Must improve ease of business to be a global production hub: Industry captains

MUMBAI| NEW DELHI: Disruption caused by the Covid-19 pandemic has thrown up opportunities for India to become a global manufacturing hub, though improving ease of doing business remains key to attracting global investors, industry captains said at the ET Global Townhall on Thursday.
Countries look for a “China-plus-one” sourcing strategy as the pandemic has shown that nobody can afford to be over-dependent on one supplier. India has a large talent pool, technological know-how and a large market to its advantage, corporate leaders said.

Yet, companies shifting out of China post the outbreak prefer to go to Vietnam, Cambodia, Myanmar, or Indonesia rather than coming to India, said RC Bhargava, chairman of the country’s largest carmaker Maruti Suzuki. “So, what has to be understood is that we have to become a much more competitive manufacturing country. And competitiveness essentially means, whether it is the government or the entrepreneur, both have to ensure that their policies, actions, regulations, the way they manage operations, are all directed towards lowering the cost of manufacturing and improving quality,” he said.

Bhargava said that while GST’s introduction helped reduce logistics’ costs, there are areas in manufacturing where GST rates are inconsistent with the rapid growth of manufacturing. “There is a need for the government to review some of these rates,” said Bhargava.

Promoting ease of doing business, creating an atmosphere where entrepreneurs can put up industry quickly and without facing hurdles or bureaucratic “red tape”, will go a long way in attracting investments, concurred Pawan Munjal, chairman of leading two-wheeler maker Hero MotoCorp.

Putting in place supply chains locally is also a critical factor to ensure cost competitiveness of manufacturing operations. Unlike in automobiles, most other manufacturers find supply chain to be one of the weakest links in India, Bhargava said.

Bharat Forge chairman Baba Kalyani said India can gain leadership in industries like pharmaceuticals, automotive and ancillaries, electronics, consumer goods, as well as in making sub-systems for several industries, like compressors for air conditioners.

The government is doing a “tremendous job” in attracting global manufacturers to India, especially in electronics manufacturing, Kalyani said.

However, manufacturing in India and exporting will not be the complete solution to becoming a global supplier. Companies will also need to excel in the philosophy of “globally local manufacturing,” said to Vivek Chaand Sehgal, chairman of automotive parts major Samvardhana Motherson Group.

The pandemic has revealed that to be a successful global supplier, companies will have to learn manufacturing economically in the customer country with support from India, Sehgal said. Long term for businesses to grow sustainably, countries cannot resort to protectionism, but would have to collaborate with each other, added Munjal.