A STORY of INDIAN MANUFACTURING

I have picked up this title from a book. It has it's own relevance. This story will be from my perspective, hence it is referred to as ,"A Story". I will not dive deep into the history but try to put down important facts from my own perspective. India had a very rich resource base and produced products for the global market. The manufacturing sector was booming and in the 16th Century india had a 30% share in the global output while britain had 2% share. The reason was the competitive advantage that india posessed in terms of skill and resources. This is known as the traditional flexible manufacturing phase.

The major changes that occured in the indian manufacturing environment were mostly due to state and government control. There are a couple of facts to back up my claim, when mughals arrived to india they treated india as their place of administration. They started to include territories inside the mughal empire and that helped in free trade. Now , due to the huge size of the empire there were less barriers and more trade opportunities. Hence, state played an important role in the structuring and booming of the manufacturing sector. Next the East India Company came in there was a period of British Raj. They provided instability to the indian economy and that is where our economy started to decline. When the whole world was facing the modern manufacturing shift, India was not able to innovate and grow because the country had no government existence. The britishers imposed policies which discriminated against the indian manufacturing sector. During 1850s, India lost it's comparitive advantage.

The dualistic nature still exists in the indian economy. It was a special feature of all the economies of the world. They had both small and large firms to start off with, but slowly and gradually they all converted into modern manufacturing units. We can talk about JCB which was a family business and which transformed into a modern manufacturing unit. But somehow, India has missed that transformation. Presently, there are still certain firms which are unorganised and come under the category of small businesses, on the other hand there are businesses which are a part of the modern industry. The industrial revolution that took place across the globe was due to the techonological methods and introduction of new techniques. There were different organisational structures that were introduced. All these things helped in the industrial revolution in the eighteenth century.

All the major economies of the world have gone through the industrial revolution but India has somehow missed this phase. India has grown straight into a service giant without utilizing the potential of it's manufacturing sector. There were a lot of opportunities when india could have prospered it's manufacturing. During the end of mughal era, India was one of the top exporting nations across the globe. It was in the traditional flexible manufacturing phase then. As the other economies in the world, it was a time for india to make use of it's comparitive advantage and enter into a modern manufacturing using the machines to produce goods and better technology. Also, the new industry needed protection from the outside market to help in growth of the local industry. Both of this did't take place. There was no stable state control in india to facilitate the introduction of new methods, no policies. And also the indian manufacturing sector was discriminated against and it lost it's comparitive advantage.

The second possible opportunity could have been after the independence. But somehow we were not able to make use of it as well. The policies by the nehru government helped the industries a lot on the supply-side and the state owned industries started to become stagnant because of the subsidies from the government. There was a lack of innovation. The government further didn't provide the freedom to the private enterprises and that restricted it's growth. Even the reforms of 1991 did nothing to transform the labour market. The indian economy still holds a lot of characteristics of the traditional system. Still there is a lot of dependence on traders to sell goods and give consumer feedback. Cluster industries are still prevalent. There exists a dualistic economy and it has not transformed even after centuries. There are a lot of segments in the economy due to which people stick to making low cost and poor quality products because of higher number of middle and lower income group people. Approximately 80% of the organisations are in the unorganised sector. It becomes difficult for the government as well to design policies in such an environment.

This background knowledge raises a lot of questions. It is important to learn from the past mistakes and try to build on them. Probably we are again at a stage where we as a nation can make or break the manufacturing sector. Again, the world is looking towards india as a great potential market as it happened in the 16th century. This time there would be no colonization or EIC. There might be other factors that can hamper our growth loop. A lot of merchants in India who started accumulating wealth in the 1990s are looking further to convert their circulating capital into the fixed capital. It is exactly what happened in the 17th century. At that time we didn't have the right structural stability to drive the nation forward, but the same mistake should not be repeated. It is upto the people to elect a stable government.

Another important aspect that can be looked at is the creation of knowledge sharing and innovative environment. The concept of cluster innovation can be used to drive growth.There are a lot of things to consider. It is important again to understand the root causes and make a startegy to tackle them. We cannot be depended just on the government to make a change. As individauls we need to think how to contribute to the growth environment. Yes one person can make a change given that you identify the right problem to hit upon. It is a way of thinking that matters.

There are a lot of questions that need to be addressed again. To make an excellent organisation, it becomes necessary to set the core values , then define the vision and purpose. I feel there are a lack of indian organisations which can compete in the global environment. There is a new LONG WAVE that is taking place in the nation in order bring a transformational change. It will not be easy to revive the third pillar(manufacturing) of the economy. It is not easy but it has been done by other countries in the world. The post world war Japan has displayed amazing grit and determination. We can learn the good things and take it ahead from there.

This was a overview of the macro level picture. As a manager it becomes necessary to look at the micro level and think about the practical steps that might be taken and the anticipated results.

Saurabh Kukreja : 27 Nov 2018 17:30 |  Tags: Mbe |  Comments (0) |  Report a problem