Manufacturing excellence in India: opportunities and challenges

Manufacturing sector growth and GDP of the country runs in tandem. In today’s world, the increased level of globalization and competition is forcing the firms to gain competitiveness, this ‘improved competitiveness’ in its broadest level is referred as manufacturing excellence. And as the business meet theme goes, we are here today to discuss on manufacturing excellence in India: Opportunities and challenges.

India has already gone through a strict policy regime for the industries in an era of 1970s and 1980s, which ended after liberalization came to India in 1990’s and changed manufacturing sector a lot after that. Today, Indian firms are working on a world class quality (WCQ) and total quality management (TQM) approach to achieve manufacturing excellence at par with the scale at which global leaders run their operations in respective fields. The manufacturing sector is moving from conventional sources to greener technology. Reduction in emission levels, use of ERP & MRP has moved the manufacturing sector to the next level of future technology. These all initiatives will help India achieve manufacturing excellence in more structured way.

So what constitutes manufacturing excellence and why is it required in India?

It’s a very important question and we must know answer to this.

The need to raise the global competitiveness of the Indian manufacturing sector is a key imperative for the country’s long-term growth for which manufacturing excellence is required at priority. Currently contribution of manufacturing sector is 16 percent, and we are aspiring for 25 percent share to GDP in India. Manufacturing PMI has increased to 52.60 in May’15 from 51.30 in April’15. Manufacturing PMI in India averaged 52.10 from 2012 until 2015.

Talking about manufacturing excellence in India, first thing which comes into our mind is “Make in India” campaign which is changing the global investors mind to come and do manufacturing in India. We are all engineers, scientists, business leaders, researchers here and we all know the importance of this campaign. A significant campaign aimed at boosting India’s manufacturing capabilities at the global level and inviting the global companies to manufacture their products in India.

But, how will it help the country?

If we talk about our economy, labor, technology, infrastructure, etc. , will it affect them?

We have lots of questions and these need to be answered by the best minds and that’s why we have leaders here for discussing the opportunities and challenges related to manufacturing excellence in India.

India is known for its services exports, but many doubt its ability to export manufactures and that is the perception which our Prime Mister Narendra Modi plans to change through “Make in India” campaign that will help boost jobs and growth.

The major factors constraining the growth of Indian manufacturing are poor core infrastructure, lethargic bureaucracy, and a high cost of capital, an agonizing land acquisition process and labor issues. Manufacturing excellence could not be achieved without curbing all these concerns first. Along with these factors, focus on product quality, JIT Production techniques, workforce management and agility in meeting customer requirements are the factors which form a core of the manufacturing excellence. The growth in the manufacturing sector is dependent on the investment climate. The trained manpower and an innovative knowledge base add to the parameters required for achieving the manufacturing excellence in India.

The primary reason for Indian manufacturing not being competitive enough is the significant presence of small-scale unregistered manufacturing units, which could be turned into well utilized sector, but it is not getting enough resources to do so. That’s why a campaign like “Make in India” and policies like “National manufacturing policy” are being driven by Indian government considering the current requirements to boost the manufacturing sector in India.

We have infrastructure sector, power sector, banking, oil & gas, and metals & mining where we are still lacking in providing excellent products with high efficiency. The other important reasons for the Indian manufacturing being not competitive enough include: Poor quality of transport infrastructure across all sectors including port facilities (where productivity is among the lowest in the world), surface roads, railways, airports and waterways. Industrial power continues to be among the most expensive in the world. It is about 50 percent more expensive than in China. The high cost of capital: It continues to be 10-12 percent against an international average of 6-8 percent.

But, talking on a  positive note, all these concerns come with an opportunity to improve and perform better in the manufacturing sector. We have opportunities in the area of:

1.    Small and Medium Enterprises (SMEs) strengthening

2.    National investment and manufacturing zones

3.    Adoption of Green Technology

4.    Increase in labor productivity

Developed countries like China, Indonesia and others have already invested a lot in these areas. For India, we have to work a lot in these areas. Getting opportunities is different than working on it efficiently and to accomplish them positively. Why are we lacking in getting excellence in manufacturing is all because of the inefficient work we have done in this sector in past. So challenges are there and with the robust infrastructure and well-defined policies, India can lead the path of excellence in manufacturing sector. Challenges which we need to address are:

1.    Infrastructure deficit

2.    Land acquisition policies

3.    Environmental clearances

4.    Labor issues

We have to manufacture and export the products with zero defects and having zero effect on the environment, because then only India will be called a nation with excellence in manufacturing.

As Indian government has already initiated the positive campaign for boosting the sector, following imperatives are required at industries level too: 

1. Upgrading manufacturing technology levels.

2. Redesigning organization structures to enhance accountability and responsiveness.

3. Enhanced emphasis on attracting and retaining talent.

4. Evolving product mix strategies, seeking opportunities in export markets.

5.  Re-engineering core processes to improve efficiency and drive business value.

6.  Enhancing quality focus and customer orientation.

Superior product quality, design innovations, robust delivery performance, customization, and excellent after-sales service are the distinctive manufacturing characteristics are needed to gain competitive advantage. Besides, the competitive ability of industries also depends on factors like infrastructure, human resources, scientific & technological research, and the existence of related industries, especially the capital goods industries. The economic policies of the past have failed to strengthen these factors, which are essential to enhance the competitiveness of national industries.

With all the challenges and opportunities we have in the Indian manufacturing sector, benefits from our demographic dividend and strong domestic consumption will always help in boosting this sector. The government is working in providing a stable business environment with simple policies and regulations which will help in a fast decision-making and prevent delay in critical investments for achieving excellence in this sector. The stage is set for SMEs to leverage their status as priority lending sector and embrace technology. The SMEs can especially benefit from the proposed tax sops and subsidies. The banking system is facing challenges in today’s competition and looking for revamp in future. Manufacturers, on their part, also need to adopt flexible manufacturing to prepare for demand volatility.

Successful implementation of Make in India campaign and national manufacturing policy will boost overall business sentiments and help stem the decline in growth of industrial output. Its implementation will serve as a trigger to transform the manufacturing sector as well as the economy. It will also place the sector on a higher growth trajectory by increasing manufacturing output and creating job opportunities. Also, to derive the desired results and achieve inclusive growth and excellence in manufacturing sector, policy initiatives such as reforms in FDI, land acquisition bill, environmental and financial reforms such as Goods and Services Tax (GST) and Direct Tax Code (DTC) implementation is the need of the hour. While it may take some time for Indian manufacturing to become a strong force to reckon with, the Indian government is laying positive foundations for achieving the goal. Let’s hope that today’s session will help us in understanding the needs of this sector, so that we can become a part of this journey to achieve excellence in the manufacturing sector of India.