By almost any statistical measure, Indians are far better off than ever before since Independence. The population has nearly doubled in just 30 years - from 683 million in 1981 to 1.15 billion today. Life expectancy at birth has risen from 41 years in 1960 to 67 years in 2010.
Today, Indians chatter on 687 million mobile phones, and the number of passenger cars on the roads is increasing in geometrical progression. The country is the second-fastest growing automobile market in the world.
However, it is not the personal consumption that has grown fast. The economy, as a whole, is performing better than ever, thanks to the dismantling of the licence raj in the 1990s. Since the successive reformist governments have been playing their part in opening the company. Consequently, after decades of only minor improvements in living standards, GDP growth increased at a much faster rate. India's share of world trade is growing.
Foreign investments flowed in at record levels, notching up a cumulative total of $111 billion between 2000 and 2009.
Last year, the world economy took the beating for the worse due to the slowdown. But India, despite coming under the influence of the slowdown, managed to stand upright.
India's success story as an IT software superpower is well known. But what about hardware manufacturing? According to a study commissioned by Deloitte and the U.S. Council on Competitiveness, India may slowly emerge as the new preferred destination for global manufacturing. The study indicates that India stands second after China in manufacturing competitiveness and is likely to narrow the gap over the next few years.
The study further says that it is the rich talent pool of well-educated, skilled people, adept in the English language, scientists, researchers and engineers and democratic regime that make the country a preferred and attractive destination for manufacturers.
According to the executives surveyed, research and development capabilities paired with engineering, software, and technology integration abilities are the key to manufacturing enterprises. India has all the capabilities and global manufacturers can design, develop and manufacture innovative products in the country for sale in local as well as in global markets, says the study.
The classic factors of production, labour, materials and energy are the most important drivers of global manufacturing competitiveness, said the senior manufacturing leaders who participated in the study.
India's has fast emerged as a manufacturing hub as multinational companies look for long-term alternatives.
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Ajai Chowdhry,
Chairman,
HCL Infosystems
“Hardware industry had been growing at a healthy pace till it hit a rough patch as a consequence of the global economic downturn. We must build on this initial success with next level of aggressive growth in other domains of technology, including electronics hardware systems and design,” says Ajai Chowdhry, Chairman, HCL Infosystems, a great believer in the manufacturing potential of India.
Ajai was invited to be part of the IT hardware Task Force set up by the Prime Minister of India, to give shape to the country's IT strategy. Ajai has tirelessly championed the cause of improving the PC penetration in the country. He has worked closely with the Government to take the cause of “IT for the Masses” agenda forward and is on several Government committees on IT and hardware. Recently, he chaired the committee to draft the Eleventh Five-Year Plan for Electronics Hardware in India.
“India needs to leverage her vast market size and identify market mechanisms and policy interventions for increasing her dominance in the key verticals of IT hardware systems, telecom, consumer electronics, defence and strategic electronics,” adds Ajai.
Ajai Chowdhry has relentlessly advocated the cause of manufacturing in India to many non-Indian MNCs, industry bodies and government.
Rajan Sharma,
General Manager - Marketing and Sales,
GIGABYTE Technology India
India is poised for explosive growth and demand in ICT with a projection of $400 billion by 2020 from the current $45 billion. “We need to gear up to meet such demand with excellent supply chain network and like China ensure that our own demand for ICT helps us to do more localizations,” says Rajan Sharma, General Manager - Marketing and Sales, GIGABYTE Technology India.
Recently, India has been ranked twenty-fifth in terms of economic transformation (Transformation Index 2008), way ahead of China's eighty-fifth position, by German Bertelsmann Foundation.
India is emerging as a global manufacturing hub. According to a UNIDO analysis mentioned in the International Yearbook of Industrial Statistics 2009, India ranks among the top 12 producers of manufacturing value added (MVA).
India as a manufacturing hub
Ketharaman G,
Unit Head-Telematics Division,
American Megatrends India Pvt. Ltd.
Consequent to the Government policy, progress has been made in the manufacturing of telecom equipment in the country. There is a significant telecom equipment-manufacturing base in the country and there has been steady growth of the manufacturing sector during the past few years.
