Why is India not competitive in manufacturing cost? Analysis by Mahindra & Mahindra MD

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Published: June 26, 2020 9:41 PM

"There are many opportunities across sectors but it is not something where we can flip a switch and say we are ready we need to do work hard, make a five-year plan... Many companies are leaving China we know very well that few are coming to India. Therefore, we need to make manufacturing competitive in terms of cost and scale," Goenka said.

Pawan Goenka said the government is now for the first time making serious efforts to see that the manufacturing sector grows in the country. (PTI)

India needs to bring in cost competitiveness and raise scale to grow its manufacturing sector and compete globally, Mahindra & Mahindra (M&M) Managing Director Pawan Goenka said on Friday. The auto industry leader also emphasised on enhancing productivity and also harped upon the importance to have a global value chain to usher in prosperity and economic growth. While participating in the BNEF summit here, Goenka said the government is now for the first time making serious efforts to see that the manufacturing sector grows in the country. “You cannot grow manufacturing by forcing people to invest because investment can happen only if there is some return coming out of it. Therefore, what India has to do is to reduce manufacturing cost,” he said. Unfortunately, India is not competitive in manufacturing cost for a variety of reasons, Goenka said.

Also, there are factors like time to set up a plant and cost of money, he said adding that the industry needs to bring in various factors together to grow manufacturing base, he added. “China was not built in a day, it took decades of focused effort towards a defined goal. China has built a scale, India has not been able to build a scale. Without scale, the manufacturing sector cannot grow. Therefore, industry and the government will have to work together,” Goenka said. India should aim at becoming a producer of products and then export these to other markets, he said.

“There are many opportunities across sectors but it is not something where we can flip a switch and say we are ready we need to do work hard, make a five-year plan… Many companies are leaving China we know very well that few are coming to India. Therefore, we need to make manufacturing competitive in terms of cost and scale,” Goenka said.
Make in India or manufacturing growth has been a big priority for Prime Minister Narendra Modi since 2014 but unfortunately, India hasn’t made much progress in that,” Goenka said. “It is for the first time, thanks to COVID-19, that the government is putting efforts to grow manufacturing sector in India,” he added.

Goenka said this whole move towards insourcing is something that he worries about. “If every country wants to get into a cocoon and isolate itself from the rest of the world, we will move 60 years back and that is not something which will bring prosperity and growth to the economy,” he said. He admitted that lately, the balance of trade has gone too much in favour of 3-4 countries but that should not push the country towards isolation. “There are things which a country can do better than others and if we try to bring everything to one country that it is going to become very inefficient,” Goenka said. He further said, “If we are producing anything like a cellphone, or a car or a washing machine, we got to have a global value chain and we should not start over reacting to the situation like this and say everything should be insourced.”

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