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Lessons for all China-lovers and India-baiters
General Electric (GE) chairman Jeffrey Immelt may have got a lot of good press when he spoke glowingly of China in comparison with India, Congress Party's eco-whiz Jairam Ramesh told a select Confederation of Indian Industry (CII) gathering the other day, but he was being economical with the truth. What Immelt didn't tell you, Jairam says, was that India is one of the largest 'industrial laboratories' for GE. GE does $2 billion of business from India annually (half of which is for products sold to the GE Worldwide system), and this includes the supply of around 800,000 motors from the old DLF factory taken over by GE. Imagine that. GE supplies a billion dollars of equipment, including electric motors, to its subsidiaries all across the world, and we still take pleasure in downgrading India's skills vis-a-vis China.
Jairam's not finished with his list. CG Igarshi, a company whose name you've probably never heard before, also supplies over a million electric motors per month to the export market. Sundaram Fasteners does the same, but for radiator caps (10 mn a year) - that Merc you just imported may just be using Sundaram's radiator cap.
So what, you might well say, this is just a flash in the pan. What about the huge foreign direct investment inflows into China each year, the mammoth exports, and the massive infrastructure spend? True, but for the moment, let's flash back to a dinner conversation this writer had in May with Dr Surinder Kapur who runs Sona Steering Systems, or the equipment that allows us to steer our Marutis, Hyundais, and several other cars on the roads today. Several countries including China, Kapur said, had 'bid' to set up a plant to manufacture gearboxes for Toyota's sports utility vehicles (SUVs) - yet, Toyota finally set up the facility near Bangalore, and many of its SUVs will be supplied gearboxes from here. China may be cheaper for some goods, Kapur preened, but India's huge engineering skill base and abundant machine tool availability make it one of the most competitive in the world for complex engineering.
Around this time, by the way, Hyundai Motors also announced it would be using India for exporting its Santros globally. And Maruti Udyog, which had been exporting the Zen to European markets, also announced that it would be exporting the Alto VXi to Germany and Switzerland - India is Suzuki's sole production base for Altos. I checked with Suzuki supremo, Osamu Suzuki, and asked him to compare Maruti's facilities with those of China where he produces Omni-type wagons. In true Japanese style, Osamu wouldn't give a straight reply, but he did say Suzuki didn't allow any exports from the Chinese plant - after all, it would have the Suzuki name on it, wouldn't it?
None of this, naturally, is meant to belittle China's success, but India clearly has a lot going for it as a 'knowledge' country, so let's not knock that. When's the last time you heard of a Chinese Dr Reddy's Laboratory - a company that managed to get a 180-day exclusive marketing license last year for fluoxetine, the active ingredient in anti-depressant Prozac, and a company which has already won 23 patents in the US?
The fact, as Jairam pointed out, is that increasingly, a large part of basic manufacturing (as in, say, a refrigerator) is now going to be embedded-software techniques such as 'fuzzy logic' - again an area of Indian strength. Arun Maira of the Boston Consulting Group, and a former Telco employee, had more to add at CII. Using examples such as Telco's Indica and Mahindra & Mahindra's Scorpio, Maira explained that costs of developing a new car in India are around just 15-20 per cent of those in markets like the US. Once again, that's a great opportunity, and a niche where China's not even a bit player, at least right now.
Of course, if reforms don't quicken, India could lose out on the advantage just as quickly - it's well-known, for instance, that Suzuki refused to bring in new car models into the Indian market as long as it felt the government was out to do it in. But that's in the future. For now, we have an opportunity. So let's build on it.
Postscript: When's the last time
you heard the roar of the extra-cheap Chinese two-wheelers that were supposed
to herald the extinction of the Rahul Bajajs and Brijmohan Lal Munjals?
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