India,
undoubtedly, has been a leader in tablets and other kinds of pills and diverse pharmaceutical
products. Pharmaceutical development and manufacturing has been one domain of
manufacturing that has brought out a Made in India advantage onto the global
arena. Of late, however, Indian manufacture has been demonstrating early shoots
of manufacture and global challenge in another kind of tablets - the electronic
tablet computers that were hitherto considered the preserve of the likes of
Apples and Samsungs! In fact, the launch of an indigenous 5” tablet by an
indigenous manufacturer at almost half the price of a ruling imported tablet
product has led Samsung to announce posthaste a new tablet model at a
dramatically reduced price. This development points to the possibility that
with some concerted government-industry action electronics manufacture could be
a new wave of growth for India.
Electronics
need not be seen as the only early shoot of industrial manufacture. There are
several other industrial manufacturing segments, some near the maturing state
and some in the emerging and growth stages. These include aeronautics, space
vehicles, automobiles, heavy engineering, electrical products, white goods and
consumer items, to name a few. There is, of course, the caveat that in each of
these certain critical internals are based either on overseas technical designs
or imported into the country from the collaborators. Examples could be engines,
compressors and the like. Yet, even in these areas capability exists to build indigenously
capable systems, for example cryogenic engines or ejection systems in space
equipment. It is instructive that the development of Indian industry occurred
when phased manufacturing programs as in the case of automobiles and national
policy missions as in the case of space engineering were put in place.
Singular
drive, plural participation
There are
two main considerations that drive indigenous manufacture. Firstly, the
Original Equipment Manufacturer (OEM) must feel and demonstrate the passion for
developing a completely indigenous product as a long term goal (say of 5
years). Secondly, the OEM should be willing to spread the same passion to
multiple industries to participate and support the indigenous OEM product. The
national space mission, for example, became an icon of indigenous success
because of its efforts to draw in as many as two hundred industries in the
development of indigenous space systems and equipment. Maruti Suzuki became the
most indigenized car by bringing along all of the Japanese component makers to
India. There is, however, only a limited indigenization that an individual firm
can prompt. An automobile OEM typically can influence its component makers to
come to India but not necessarily the raw material makers, for example steel.
OEMs require
more than normal procurement or vendor development activities to develop high
quality, low cost indigenous activities. A complete supply chain, cascading the
Bill of Materials (BOM) down to the basic materials would need to be drawn up
to establish, first the plurality of participation that is required and next
the suitability of the available component and materials infrastructure. A
detailed gap analysis would then establish the task of development at hand.
While it would be impractical and inefficient to try to develop the entire new
BOM of an OEM product to new standards, a judicious mix of indigenous
development and import access should be examined on a case by case basis. The
strategic plan for total indigenous development has several imponderables to
consider, essentially related to the technological and investment
considerations.
Cascade, cluster
To establish
a complete indigenous industrial infrastructure that enables an OEM product
with 100 percent indigenous content, there exist two approaches. The first
approach is the cascade approach discussed briefly above. In the cascade
approach, the drawback or limitation is that what works at the OEM level does
not necessarily apply to the steel sheet level. In a typical automobile weight
of 1400 kg, approximately 75 percent is metal weight (iron, steel and aluminum).
Steel by itself constitutes 60 percent at 800 kg. Considering that most cars in India are small
cars, the average weight of a car could be 1100 kg and the average weight of
steel per car could be lower at 600 kg. India produces 3 million cars which is
an economical volume of production. The three million per annum car output
requires a steel tonnage of 1.8 million per annum. This level of steel tonnage is,
however, less economical for steel plants. Moreover, the lead time for a new
steel plant could be as high as 10 years and for modernization 5 years. On the
other hand, changes in steel technology as a subset of automotive technology
could be occurring every 5 years. The investment in a steel plant’s
technological modernization could be three times that of an automobile plant’s
modernization. Such imbalances in
technological, lead time and investment considerations in OEM and basic
material industries make a coordinated cascade approach that seeks complete
indigenization across the entire industrial spectrum more of an aspiration than
a practical proposition.
