http://www.businessweek.com/globalbiz/content/oct2007/gb2007104_657544.htm
Hope this does not make some disappointed, better even, furiously frustrated,
seeing the inevitable coming - India's progress, that is!
C'da, how about you? :)
From: Ram Narayanan [mailto:[EMAIL PROTECTED] Sent: Tuesday, October 09, 2007
3:18 PMTo: Sarangapani, AlpanaSubject: For big manufacturers, India is becoming
an alternative to China
"Made in India--that’s not a label Western consumers come across very often.
India has made a name for itself in information technology, but in
manufacturing the country badly lags China. That may be starting to change now
that multinationals of all stripes are flocking to India to open new
factories". Manjeet Kripalani of BUSINESSWEEK discusses who’s taking the
plunge, and why. Cheers, Ram Narayanan US-India Friendship
http://www.usindiafriendship.net/
http://www.businessweek.com/globalbiz/content/oct2007/gb2007104_657544.htm?link_position=link1
BUSINESS WEEK India October 4, 2007, 9:21AM EST Firing Up India’s Factories
For big manufacturers, the subcontinent is becoming an alternative to China by
Manjeet Kripalani For years, Sriperumbudur was known primarily as the town
where Rajiv Gandhi was assassinated by a Sri Lankan suicide bomber in 1991. But
these days, the city 25 miles west of Chennai is earning a far less grisly
reputation. Alongside well-paved roads flanked by freshly planted trees, scores
of glistening factories have popped up, bearing the names of global
heavyweights such as cell-phone producers Nokia (NOK) and Motorola (MOT) and
automaker Hyundai—which now builds some 350,000 cars a year in India. All
around Chennai, other industrial parks are filled with the plants of auto-parts
manufacturers, leather and textile exporters, and even German über-carmaker
BMW. India and IT, yes. But India and manufacturing? In the past two years
manufacturing has emerged as the country’s new rising star. Industrial
production jumped by 12.5% in the year ended in March, the highest rate in
years. With its huge market, productive workers, and—finally—a government that
is starting to help rather than hinder investment, India is becoming an
attractive alternative to China for making everything from sneakers to SUVs.
Manufacturing "is where India’s future lies; this is the real economy," says
Ravi Uppal, president for global markets at Swiss engineering giant ABB Group,
which is in the midst of a $200 million expansion in India. Manufacturing’s
moment has been a long time coming. Nearly five decades of stifling
restrictions left Indian industry rusty and outdated. While the dynamic
software-services sector has picked up some of the slack, it employs just 2
million people—a speck in a country where 14 million new job seekers enter the
market every year. India generates fewer than 1 million new manufacturing jobs
annually, but needs to create at least five times that. And to really lift
hundreds of millions of people out of poverty, India, like China, must build up
labor-intensive export industries such as textiles, toys, and electronics. Many
of the new plants are intended to serve India’s growing market, but they’re
also targeting sales overseas. "As India gets better at manufacturing, it will
start to export in larger volumes," says Raju Bhinge, chief executive of
consultancy Tata Strategic Management Group. While technology giants build vast
outsourcing operations in India, manufacturing investment far outweighs theirs.
In the verdant hills near Mumbai, India’s commercial capital, Volkswagen
(VLKAY), Hyundai Motor, General Motors (GM), and a joint venture of Fiat (FIA)
and local automaker Tata are all building new factories, for a total investment
of $4 billion. Korean steelmaker Posco is planning a $12 billion plant in the
eastern state of Orissa, while Luxembourg-based ArcelorMittal (MT) plans to
invest $20 billion in two steel mills in Orissa and neighboring Jharkhand. In
March, Hewlett-Packard Co. (HPQ) opened a factory near Delhi, its second Indian
operation. And bathtub, sink, and toilet maker Kohler Co. is planning a $200
million plant in Gujarat. All told, 40% of 340 multinationals surveyed by
consultant Capgemini plan to establish manufacturing operations in India by
2012. The companies say they’re put off by rising costs in China, and have
found that "the Indian government is being more proactive," says Capgemini
Vice-President Roy Lenders. SPECIAL ECONOMIC ZONES That doesn’t mean there are
no more roadblocks. India’s infrastructure is improving, but slowly. Power
supplies are iffy, so companies typically need their own generators. Ports,
though partly privatized, are still overcrowded. A shortage of vocational
training, restrictive labor codes, and a hodgepodge of state and local
regulations all continue to give business leaders headaches. " Our policies are
archaic and not in tune with the realities of modern India," says V.
Krishnamurthy, chairman of the National Manufacturing Competitiveness Council,
which has been lobbying hard for lower taxes and more business-friendly labor
laws. But in many respects, the government is coming around to the realization
that manufacturing is important, and is doing its part to woo investment.
India’s Commerce Ministry two years ago announced a policy encouraging special
economic zones like the one China established in Shenzhen, the city near Hong
Kong that has become home to thousands of factories. India’s zones offer
reliable power and water supplies and good roads—a relief from the otherwise
crumbling infrastructure—as well as expedited clearance for exports and imports
and minimal interference from bureaucrats. As states compete fiercely for
foreign investment, some 300 SEZs have sprung up across India, the bulk of them
near Chennai, Mumbai, and New Delhi. "We don’t have to worry about the roads,
power, water, access to ports; that is all taken care of here," says Stefan
Hulsenberg, chief executive of BMW India. The company in February started
producing 3 and 5 Series sedans (to be sold in India) at its 22-acre assembly
plant in an SEZ south of Chennai. Like China, India is also developing tightly
knit networks of suppliers, which help establish particular industries. In
autos, for instance, Japan’s Suzuki Motor Corp. came to India in 1981 in a
joint venture to make a "people’s car for India." It brought components makers
such as Asahi Glass Co., which soon allied with local companies. Since then
they’ve been followed by the likes of Delphi (DPHIQ) and NipponDenso. And
locals such as Sundaram Clayton have stepped up their game—creating a strong
supplier base for the auto industry and attracting other players like Hyundai
and Honda (HMC). The same thing is happening with cell-phone makers. India is
the fastest-growing major mobile-phone market in the world, and the industry’s
leaders have all launched operations there. Nokia set up shop in March, 2006,
bringing along Salcomp, a Finnish company that makes chargers. They were
followed by plastic-component maker Perlos, contract manufacturer Foxconn, and
others. Today, seven companies supply Nokia in India, and many of those buy
smaller components from locals as well. "Everything is made here, right from
the printing on the circuit boards," says Sachin Saxena, operations director
for Nokia in Sriperumbudur. Now, Nokia’s suppliers also sell to Motorola, which
a year ago started making phones just two miles up the road and in November
plans to open a sparkling new facility. India is even starting to see
investment from a place that was a key driver of China’s growth: Taiwan. In
addition to electronics makers such as Foxconn, other, lower-tech outfits are
starting to show up. Taiwanese shoemaker Feng Tay Enterprises, which sells
shoes to Nike, is setting up a factory in an SEZ near Chennai, and rival Apache
Footwear, a Reebok supplier, is planning similar operations in Hyderabad. Feng
Tay has already hired 5,000 Indians, while Apache and two other operations in
the works in Hyderabad will employ an additional 20,000. The owners plan to
build dormitories for employees in order to attract migrant laborers—a
fundamental part of China’s equation for success. "We want to encourage more
companies to come to India, because they don’t want to put all their eggs into
the China basket," says Thomas Chang, director of Taiwan’s trade promotion
organization Taitra. "India is a good option." Kripalani is BusinessWeek’s
Bombay bureau chief . ______________________________________________
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