The causes for and solutions to India’s manufacturing angst may not lie in
high land costs, excessively labor-friendly laws or excessive taxes
Inside a factory in Jammu. According to the
government’s Economic Survey, the number
of people employed in manufacturing in India
dropped by 4 million in the past five years
MUKESH GUP TA/REUTERS
Even if West Bengal Chief Minister Mamata Banerjee, Tamil Nadu Chief Minister J Jayalalithaa, Indian Finance Minister P Chidambaram, Bihar Chief
Minister Nitish Kumar, Gujarat Chief Minister Narendra
Modi, our prime minister and officials in the Planning
Commission cannot agree on many elements of public policy, there is one thing they speak for in one voice: The need
to have more factories in India and to have existing factories grow at a faster rate.
The reason for this unusual consensus is not difficult to
If you are a politician at any level and are campaigning at
election time, what the sullen young men and women in
front of you want to hear are your plans to get them industrial jobs. Such an opportunity will let them escape the
dead-end jobs in their parents’ tiny farms —where some act
of the weather gods can destroy
in one instant the work of a
whole season; where hours of
back-breaking labor under the
blazing sun do not yield enough
rice or wheat or vegetables to
feed their own families, let
alone have anything left over to
sell and earn some cash.
Nor do they want equally
dead-end jobs as fetchers and
carriers in city shops far away
from home. They yearn for a situation where their hard-won grade-VIII or grade-X pass certificates and willingness to slog are rewarded with jobs in which they are treated with respect and get paid enough to be able to afford a
decent life, with a little left over to support ageing parents
back on the farm.
But the same Mamata Banerjee, J Jayalalithaa, P
Chidambaram, Nitish Kumar, Narendra Modi, our prime
minister and officials in the Planning Commission also
stare in unison at the stark reality of India’s manufacturing
landscape: The vast majority of ‘factories’ that exist in India
are not the gleaming, well-lit, airy production units efficiently producing cars, mobile phones and refrigerators.
Most are hole-in-the-wall operations, employing a mere
dozen or so workers, and eking out a living dodging the
excise and sales tax inspector.
This situation is not for lack of trying by our policy makers and political leaders. The most ambitious effort was
made in 2005, when Special Economic Zones were legislated. Industrial units in these SEZs were offered land at
throwaway prices and exempted from customs and excise
duties and income tax. In some states, even the operation
of labor laws was suspended. But to no avail.
According to the government’s Economic Survey, the
number of people employed in manufacturing in India
actually dropped by 4 million in the past five years. This
comes at a time when we ought to be creating several million manufacturing jobs every year, lest we drown in an
immense national social crisis.
But evidence is mounting
that the causes for and solutions to India’s manufacturing
angst may not lie in high land
costs, excessively labor-friendly
laws or excessive taxes. It may
lie in the sheer lack of manufacturing management expertise among our managers and
business persons. This is the
expertise needed to manage
your factory in a way that you
hold far lower inventory than your competitor, respond to
an order within hours of it being received rather than in
days or weeks, change over from one mix of products to
another mix of products in hours, not months, and the
expertise to make subtle design changes in your product
and make it easier to manufacture or to repair.
A group of far-sighted people is working quietly behind
the scenes to make such expertise widely available to
Indian industry. The Indian Institute of Management-Calcutta, the Indian Institute of Technology-Kanpur, and
the IIT- Madras, have for the past five years jointly offered
a one-year academic program to train a generation of manufacturing visionaries, who will hopefully bring about a
revolution in Indian manufacturing.
The course takes in executives who are already working
in manufacturing companies and equips them with techniques developed in cutting-edge manufacturing companies in Japan and the United States. Techniques such as
visual mapping — which helps visualize and optimize the
flow of materials and information within a factory — can
increase a factory’s output 50-fold or more without increasing the number of workers, or the number of hours worked,
or the capital equipment deployed. These techniques do
more to make a manufacturing unit competitive, compared
to what cheap land or tax breaks can ever hope to achieve.
The Visionary Leaders in Manufacturing Programme, as
it is called, is the result of a Herculean effort by the
Confederation of Indian Industry, the National
Manufacturing Competitive Council and the Japanese government. It is inspired by the legendary Japanese manufacturing guru Shoji Shiba.
Faculty from IIM-Calcutta, IIT-Kanpur, IIT-Madras and
Japan join in delivering this course and in creating a community of like-minded professionals to share experiences.
The discourse on manufacturing in India has so far tended to quickly regress to one about land acquisition, tax
exemptions and labor law relaxation. Business persons
loudly make the claim that getting land virtually free and
being exempt from state taxes are the keys to making
Indian manufacturing competitive, and chief ministers of
states — desperate for manufacturing jobs — oblige them
by acquiring land at low prices from near-destitute peasants.
This triggers social conflict.
Hopefully, a new generation of visionary manufacturing
leaders, who have the skills to unravel the drivers of supply
chain performance and to manage global supply chains,
will elevate this discourse to one about expertise in manufacturing.
Ajit Balakrishnan is founder and chief executive officer of
Rediff.com, the parent company of India Abroad. He is
also the author of The Wave Rider.
By arrangement with Business Standard