In the last five years, India's contribution in mobile devices has increased from zero to 6 per cent of the global device production. Several Indian companies in the telecom and electronics industry are creating global scale.
India has all the potential for meeting the growing demand of hardware manufacturing. This is true in the realm of mobile telephony business and the growing demand for automotive electronics. “GPRS is cheaper now in India and we are trying to leverage our ability to provide solutions based on GPRS technology,” says AMI.
Kunwer Sachdev,
Managing Director,
Su-Kam Power Systems
“For any organization 'manufacturing' is an important and key activity in the supply chain business, whereby customer needs are considered paramount,” says Kunwer Sachdev, Managing Director, Su-Kam Power Systems. Su-Kam produces a whole gamut of products like inverters, transformers, batteries, OLUs, solar products, etc.
According to Sachdev, “It is possible to meet the ever-growing demand of hardware post 2011. For that, we need to create a sustained demand and then work on inclusive growth, where the benefits of development reach every nook and corner of India.
“The purchasing power of the masses must increase to trigger this growth and resources need to be tapped ethically and at an affordable cost. New territories to tap raw material need to be identified without effecting the environment and government policies need to be favourable and conducive for industrial growth,” adds Sachdev.
TVS-Electronics has been in the forefront of embracing domestic IT hardware manufacturing for the last 25 years.
S. S. Raman,
Director & CEO,
TVS-Electronics
“We have a proven track record of sustaining the momentum over the years. There is definitely a long-felt need for energizing the Indian consumers with 'Made in India' products which will drive the fundamental usage behaviour of these products with Indian language enabled, robust products to sustain extreme Indian usage conditions and low TCO. TVS-Electronics is evenly poised to capitalize on the emerging needs of IT hardware industry and will stay tuned to domestic IT hardware manufacturing,” says S. S. Raman, Director & CEO, TVS-Electronics.
Very soon, TVS-E will expand the manufacturing base for POS range of products and will be the first Indian company to manufacture the entire range of POS products in India.
Vinay Rane,
Vice-President - Manufacturing,
Digi-Link
Digi-Link is working proactively to increase the manufacturing activity. “We have three state-of-the-art high-speed SMT lines and wave soldering machines. The quality of the product is assured through inspection equipment's such as X-ray machine, solder paste height measurement, electronic magnifier, incircuit testers, etc.,” says Vinay Rane, Vice-President - Manufacturing, Digi-Link. Digi-Link manufactures networking products like Switches, Routers, Wireless Modem, VOIP products and various Motherboards. “Our manufacturing lines are set up with full-fledged shop floor control systems for efficient processes, linking inbound and outbound supply chains to the operations,” says Vinay.
Ashwini Aggarwal,
Ececutive Director, MAIT
According to Manufacturers' Association of Information Technology (MAIT), a long-term, holistic fiscal policy is needed to encourage hardware manufacturing in India. There is an immediate need to address the inverted taxes, cross-purpose taxes like 4-per cent SAD for manufacturers (it is refunded for importers of finished goods) and cascading taxes like CST.
MAIT has the twin agenda of creating the demand for ICTE products in Ind ia through policy stimulus and building a globally competitive, standards compliant, ethically clean ICTe Ecosystem. MAIT is working with the government policy-makers by bridging the industry-government interface and providing policy-makers with thought documents.
The rising demand for a wide range of telecom equipment, particularly in the area of mobile telecommunication, has provided excellent opportunities to domestic and foreign investors in the manufacturing sector. Many renowned telecom companies are setting up their manufacturing bases in India. Nokia and Nokia Siemens Networks have set up their manufacturing plant in Chennai. Ericsson has set up GSM Radio Base Station Manufacturing facility in Jaipur. Motorola, Foxconn (OEM ) has set up large manufacturing plants in Chennai. Elcoteq has set up handset manufacturing facilities in Bangalore. LG Electronics has set up a plant for manufacturing GSM mobile phones near Pune. Ericsson has launched their R&D Centre in Chennai.
