India's demographic dividend is fast turning into a demographic disaster...
https://www.ft.com/content/67e8e168-241c-11e7-8691-d5f7e0cd0a16
Lack of local parts hampers Make in India campaign
Many manufacturers end up assembling goods made of Chinese imports
In February, weather stations located around the north-east Indian state of Meghalaya recorded 600mm of rainfall in Cherrapunjee, a town of 15,000 people. Although the area generally gets more rain than almost anywhere else on earth, the state until recently lacked such real-time information on weather conditions, let alone advance notice of floods.
Now there are weather stations that pick up and transmit such vital data. The information does not come from the Indian Meteorological Department, however, rather from Yobi Technologies, a small, Gurgaon-based start-up. The company was founded by Gautam Kumar, who moved to the city after graduating from Harvard in 2013.
Yobi’s weather stations cost a fraction of what competitors including the IMD have to pay. Technologically, the software Mr Kumar has developed is highly sophisticated. It taps cloud-based analytics software to mine multiple global climate models and applies machine learning to reach local results.
Parts of the hardware, though, are not nearly as impressive. Mr Kumar has found it a challenge to find something as simple as a small funnel to collect rainwater in quantity, quality and consistency in India. So, as his orders for weather stations multiply, Mr Kumar says he will probably need to turn to China to source parts.
In 2014, Prime Minister Narendra Modi launched the much-hyped Make in India campaign to create jobs and establish a world class manufacturing base in the country. But Mr Kumar’s decision to shift from Make in India to “Make in China, Assemble in India” is emblematic of the difficulties of trying to realise Mr Modi’s vision. The country’s high-profile Jio mobile phones largely use parts made in China by telecoms group ZTE, says Credit Suisse. Micromax, another top-selling local Indian handset brand, also relies on Chinese parts.
A stroll through the electronics market in Old Delhi suggests just how far India has to go before its manufacturing sector can begin to compete with smaller rivals such as Vietnam or Bangladesh — let alone China. Small traders dominate this market and virtually everything they sell is made in China and imported into India, whether surreptitiously or otherwise.
“Chinese suppliers can provide whatever quality a customer wishes, and it is always cheaper. They are flooding the market. One Chinese factory has greater output than the total output of India,” says Kamal Kapur who started out manufacturing laptop adaptors with parts made in India, then switched to Chinese imports and now runs Intrim Business Associates, a consultancy in New Delhi.
Mr Kapur cites the example of micro components: Indian-made simple resistors and integrated circuits are hard to find, while even the most complex integrated circuits from China work well. Across a whole range of products and parts, “there is no value-added in India”, he says. “There is just assemble in India. And there is no future in assembly.”
The lack of local parts is caused and compounded by a series of other obstacles. Among them are a struggle to compete for workers, acquire land to set up facilities and to get government approvals without paying what one small manufacturer terms “speed money”.
Many Indians say they envy the support even private sector Chinese makers get from their government. They cite China’s participation in global standard-setting groups. “To lead in technology is strategic for the Chinese government,” says an executive with a French manufacturing multinational in New Delhi.
Many executives believe the jobs component of the Make in India campaign is doomed. “It is too late,” says the head of one foreign bank in Mumbai. “There is a strong possibility that Make in India will be overtaken by robots. Mass production here can never be cheaper than in China and can never drive the economy. It is not an option.”
He thinks India should rely more on its tradition of fine craftsmanship, and aspire to the sort of customised luxury of the Italian model. But that too has its drawbacks. “Actually, the vendors making the funnels I need to collect the rain are craftsmen,” says Mr Kumar. “But at scale they won’t be able to get the kind of [quality] I need.” More importantly, those small enterprises will never generate jobs in the volume India requires either.
henny.sender@ft.com
https://www.ft.com/content/67e8e168-241c-11e7-8691-d5f7e0cd0a16
Lack of local parts hampers Make in India campaign
Many manufacturers end up assembling goods made of Chinese imports
In February, weather stations located around the north-east Indian state of Meghalaya recorded 600mm of rainfall in Cherrapunjee, a town of 15,000 people. Although the area generally gets more rain than almost anywhere else on earth, the state until recently lacked such real-time information on weather conditions, let alone advance notice of floods.
Now there are weather stations that pick up and transmit such vital data. The information does not come from the Indian Meteorological Department, however, rather from Yobi Technologies, a small, Gurgaon-based start-up. The company was founded by Gautam Kumar, who moved to the city after graduating from Harvard in 2013.
Yobi’s weather stations cost a fraction of what competitors including the IMD have to pay. Technologically, the software Mr Kumar has developed is highly sophisticated. It taps cloud-based analytics software to mine multiple global climate models and applies machine learning to reach local results.
Parts of the hardware, though, are not nearly as impressive. Mr Kumar has found it a challenge to find something as simple as a small funnel to collect rainwater in quantity, quality and consistency in India. So, as his orders for weather stations multiply, Mr Kumar says he will probably need to turn to China to source parts.
In 2014, Prime Minister Narendra Modi launched the much-hyped Make in India campaign to create jobs and establish a world class manufacturing base in the country. But Mr Kumar’s decision to shift from Make in India to “Make in China, Assemble in India” is emblematic of the difficulties of trying to realise Mr Modi’s vision. The country’s high-profile Jio mobile phones largely use parts made in China by telecoms group ZTE, says Credit Suisse. Micromax, another top-selling local Indian handset brand, also relies on Chinese parts.
A stroll through the electronics market in Old Delhi suggests just how far India has to go before its manufacturing sector can begin to compete with smaller rivals such as Vietnam or Bangladesh — let alone China. Small traders dominate this market and virtually everything they sell is made in China and imported into India, whether surreptitiously or otherwise.
“Chinese suppliers can provide whatever quality a customer wishes, and it is always cheaper. They are flooding the market. One Chinese factory has greater output than the total output of India,” says Kamal Kapur who started out manufacturing laptop adaptors with parts made in India, then switched to Chinese imports and now runs Intrim Business Associates, a consultancy in New Delhi.
Mr Kapur cites the example of micro components: Indian-made simple resistors and integrated circuits are hard to find, while even the most complex integrated circuits from China work well. Across a whole range of products and parts, “there is no value-added in India”, he says. “There is just assemble in India. And there is no future in assembly.”
The lack of local parts is caused and compounded by a series of other obstacles. Among them are a struggle to compete for workers, acquire land to set up facilities and to get government approvals without paying what one small manufacturer terms “speed money”.
Many Indians say they envy the support even private sector Chinese makers get from their government. They cite China’s participation in global standard-setting groups. “To lead in technology is strategic for the Chinese government,” says an executive with a French manufacturing multinational in New Delhi.
Many executives believe the jobs component of the Make in India campaign is doomed. “It is too late,” says the head of one foreign bank in Mumbai. “There is a strong possibility that Make in India will be overtaken by robots. Mass production here can never be cheaper than in China and can never drive the economy. It is not an option.”
He thinks India should rely more on its tradition of fine craftsmanship, and aspire to the sort of customised luxury of the Italian model. But that too has its drawbacks. “Actually, the vendors making the funnels I need to collect the rain are craftsmen,” says Mr Kumar. “But at scale they won’t be able to get the kind of [quality] I need.” More importantly, those small enterprises will never generate jobs in the volume India requires either.
henny.sender@ft.com
