Make in India: Why There is Struggle

By S.A. Srinivasa Moorthy

0
2006
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Based on personal experience, the author explains why Make In India initiative is yet to make a mark in the electronics industry

Having been in India all through my career and a part of the Indian government-owned telecommunications technology development centre, Centre for Development of Telematics, or C-DOT—which changed the profile of the Indian telecom industry—I was hopeful of Make in India succeeding at least in the electronics industry, because the auto industry in India demonstrated it can be done.

Recently, I was on a work trip to Shanghai and Shenzhen in China to develop/source 17.8cm (7-inch) tablets—it is cheaper to import tablets than making these in India, even after paying duties.

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I met three vendors—one each for plastics, electronics and batteries. My experience was an eye-opener! Some of my observations are given below.

The plastics vendor’s infrastructure is as good as I have seen in India, but why are we not able to get this done in India? What I noticed was the attitude of the vendor. He was very clear in terms of business, and never bothered about volume. His conditions were clear, too. He told me that he will do the tooling and supply the plastics. And if I wanted him to do only one of these, then he was not interested.

Second, he gave me the pricing based on volume. In India, this is never done. Most vendors ask about the quantity before even trying to understand what needs to be done.

Interestingly, I found a vendor in India for a different plastic part for a particular model, who was willing to work with me on scaled-up volumes. He was able to get tooling done at par with Chinese prices, and plastics at a reduced price (sixty per cent lower) than my existing vendor. The effort I put in is the same as when I was working with the Chinese vendor.

Ditto for electronics! In India, solution houses (as they call themselves) will do the design only if you buy assembled electronics from them. Their turnaround times are in terms of a few weeks. Having been in the design service business, I have realised that unless the design is back-ended with manufacturing, pure design service will never succeed. I have experienced it when I was heading an engineering design organisation of an electronics manufacturing services (EMS) vendor.

In India, we try to do such connected things individually, which leads to failure. So-called EMS providers in India are assembly houses, or can only take up matured products. These have a weak or non-existent vendor development process.

Having worked in C-DOT, I know the difference between supply chain and vendor development. The primary reason why Indian auto-vendors have succeeded is because of their vendor development and supply chain processes. In India, especially in electronics, this is a huge gap that needs to be filled.

The government listens to the industry and slaps punitive tax on import of finished goods, but unless the backend is fixed this will not make any difference. There is no concerted incentive mechanism for basic electronic components manufacturing.

Let me give an example. I was involved with a would-be investor for setting up a multilayer PCB plant. While the investment was in the range of hundred million dollars (approximately), the investor’s main request was that the government set up a common effluent treatment plant for the industrial estate, because pollution is a big issue in the PCB industry.

The relevant government department did not understand the importance of this, and kept on asking the company to commit to the investment. Eventually, the company lost interest and shelved its plan.

If Make in India has to succeed, a solid ecosystem is the key. By ecosystem I mean the essential common infrastructure that must be provided by the government. For instance, in the states of Tamil Nadu and Maharashtra, when a new industrial area is started, all basics are put in place before promotions are started. Most other states have never done this—offering a piece of land alone will never suffice.

Coming to incentives, there are three essentials that need to be heavily subsidised for Make in India to succeed in electronics, namely, PCB, lithium-ion battery technology and tax holiday for extended period so that the industry stabilises. Unless this is done, Make in India initiative will not succeed.


S.A. Srinivasa Moorthy has over thirty years of experience in the IT industry as head, leader and technocrat in the electronic product design and engineering services, and is currently working as chief executive officer of Andhra Pradesh Electronics & IT Agency

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