Ask anyone on the sidewalks of New York or Auckland to name globally recognized brands from different countries and the following would form a sub-set of their responses:

 

Japan has Canon, Sony, Honda …..

Taiwan has Acer, HTC …..

South Korea has Hyundai, Samsung, LG ….

India has …………………………………..long pause……scratching of head….. Jaguar/Land Rover {these were acquired brands and so constitutes cheating here}

 

What India lacks is a clutch of world-beating products. Herein lies the rub. Its Asian neighbours had 60 years of thoughtful leadership which marshaled agriculture, manufacturing and finance policy-makers towards the one goal of collective prosperity. The progression of Japan, for example, from a broken country and one on its knees in 1945 to a formidable economic powerhouse in 2015 was through small-holding agriculture to small-scale manufacturing to a world-leading manufacturer with Nikon, Komatsu and other internationally recognized brands in its stable. This progression was underpinned in its entirety by a finance and manufacturing policy that encouraged exporters and fostered intense internal competition.

 

Prime Minister Modi launched his Make In India campaign immediately upon taking up office in mid-2014. He recognizes the importance of manufacturing in driving economic prosperity. However, this manufacturing has to be of a particular type to achieve his lofty goal, viz., one that is export oriented.

 

Over the past six decades since independence from Britain, the various Indian governments gave scant attention to local manufacturers, except if they were run by favoured industrialists, but were quick to prevent imports, for both production and for consumption. In this manner, local competition was stifled and mediocre products were turned out.

 

QUANGO’s {Quasi-Autonomous non-Governmental Organisations} flourished under these artificial conditions and some were even able to come out with goods of unquestionable excellence. Hindustan Machine Tools (HMT) is a prime example of such an entity.

 

Walk into any hardware store in India and ask for a screwdriver. The tool handed to you is mediocre, except if it is an import—usually from China—and comes without a warranty. Against this backdrop, Modi intends to make India into a manufacturing titan fully capable of turning out stealth fighter jets and high-speed bullet trains and, that too, during his tenure as PM, say by 2020. This is a laudable objective but the timeline is hardly realistic.

 

For him to achieve success here, he has to look first towards education. The British, plantation style of education that India has had thrust upon it by its Colonial masters cannot produce the hordes of technocrats necessary to drive his dream. If he looks towards the much vaunted IITs as producers of the calibre of individuals he desires, he’ll be sorely disappointed. Over the past two decades, India has provided the world with IT professionals of exceptional quality. However, only about 3 million of an estimated 500 million in the Indian workforce are in IT. Had the graduates of the IITs and other colleges gone on to industry rather than IT or finance, which has been their wont, there would have been no need to have a Make In India campaign.

 

Almost 5 decades of policy neglect have created a situation where only 10 per cent of the work force is employed in manufacturing. Contrast this with South Korea where the focus was industry-based development for the past 3 decades and fully 30 per cent of the labour force is drawn into industry. So, secondary and post-secondary education will have to be re-aligned along the German, Italian and Swiss models with industry providing internships. They will become the incubators of the new crop of technocrats.

 

The next item on his To Do list is to look to the crumbling infrastructure. The roads and railways connecting the various cities and the road systems within the cities themselves have to have a serious expenditure in analysis and then monumental capital outlays have to be planned for upgrading most of these. Electrical capacity building will have to be an imperative. Private-Public partnerships may work in this context.

 

Finally, he will have to corral bureaucrats charged with land, labour and capital policy to provide the last supporting pieces. Agriculture land will have to be made available for the factories. Buying farmland and converting it to build factories is tremendously complicated and expensive; by law, companies have to pay four times the market price in rural areas The Special Free Zones, where enterprises are given special treatment, also will not suffice.

 

India continues to provide heavily subsidized power to agriculture and, at the same time, charge prohibitively high rates to manufacturing. China, and other countries hoping to develop, follow the reverse logic. Price baselining and making available a plentiful and regular supply has to be a given here.

 

 

The cost of labour in India is lower than in China. With the spectacular growth in China, wages there have moved up considerably. India has a plentiful supply of labour available at attractive rates.

 

India’s cost of capital is one of the biggest impediments to entrepreneurs. These costs are among the highest in the world and the root cause is the closed financial system in India. So, Modi has much on his plate if he wants this to succeed and all the items are priority number 1.

 

The realistic estimate to make everything fall into place and to have all the policy parties aligned should, at the very least, take a generation. This is a long time horizon for any politician but Mr Modi has to be credited with at least being able to identify the current malaise in India.

 

The Make In India initiative is going to have to have a lot of thought expended into it. The results will be immense, if the execution is done right.