In the cluster
approach, several indigenous industrial infrastructural capabilities are
created regardless of any coordinated pull from the OEM sector. This could be
infrastructure in all kinds of metals, machine tools and plastics, for example.
Early industrialization in India followed this approach. There are again two
fundamental considerations in the cluster approach. The first consideration is that of creation of
islands of excellence in various industrial segments which like bubbles would
grow and coalesce into larger clusters. The second is that individual
industries, if developed well, provide their own push effect to overall
industrialization. The cluster approach of indigenous industrialization works
well in the short and medium term but does not provide spread or
competitiveness in the long term. In India, for example, steel and machine
tools were developed as the first islands of indigenous industrialization
without giving any fillip or support of any sort to the automobile industry
which is one of the most important users of these two segments, and which also
sets the higher standards of technology
(in terms of machining and material tolerances). As a result, not only
the automobile industry lagged behind domestic needs for decades (until Maruti
Suzuki came on the scene in the 1980s) and international capabilities but also
the enabling industries of steel and machine tools remained uncompetitive in
both quantity and quality.
Integrated
development
Integrated
development of a spectrum of industries with a simultaneous approach of cascade
and cluster strategies is well merited. The success of the Indian National
Space Mission in accomplishing its mission with largely indigenous clusters is
a great example of combining the cascade and cluster approaches. Whatever be
the past considerations in not applying such a combined approach in indigenous
industrial development, the move forward requires such an approach,
particularly because India has achieved globally critical mass in a number of
industries. India, for example, is the sixth largest producer in the world of
all four wheeler automobiles with an annual output of 4 million units (nearly 6
percent, out of a global output of 70 million units). India is also the fifth
largest producer of steel with an annual output of around 80 million tonnes (5
percent, out of a global output of 1600 million tonnes). In terms of cellular phone usage, India is the
second highest user in the world with cell phones in use of 1.2 billion (20
percent, out of the world’s use of cell phones being 6 billion). There are,
however, a few industries like machine tools where India has the potential but
is just 3 percent of the global output in dollar terms, and just 10 percent of
even the Chinese machine tool output.
India can
catapult into global industrial output if it adopts an integrated strategy of
cascade and cluster. For the cascade component of the integrated strategy to be
successful, India must choose industries which would move in alignment with
India’s population and the country’s changing demographic, employment and
income profiles, all of which are a clear positive for maximizing industrial
output. Electrical, electronic, computing and telecommunication devices and
equipment, automobile, rolling stock, aircraft and machine tool products, and
chemical, oil and gas and pharmaceutical products, for example, can define and pull
the cascade. Semiconductor, chip, steel and other metal and non-metal, forging,
casting, tooling, mold and die industries could be the clusters that support
the cascades. The combination of cascades and clusters could together boost
indigenous industrial production where consumption and usage has already
reached (or will reach) critical scale. The implementation of the cascade and
cluster strategy requires active collaboration between various industries on
one hand, and the industry in the aggregate and the governments, central and
state, on the other.
Prescriptive
need
However good
the concept of cascade and cluster industrial paradigm is, it cannot be proactively
initiated and effectively implemented without a prescriptive approach. The
prescriptive approach requires industry associations to develop strategic plans
by which industries can be effective in triggering cascades and clusters. It also
requires the governments to provide material support and regulatory direction
to participate in the cascade and cluster strategy. If Japan could become a
global industrial power by inter-industry and industry-government collaboration
facilitated by the government agencies (for example, MITI), there is no reason
why India cannot excel in the same manner. The fundamental transformation sought
to be achieved by the Indian tablet devices could be indicative of the right
prescription for the future health and vigor of Indian indigenization.
Posted by Dr
CB Rao on March 3, 2013
1 comment:
Thank you for your great article. Very well written, much appreciated. Thanks a lot for sharing. . .
movers in Patna.
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