Flextronics set up an SEZ in Chennai. Other major companies like Aspcomp, Solectron, etc. have decided to set up their manufacturing bases in India. A large number of companies like Alcatel and Cisco have also shown interest in setting up their R&D centres in India. With the above initiatives, India is expected to be a manufacturing hub for telecom equipment.
With the upcoming broadband revolution, the demand for wireline products, transmission equipment, wireless equipment, fibre and devices will multiply, providing large-scale opportunities for Indian and multinational companies.
Indian business leaders - in a survey by Korn/Ferry International - are found to be more entrepreneurial than their Asian counterparts, owing largely to their strong language skills and association with a society that encourages entrepreneurship. The geo-political strategy of utilizing India's young demographics as against its ageing population, both as a source market for goods and services as well as cost competitive re-export base is a masterstroke by our economic leaders.
Focus on exports
In the past, telecom equipment manufacturing was limited to meeting the domestic requirement and there was no emphasis on the export of telecom equipment and services from India. Often, imports were the only means for fulfilling even domestic demand. Now that India has emerged as a manufacturing base and more and more investments are being committed, there is a need to give focussed attention for exports as well. This goes back to 1994 when the Government announced the National Telecom Policy which defined certain important objectives including ensuring India's emergence as major manufacturing / export base of telecom equipment.
After companies like Microsoft, Intel, IBM, Hewlett-Packard, Dell, Citigroup, J P Morgan and Morgan Stanley, Yahoo and Google, many other companies are also planning to enter the Indian market with big investments. They have plans to make India a hub for developing and manufacturing products for global markets and sourcing components across core areas. India has overtaken the US and China to emerge as the largest developer location for Sun Microsystems.
Besides these large corporates, mid-sized IT services firms such as TCS, Wipro, Patni Computer Systems are using alliances to strengthen their presence.
Today, India ranks second, next to Mexico in terms of the total cost of production.
The services sector is one of the most important segments of the Indian economy in terms of its contribution to the gross domestic product (GDP) in recent years. The sector is set to benefit by the recent government incentives announced as a part of the third stimulus package. The growth of the Indian services sector has not been confined to the domestic market alone. It is also reflected on its trade front. A vertical break-up of India's IT- BPO export sector shows telecom contributed 20 per cent. The Global NOCs/Hosting services provided by telecom giants are all contributors to this growth.
According to IT research firm Gartner Inc, India has maintained its advantage in the field of offshore services in 2008, as one of the global leaders in the market. India has 45-per cent share of the global offshoring market, which has a market volume of around US$ 70 billion. In 2008, India generated close-to US$ 40 billion in sale proceeds from IT and IT-based services. Indian IT outsourcing firms will be able to provide a relief to IT services market where countries are looking to cut costs in the recessionary clime by outsourcing to cheaper destinations as India rather than China or Korea.
Bottom Line
The global rush towards lower costs component outsourcing provides with a window of opportunity like never before. With continued commitment to total quality management (TQM) and investment in R&D, India will be able to build on its inherent strength, take on global competition, and realize the ambition of building Indian MNCs.
India is rapidly expanding economy along with a booming consumer market and easy availability of skilled personnel has been instrumental in attracting several companies to invest in India. The rapid growth of the Indian economy is likely to make India the fifth largest consumer market in the world by 2025 from twelfth in 2005, according to a study by McKinsey Global Institute.
The aggregate Indian consumer spending is likewise estimated to more than quadruple to approximately US$1.5 trillion by 2025, on the strength of a ten-fold increase in the middle-class population and a three-fold jump in household income.
Besides the big companies investing in India, India continues to provide backoffice work to a large number of companies and industries. IBM, Intel, Boeing and Lockheed Martin are among several large corporates supporting joint research in high-tech areas.
Target Setting
To achieve an export-led manufacturing growth, the targets:
- Export growth at 25% CAGR
- Production targets growth 18% CAGR
- Productivity doubling in the next five years
- Employment targets of 18 million by 2015
India's growing consumer market, skilled human resources and software excellence, its manufacturing prowess and cost competitiveness will provide a strong platform for the growth of their economies and also their bilateral economic ties. Moreover, the rest of Asia will also continue to be energized by the boom in India.
For more contact: Deepak Singh
edit@varindia.com
