such initiatives.
* Consumption of goods made locally should be encouraged. Such goods are bound to be cheaper as they don’t involve storage and transportation costs.
* Bank lending must be done easily with lower collateral security & rate of interest to encourage new entrepreneurs & should be on top priority.
Any business decision involving huge capital outlay will be taken with prime consideration for the risks involved in safeguarding the capital deployed. This can be assured only with consistent long-term policies, political stability, rule of law, corruption free administration, efficient funding institutions and availability of skilled manpower. All these areas need to be addressed by political leadership. Beginning has already been made. China has provided us with the impetus to move ahead quickly in all these spheres.
The writer is a PHD scholar from NIT surat.