The Make in India lesson I learnt when I bought a television set

May 6, 2015

- By Vivek Kaul

Vivek Kaul
Yesterday's edition of The Times of India had a very interesting newsreport. As per the newsreport: "Data available with the Bureau of Indian Standards (BIS) shows that over 60% of the recently registered products are "Made in China.""

These include products like mobile phones, printers, power adapters, notebooks, tablets and so on. What this tells you clearly is that a vast majority of electronic products that we buy in India are not made in India, but in China.

Interestingly, the last time I bought a television set few years back, it came with a weird looking plug-something that I had never seen before. It wouldn't fit into the electrical socket at home. It took a helpful neighbour to solve the problem. He told me that I would need a converter to fit the plug into the socket. The converter cost me Rs 25 and left me wondering that why did a company which sold a product worth Rs 15,000 inconvenience its customers for something worth Rs 25? Maybe marketing professionals can throw some light on that.

Last year when I bought a smart phone a similar experience awaited me. But this time around I was prepared and as soon as the smart phone was delivered at home (I had ordered it online), I went out and bought a converter, which cost Rs 20 this time around.

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As you must have figured out by now, dear reader, both the products were made in China. Not just technology products which are made in China are flooding the Indian market. There are other products as well. As The Times of India newsreport referred to earlier points out: "There are a vast majority of goods - from electricity bulbs and thermometers to Ganesha and Laxmi idols - where the government is yet to have domestic standards resulting in unregulated entry of Chinese product." Even Rakhis are now made in China. Indeed, this has been a worrying trend for sometime now.

The reason for this is fairly straightforward-no country has gone from developing to developed without the expansion and success of its manufacturing sector. As Cambridge University economist Ha-Joon Chang writes in Bad Samaritans-The Guilty Secrets of Rich Nations & the Threat to Global Prosperity: "History has repeatedly shown that the single most important thing that distinguishes rich countries from poor ones is basically their higher capabilities in manufacturing, where productivity is generally higher, and more importantly, where productivity tends to grow faster than agriculture and services."

And the Indian manufacturing sector cannot flourish with products being made in China. For a while there was great hope that India does not need to go through a manufacturing revolution to pull its citizens out of poverty. And that the information technology led services revolution would do that trick. But services by their very design have certain limitations.

As Chang writes: "There are certainly some services that have high productivity and considerable scope for further productivity growth-banking and other financial services, management consulting, technical consulting and IT support come to mind. But most other services have low productivity and, more importantly, have little scope for productivity growth due their very nature (how much more 'efficient' can a hairdresser, a nurse or a call centre telephonist become without diluting the quality of their services?)."

So, where does that leave us? Over the last few years the education infrastructure that has been built to feed trained individuals into the services sector has been huge. As Akhilesh Tilotia writes in The Making of India: "An analysis of the demand-supply scenario in the higher education industry shows significant capacity addition over the last few years: 2.4 million higher education seats in 2012 from 1.1 million in 2008." In 2016, India will produce 1.5 million engineers. This is more than the United States (0.1 million) and China (1.1 million) put together.

The number of MBAs between 2012 and 2008 has also jumped to 4 lakh from the earlier 1 lakh. As Tilotia writes: "India faces a unique situation where some institutes (IITs,IIMs, etc.) are intensely contested while a large number of the recently-opened institutes struggle to fill seats...With most of the 3 million people wanting to pursue higher education now having an opportunity to do so, the big question that should...be asked...are all these trained personnel required? Our analysis seems to suggest that India may be over-educating its people relative to the current and at least the medium-term forecast requirement of the economy."

What this means is that a large number of people going in for higher education will find it difficult to find jobs which are commiserate with the kind of money they have paid for their education, after they pass out. And they will not be the only ones having a tough time. India is adding nearly 13 million people to the workforce every year. And enough jobs are not being created.

This is something that the latest economic survey points out: "Regardless of which data source is used, it seems clear that employment growth is lagging behind growth in the labour force. For example, according to the Census, between 2001 and 2011, labor force growth was 2.23 percent (male and female combined). This is lower than most estimates of employment growth in this decade of closer to 1.4 percent. Creating more rapid employment opportunities is clearly a major policy challenge."

And these rapid employment opportunities will be created only if more and more products are made in India and not China. For products to be made in India, major labour reforms need to happen. A report in The Indian Express seems to suggest that the government is working on this front. It is planning to make amendments to the Industrial Disputes Act, 1947. The government is also planning to: "codify the Central labour law architecture wherein the labour ministry plans to merge all 44 Central legislations into four codes on labour laws - one each on wages, industrial relations, social security and safety & welfare. Apart from industrial relations and wages, other codes are likely to be released during the course of the year."

Let's see how far is it able to move on this front.

Vivek Kaul is the Editor of the Diary and The Vivek Kaul Letter. Vivek is a writer who has worked at senior positions with the Daily News and Analysis (DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. The latest book in the trilogy Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System was published in March 2015. The books were bestsellers on Amazon. His writing has also appeared in The Times of India, The Hindu, The Hindu Business Line, Business World, Business Today, India Today, Business Standard, Forbes India, Deccan Chronicle, The Asian Age, Mutual Fund Insight, Wealth Insight, Swarajya, Bangalore Mirror among others.

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5 Responses to "The Make in India lesson I learnt when I bought a television set"

Joisa

May 7, 2015

I agree 100% with your views on flooding by China and also by those having lopsided treaties. Unless these things r dealt with heavy hand, make in India will not succeed . Harping on RBI to reduce interest will not help

Like 

RAVI KATARI

May 6, 2015

Having worked in large organisations and then run my own SSI unit for many years I can confidently state as follows. Indian skills are as good as any.Our bureaucrats, from top to bottom, need to be changed as they only act as a total dampener to entrepreneurial enthusiasm of the Indian manufacturer and worker. They need to be changed and the rule books torn up. Do not tinker with them just destroy them. A very simple set of rules is easily created. As an example the useless DGFT. Instead of wasting time determining consumption, wastage etc of imports, all we need is a stipulation that if you import $100 you must export $ 120 or whatever. Your bank can certify it and that's it. Send all the bureaucrats thus saved to rural India. All departments can follow similar examples. India will thrive.

Like (1)

vijay chandar

May 6, 2015

Is change in lsbour law going to be the silver bullet to remedy the situation? There are equally or more important issues that need to be tackled; issues like infrastructure, credit, efficient bureaucracy, stable law to name a few

Like (1)

Nirav Mehta

May 6, 2015

I bought a LLOYD LED TV a few months back - MADE IN INDIA - NO hassles at all!

Like (1)

A Chopra

May 6, 2015

I don't know how many people understand the plight of owner of a manufacturing unit. The number of forms and returns to be filed every month leaves no time for innovation, and there is no improvement with the change in govt, bureaucrats remain the same.

Soon no one will be able to run an MSME due to these hurdles, and 'Made/Make in India' scheme will remain on papers.

Like (4)
  
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