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China’s ascent into Worlds Factory started in the Late 1970s as economic reforms were introduced by Deng Xiaoping, a reformer within the governing Chinese Communist Party. This was to move away from a Centrally Planned economy to a market-based economy. India’s watershed moment came later in 1991 under the able Leadership of Visionary FM: Ex PM Shri Manmohan Singh as reforms were introduced in Phases opening up sectors phase-wise with an FDI partnership ceiling limit & involving Local partners to create JVs for getting the technical competency at the same time preserving Local Players. Both China & India Charted a Different Path where the focus in both cases was to make the local industries competitive & develop products that match world Class Quality Standards yet China focussed on Manufacturing whereas India on the Services Industry. The Chinese had a Strong Foundation in Manufacturing owing to their decades of experience in Mass Production mostly in Iron & Steel fuelled by their demography & availability of Coal, Metal & Non-Metal Deposits. The monolithic architecture of the political system in China Contributed to the fast creation of Infrastructure facilitating the easy flow of Capital another was Cost Lever. Vocational-based Education in China created an enormous pool of Competent Technicians and a white/Blue Collar Workforce. India continues to have an educated, English-speaking population, limited opportunities & Cheap labour that made it the Service Capital of the World in the Late 1990s.
It is important to understand the Supply Chain of a product in a particular sector to note the evolution. China started out as a Tier-1 supplier & integrated them into the Global Supply Chain, now it is the First Part slowly as maturity & capability set in, they aspired to move up the Value Chain as it is the only way to achieve sustainable growth as in a Long Run Low Cost is not the competitive differentiator, especially when in a Globalised world where each nation is vying for foreign investment. Innovation is a key Attribute along with automation – In India, the Service Industry has different hierarchical layers like BPO, KPO, and services related to Digital / Physical Products e.g. SAS, PAS, IAAS etc. The advent of artificial Intelligence has accelerated the transition of India to move up the Value Chain in the Global Service sector Context.
There has been a disruption in the supply Chain already due to COVID-19 measures which necessitated a geographical redundancy at the same time the demand patterns have become more Volatile & Uncertain on top of it you have changes in technology enabling shifts in customer preferences. It goes without saying that India is a Software Powerhouse exporting 156.7Bn USD in FY21-22. In the manufacturing sector to achieve its true potential lies in unlocking the value of its SMEs currently contributing 33% India's GDP (45% of India's Export FY21-22)
I am a great believer in tailored Solutions for our SMEs & against Blind adaptation of practices as successful somewhere else but it is clear that the SMEs cannot function with technology debt. Each SME needs to have an effective Innovation drive internally as well as nationally as a platform to get recognised for their Value Engineering or Commercial Cost Savings. IT will be an enabler for rooting out all the inefficiencies in manufacturing besides it helps in adding an alternate skill to the workforce especially if it is young & trainable. To substantiate my case let us consider the case of the Automobile Industries there has been an observable shift towards Electric Vehicles so in future once the charging infrastructure matures due to lower operating Costs it will be the preferred Choice Now the transition over the years needs to be done at the Supplier level the SMEs will have expertise in Casting / Forging Commodities but with Change from an IC Engine vehicle to Electric Vehicle the no. of moving parts are substantially reduced therefore in long term must be a de-risking road map. This de-risking road map would entail building alternative expertise, technical/ PMO support for Change management, Creation of new entities, future Mergers & acquisitions, Retraining Employees & re-evaluating Priorities in the Short, Mid & Long Term.
Things to do & Ongoing at “Macro Level”: India is a Vibrant democracy at Macro Level the Central & State Govt. promulgate laws that fuel the future trajectory of this Nation. Peace is a must for sustained growth, the Constitution of India gives ample room for peaceful dissent, Cross questioning & debates weeding out any future disturbances/militancy/ radicalism. This is already established in the PESTEL framework.
Let us celebrate the right steps in this direction:
India must not Copy China but rather create its own value & place in the global supply chains in the form of Products, Services etc. Its Unique Geography, demography dividend, and Democracy would pave the path to Chart its own story. As per the graph below it is clear that by 2040s China will surpass the USA in GDP Terms, it is to be seen if it is replicated in reality as China has Cooled off to an Annual Growth Rate of 6% and India has been growing close to 7% annually.
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