Page 73 - IMDR EBOOK 20 OCT 2020

"Pandemic and Beyond: Naviga ng the New Normal" E - Book Year 2020

Though India steadily improved its performance and had a modest emergence as a
manufacturing hub, it was largely the Service Sector in the country which surpassed
Manufacturing Sector as both, the revenue and employment generator. Also, India
lacked the World view and World scale. India`s emphasis in manufacturing was focussed
on “import substitution” than “selling abroad”. This was one of the reasons why Indian
manufacturing had a `bonsai` look and its real growth remained below potential. Take
the case of Two Wheeler Industry in the seventies. Though India badly needed personal
transport, Bajaj Auto was not allowed to manufacture a larger number and we were
made to wait for 12 – 13 years for a scooter. Imagine if Bajaj Auto was encouraged to
make scooters for the world in 1970s and encouraged to export. They would have
become a world giant!

India`s red tape had a vice like grip over most aspects of industrialization, ground level
corruption stayed unpunished and the foreign investors grew increasingly wary of
investing in India.
Like most developing countries, Chinese government offers many incentives to
manufacturers, particularly those who export. What is different about China is that,
these incentives are woven in the system in such a way that the beneciary doesn`t have
to claim for most of them and they are received in a manner that helps in lowering his
manufacturing cost at the manufacturing stage itself. These incentives are spread over a
large range of activities from raw material procurement stage till transportation of
nished products to the port. In addition to the Central government, the local
governments have sets of incentives which actually are designed in a competitive
manner, to attract the potential investor to the province. One unique way of helping and
supporting the investor is that, some provinces have a system of appointing a mentor /
hand holder who ensures that the progress from expressing intent to operationalize the
unit is smooth and with least problems to the investor.
Another different thing about China is that Chinese bureaucrats are incentivised for
their contribution to local industrialization and are punished for failures or corruption.
This punishment invariably results in demotion, loss of job or public humiliation and
imprisonment up to 10 years in case of corrupt practices.

One interesting example was stated by Mr. Sanjay Gupte, a Senior Business Executive of
Mahindra Group who dealt with Chinese and has visited there. According to him, a
Japanese businessman wanted to start a factory in China. After initial homework he
shortlisted 3 provinces. During his visit to the very rst province to locate land for his
factory, the government ofcials of that province were so persuasive that they talked him
out of the idea of building his own factory by offering to build one for him as per his
drawing and specications. That would then be rented to him without any commitment
of period. They also asked him to give them a list of the skillsets he would need and they
would provide manpower with those skills. If anyone would be found not up to the mark,
he would be simply replaced within 24 hours. Availability of electricity, water and roads
are non-issues in Chinese industrial zones. Who wouldn`t put up a unit there with these
kind of offerings? What is remarkable is all this actually happened.

India will have to gear up her executive and administrative machinery to match this level
of cooperative, supportive approach to prospective investors. According to my friend Yin
(Peter) Wu of Crystal Trades, if any investment prospect fails to convert in specied
period, there are steep penalties for the provincial ofcials in case they fail to justify the
failure. We will have to overhaul our accountability parameters for the government
machinery and bring a strong, visible Carrot & Stick policy if response is to be matched to
these benchmarks.
Political will and matching administrative zeal are the major foundations of the Chinese
manufacturing rise. India will need to adopt similar approach, reform its bureaucracy
and bring the politicians regardless of parties and geographies on the same page, if this is
to be matched.

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