|
The onslaught of cheap Chinese goods is sounding the death knell
for Indian manufacturers, as they can hardly compete on the economies
of scale managed by the Chinese. At the All India Management
Association's 28th National Management Convention, Sudarshan Sampathkumar,
Partner, Accenture, spoke about the china factor, specially
with reference to the manufacturing sector.
 According
to the Accenture study, China has evolved in a unique way. The Chinese
Government is committed to reforms and they have been able to multiply
their GDP by four times in the past decade. They have concentrated
on low- tech labour-intensive products. They encourage export promotion
by offering 33 per cent subsidies for export production. Power and
labour costs are very cheap. Labourers are highly regimented. Production
costs are reduced through economies of scale.
What is ailing the Indian manufacturing sector?
This seemed to be the vital question that kept popping up every
now and then. Globalisation is here to stay, Indian manufacturing
cannot wish it away. The major constraint seems to be the high cost
of finance. The complex sales and excise tax structure, poor infrastructure
and lack of economies of scale are certain things that the Indian
entrepreneur finds very tiresome, when it comes to conducting business
in India.
 Many
Indian entrepreneurs have in recent times admitted the temptation
to set up shop in China than get wiped out. Some have actually gone
ahead and done it. What are the reasons for that. Starting from
the huge amount of investment required to set up a factory to availability
of raw materials, spare parts and components, from poor inventory
management to bad supply schedules, from complicated bureaucratic
procedures, from horrendous tax structures to high tariffs of electricity,
from a bad work culture to low productivity, Indian manufacturing
seems to have got everything wrong.
On the other hand, it requires very less investment to set up a
manufacturing unit in China. Raw materials, spare parts and components
are readily and cheaply available, as they have set up numerous
small outfits that manufacture these products, which are typically
labour intensive and require low level skills. Production cost is
low as the level of managerial staff is also kept low. Each entrepreneur
is required to concentrate only on his plant and his products. The
Chinese do not get into complicated things like unviable forward
and backward integration, which unless you are a company like Reliance
or Tata, still looks good only in management books.
 Most
companies in China have zero inventory, this is because of their
disciplined supply schedules. In India, factory owners need to stock
three months' material, thereby increasing their investment and
adding to the cost. In China, suppliers rarely fail manufacturers.
Indian manufacturers often cite tedious customs, excise and sales
tax procedures as reasons for piling up stock. Productivity is another
factor that we have to take a close look at. Indians have the dubious
distinction of being the least productive in the world. "We
rank only next to the Arabs, when it comes to productivity",
quipped one CEO of a pump manufacturing company.
There are a number of lessons that can be learnt from the Chinese
economy. Firstly Indian manufacturing has to recognise export orientation
as an imperative. Looking inwards cannot achieve growth. The products
need not be really hi-tech, India has to look at developing its
village hand enterprise and other arts and crafts. To contain the
Chinese factor, there is a need to improve our labour laws. We need
to cut down further on bureaucracy. Improve the tax structure and
power supply.
There is an urgent need for permanent cures. We have to set an
agenda for reforms. Merely setting up agendas will not suffice,
we have to seriously enforce these agendas.
| Author : Anuradha Sriraman |
|
 |
| |
 |
|
