India to Western Tech Firms: To Sell It Here, Build It Here

[janon]

Ending up paying is not unique to India. Several countries have trade deficits esp. the US who pays billions into Chinese accounts for "Made in China" goods. What if the US implemented similar measures?

It will make things a lot harder for everyone.

The difference is that US benefits from the cheap manufacture of goods in China. American consumers end up paying a lot less than what they would need to, if goods were manufactured in USA and American standard of wages had to be paid for it. Their companies also benefit because they can sell the iphones, ipads et al to millions of people in America and elsewhere, since the end product costs a lot less if manufactured in China. If iphones were manufactured completely in the US, there would be no iphones, because most people wouldn't be able to afford them.

But producing goods in India as opposed to china doesn't hurt Indian consumers or Indian industries, because labor charges are similar in India and China, and in some cases, lower in India than in China. The end products can be just as cheap, and they can sell just as many. The only difference is that the money we spend on our day to day purchases will stay in India and benefit our workers, instead of going to China.

So there is a difference between a first world country enacting such measures, and India enacting such measures.

 

[conworldus]

Disagree. Labor in China is much more expensive than India, which is causing some low end manufacturers to relocate. Factory workers now days earn on average 300 USD per month (with accommodation included), which is about 17,000 Indian Rupees per month. That's managerial wage in India.

However, the cost of manufacturing is much more than just labor. Logistics, supporting systems, bureaucratic delays, raw material all affect the final cost. In fact, labor often accounts no more than 20% of the total cost. China has forged ahead not because of labor cost, but because of other factors.

So basically, I am not sure if India can manufacture the goods just as cheap as China does as there are too many unknown factors.

Remember, Akash tablet is bought off the shelf from China to control the cost. If India is cheaper, Datawind would have just made those in India.

The difference is that US benefits from the cheap manufacture of goods in China. American consumers end up paying a lot less than what they would need to, if goods were manufactured in USA and American standard of wages had to be paid for it. Their companies also benefit because they can sell the iphones, ipads et al to millions of people in America and elsewhere, since the end product costs a lot less if manufactured in China. If iphones were manufactured completely in the US, there would be no iphones, because most people wouldn't be able to afford them.

But producing goods in India as opposed to china doesn't hurt Indian consumers or Indian industries, because labor charges are similar in India and China, and in some cases, lower in India than in China. The end products can be just as cheap, and they can sell just as many. The only difference is that the money we spend on our day to day purchases will stay in India and benefit our workers, instead of going to China.

So there is a difference between a first world country enacting such measures, and India enacting such measures.

 

[janon]

Disagree. Labor in China is much more expensive than India, which is causing some low end manufacturers to relocate. Factory workers now days earn on average 300 USD per month (with accommodation included), which is about 17,000 Indian Rupees per month. That's managerial wage in India.

However, the cost of manufacturing is much more than just labor. Logistics, supporting systems, bureaucratic delays, raw material all affect the final cost. In fact, labor often accounts no more than 20% of the total cost. China has forged ahead not because of labor cost, but because of other factors.

So basically, I am not sure if India can manufacture the goods just as cheap as China does as there are too many unknown factors.

Remember, Akash tablet is bought off the shelf from China to control the cost. If India is cheaper, Datawind would have just made those in India.

If wages are higher in China, that only further proves my point, that there is a difference between American companies deciding to manufacture only in America and only manufacturing in India. And you are right that wages are much higher these days in china than India. (But 17,000 rs is definitely not managerial wages in India, that has grown exponentially in recent times.) That is only natural, that as people get richer, and the economy grows, wages increase. There was a flight of manufacturing jobs from USA and Europe to Japan and S Korea in the 60s and 70s. Now that wages are sky high there, China took up that mantle. India should also do the same.

Flying geese paradigm - Wikipedia, the free encyclopedia

You are right that it is not always about labor costs alone. Hovewer in certain manufacturing sectors, that is what matters most. Production of low end electronic goods, like ram cards and wireless cards and motherboards are mostly about labor costs. Not about logistics or raw material (silicone is available aplenty anywhere.) For other industries like aerospace, labor is not all that matters, which is why we cant ask boeing or airbus to produce everything locally in India. But there are some sectors where low end manufacturing houses are easy to set up, and India would be foolish to let that opportunity go by. We are one of the biggest markets for it anyway, and the market is going to increase tenfold in dollar terms, as the article states.

