Article: The Intangibles of “Make in India”

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The Intangibles of “Make in India”

To make India a world leader in manufacturing requires effective use of resources and building the right perception
The Intangibles of “Make in India”
 

The “Make in India” campaign aims to make India a leader in manufacturing by 2020 by creating exports worth $990 billion. To achieve this, we have to grow manufacturing by almost 10% per annum while for the last three years, manufacturing has actually grown at only 3% in a year

 

There was a time when anyone who traveled outside India, especially to US, would get flooded by requests to bring back goodies. Friends, relatives and colleagues would all hand over their shopping lists. These included requests for clothes, cosmetics and electronics primarily. The traveler would come back to a small crowd of friends and relatives who would eagerly gather to see what gifts the traveler had come back with. After displaying all the gifts, the crowd would settle down to lament the lack of quality products that were made in India. This was the scenario till mid-nineties in India.

This scene continued to be replayed till the mid-nineties. Then one day the traveler came back with a suitcase full of gifts. His cousin, a young man in his twenties had asked for a branded shirt to be brought back. “Thanks. This is the brand I have always wan-ted to own. You should not have spent so much for me.” There was a silence and then the disappointed man spoke out, “This is made in India.”

Those who knew better explained that several top notch brands source their products from India. That it should be a matter of pride. The young man’s disappointment was visible. A shirt that had the “made in India” label did not have the same meaning as one that had been “made in USA”.

The Task

The “Make in India” campaign aims to make India a leader in manufacturing by 2020 by creating exports worth $990 billion. To achieve this, we have to grow manufacturing by almost 10% per annum while for the last three years, manufacturing has actually grown at only 3% in a year. The National Manufacturing Policy of 2012 set out plans for the sector to reach 25 percent of GDP and create 100 million additional jobs by 2022, the sector’s contribution to GDP has fallen from 16 to 15 percent, with fewer than five million incremental jobs having been added to the economy over the past five years.

Benchmarking China

As China faces rising costs of production and rising wage bills, more and more manufacturers may turn to India that has managed to steadily hold wages and costs. Russia is battling geo-political turbulence. In this scenario it is actually US and Mexico that is growing its clout in the global manufacturing scene.

India’s share of global manufacturing has moved from 1.9% to 2% over the last ten years. In comparison, China now owns 24% of the global manufacturing kitty as compared to 17% in 1995 and contributed 8.5% of the global GDP. India now contributes 2.5% of the global GDP. I am quoting these figures to simply establish that “make in India” is truly an audacious goal for India. Audacious goals often galvanize nations to reinvent themselves. India has a massive base of domestic demand and a growing pool of entrepreneurs who are making things happen. Innovation drives growth. India has one-fifth the number of researchers per million as com-pared to China and even lesser proportion as compared to even the SMEs in Germany. Almost 50% of the 4m SMEs in Germany hold patents. One the other hand, less than 10% of 48 million SMEs in India hold a patent.

Challenges and Opportunities

The task ahead is formidable. India’s infrastructure has to be brought up to match global standards. The roads, ports and airports have to be built. Uninterrupted power supply has to be made available. Only 16% of our workforce is regularized. The rest of the workforce is made up of temporary workers and contract labor. The employers need to be able to work with a flexible workforce to match fluctuating demands. The workforce on the other hand needs to be highly skilled. The government has to create a social security system that acts as a safety net when people are in between jobs. The employers have to create opportunities for people to continuously reskill when they are unemployed.

Build the ‘Made in India’ Brand

“Made in China” has a distinctly different connotation to a buyer than a label that says, “made in Switzerland” especially if the product in question is cheese. A luxury car made in a state of the art plant in a very poor country lacks credibility.

Is Apple an example of an American brand or is it a Chinese brand? Apple’s manufacturing partner Foxconn, which makes the iPhone, iPad and several other Apple products in factories in China is in talks to open factories in India to make iPhones. Does it matter to the consumer where the iPhone is made? In a blind test would a consumer be willing to pay the same price for an iPhone that was made in India as compared to some other country?

Shaping Perceptions

“Brand Breakout – How Emerging Market Brands Will Go Global” by Nirmalya Kumar has recommendations on how an emerging market like India can go global. The country of origin automatically has connotations of six dimensions: quality, innovativeness, aesthetics, prestige, price value and social responsibility. Nirmalaya says, “Branding is not only about differentiating products; it is also about striking an emotional chord with consumers. It is about cultivating identity, attachment, and trust to inspire customer loyalty.”

As choice increases consumers choose products based on intangible elements such as their perceptions and emotional connect with a brand and go beyond cost and quality. While there is a plan to address issues of infrastructure, raise FDI, craft labor reforms and increase the “ease of doing business” where India ranks at 142 according to the World Bank, someone has to sit back and think about addressing the brand perception of the country. This is exactly the problem that Chinese companies are facing.

While the American consumer is surrounded by products manufactured in China, the US & UK consumers on the other hand rated Chinese companies near the bottom in consumer perceptions of quality, ethical behavior, and environmental consciousness. (According to a study by J Walter Thompson) A brand is not about creating a clever advertising campaign and flooding it in the media. A brand is the reality that we live every day. The brand is a verb that is made up of our daily actions and choices. Until there is consistency of demonstrated behavior on all the six parameters of quality, innovativeness, aesthetics, prestige, price value and social responsibility by a billion Indians, the other six billion people across the world will not rethink “made in India” as a global benchmark.

Maybe it is time to run a campaign like “Incredible India” once again. You may think I am being irrational. But that’s the power of the brand. Human beings are not as rational as we think they are.

 

 

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Topics: Others, #National

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