Pawan Goenka On Why India’s Not Self-Reliant In Manufacturing
India’s inability to become a manufacturing brand for itself is preventing it from being “Atmanirbhar” or self-reliant, according to Pawan Goenka, managing director and chief executive of Mahindra & Mahindra Ltd.
Goenka, who was speaking at the 18th edition of the Confederation of Indian Industry’s Manufacturing Summit 2020, said India cannot become a $1 trillion manufacturing economy simply based on domestic market.
Domestic market will take us somewhere but we will have to add export, which right now is a pittance.Pawan Goenka, MD & CEO, Mahindra & Mahindra
Goenka said factors such as cost of land, power and capital, and higher cost of doing business in India act as a “disabler” of becoming self-reliant. He said infrastructure efficiency, logistics costs, and an “underdeveloped” MSME sector—the backbone of the manufacturing industry—is also holding back Indian’s manufacturing sector.
“When compared to China there is 8-10% cost disadvantage of making anything in India, it doesn’t matter what it is,” he said.
Low investment in research and development, and technology by the private sector are other factors he said. “Our private sector investment in R&D is only about 0.3% of the GDP, whereas in a country like (South) Korea, it’s 2.5%.”
Goenka said India has never been able to develop a brand in manufacturing. “How many products get sold outside India with ‘Made in India’ because they are Made in India,” he said, adding the only reason they’re sold is because of lower cost of products.
“When you think about Japan, you think about quality, when it’s about Germany, you think about engineering, then China for low cost of production and South Korea it is about value for money. What is the narrative that India has?” he said adding that India needs to define its brand and build it on that basis.
Giving an example of India’s auto component sector, a developed industry, Goenka said India’s trade of auto components is 1.3% of the overall global trade.
“The country with such a big auto industry, with low labour cost, why is our trade just 1.3%? It’s because there is resistance in buying from India, not because of cost, because we don’t have a manufacturing brand,” he said. “It’s because people don’t associate quality and technology with Indian manufacturing.”
Goenka said while the task of making India “Aatmanirbhar” is on the industry, the government needs to be a facilitator.
“My only request from the government is that we need speed. Whatever has to be done, let’s decide and do it immediately,” he said. “We have a window right now, if we let that window pass, it’s probably never going to come back again.”
He said there’s also potential to develop sunrise industries such as drones, CCTVs and electric vehicles, and India shouldn’t let the opportunity slip out of its hands.
“These are going to be big industries in 10 years from now.”