The IT industry was another such area where it was easy for India to divert many low end jobs from the west here, since logistics, bureaucratic red tape etc did not really matter. All it needed was relatively low paid (compared to the west) IT professionals sitting in front of a cheap computer, to produce the same output. And IT and associated services brought in invaluable jobs, money and equally importantly, Indians who needed IT services could pay Indian companies, thereby retaining our money at home. And now we are moving higher up in value chain of IT, since many serious programming for giants like IBM or Intel or Microsoft is also done in India.

 

[curioususer]

Will this move reduce the price of the products?

 

[Yogi]

Will this move reduce the price of the products?

nop but rather increase the prices of some electronics initially but this policy will pay well in long term....

 

[Cheetah786]

What happens if every country start to ask the same since India exports more then it imports this policy will be shooting yourself in the foot.

 

[RazorMC]

There may not be much difference in the end-price of goods initially but prices will likely go down later on.

 

[Cheetah786]

The difference is that US benefits from the cheap manufacture of goods in China. American consumers end up paying a lot less than what they would need to, if goods were manufactured in USA and American standard of wages had to be paid for it. Their companies also benefit because they can sell the iphones, ipads et al to millions of people in America and elsewhere, since the end product costs a lot less if manufactured in China. If iphones were manufactured completely in the US, there would be no iphones, because most people wouldn't be able to afford them.

But producing goods in India as opposed to china doesn't hurt Indian consumers or Indian industries, because labor charges are similar in India and China, and in some cases, lower in India than in China. The end products can be just as cheap, and they can sell just as many. The only difference is that the money we spend on our day to day purchases will stay in India and benefit our workers, instead of going to China.

So there is a difference between a first world country enacting such measures, and India enacting such measures.

Apple to start MFG apple products in USA and not in china.

 

[Skull and Bones]

What happens if every country start to ask the same since India exports more then it imports this policy will be shooting yourself in the foot.

Depends on the domestic market, with current estimate Indian market for electronics will exceed $400 Billion by 2020. If GoI increase taxes on imported products, that'll make space for domestic industries to churn out quality products at a cheaper price.

Just look at Micromax mobiles for example, from nowhere in 2009 to one of the top 12 global mobile phone manufacturer.

 

[Yogi]

There may not be much difference in the end-price of goods initially but prices will likely go down later on.

it also depends on the domestic market size alot not every country can replicate it
with an expected electronic market size of nearly $400 billion by 2020, foreign companies can no longer ignore India even if we implement such policies with immediate effect

 

[Cheetah786]

Depends on the domestic market, with current estimate Indian market for electronics will exceed $400 Billion by 2020. If GoI increase taxes on imported products, that'll make space for domestic industries to churn out quality products at a cheaper price.

Just look at Micromax mobiles for example, from nowhere in 2009 to one of the top 12 global mobile phone manufacturer.

Protectionist policy will not work If you increase taxes on imported product countries whose products will get effected by that taxation will retaliate in same manner.Not evey country is run by Pakistani sold out politicians others actually care for their country and country men.

 

[JohnyD]

get rid of chinese junk...

 

[Skull and Bones]

Protectionist policy will not work If you increase taxes on imported product countries whose products will get effected by that taxation will retaliate in same manner.Not evey country is run by Pakistani sold out politicians others actually care for their country and country men.

Protectionist policy worked very well for our domestic automobile industries. Which forced foreign car makers to change their strategy for Indian car market, and had to open up manufacturing plants in India, as the taxes on CBUs is more than 118%. Same should happen with electronics now.

 

[Yogi]

Protectionist policy will not work If you increase taxes on imported product countries whose products will get effected by that taxation will retaliate in same manner.Not evey country is run by Pakistani sold out politicians others actually care for their country and country men.

u can see the example of automobile industry in India, Pakistan n BD, India applied very high rates on imported vehicles whether new or used and coupled with a big domestic market it lead to the development of our Industry to world standards but the same is not true in case of Pak n BD...

such things r part n parcel of world trade nobody is saint here look at China it still undervalues yuan so did it stopped other countries from trading with China or did Japan abandoned US market after it increased taxes on Japanese automobiles...

 

[janon]

What happens if every country start to ask the same since India exports more then it imports this policy will be shooting yourself in the foot.

I wish that were true, but it isn't. India imports a LOT more than it exports, which is why we have a big trade deficit. If your statement was true, we wouldn't be talking of these policies at all.