Tuesday, January 26, 2016

Make for India?

Sometime back I had blogged highlighting the differences between making in India (for external markets) and making for India. In this context, a Project Syndicate article, which points to the possibility of China emerging as a global innovation hub, highlights the point,
Chinese companies have prospered in customer-focused industries because they have learned to tailor their goods to the needs of their country’s emerging consumer class. Whereas Chinese companies used to focus on designing products that were “good enough” – not quite matching the standard of Western products, but offering huge cost savings – they are now out to create products that are cheaper and better, in order to satisfy wealthier consumers. The sheer size of China’s market – comprising more than 100 million mainstream consumer households – also helps, as it enables companies to commercialize new ideas rapidly and on a large scale.
As numerous studies - SECC, Credit Suisse, Pew, and the government's own income tax database - show, India simply does not have a large enough, less price sensitive domestic consumer class that can sustain learning by doing involving world-class innovation. Given this country's narrow and deeply price-sensitive consumer base, that vast majority of manufacturing has to be stripped-down, less-than-world-class, and frugal to be competitive enough for the domestic market. In the circumstances, in the medium-term, even with the headwinds of competition from Chinese exports and weak domestic manufacturing competitiveness, a more realistic approach would be to promote making for India.

Update 1 (07.02.2016)
Arun Maira is the latest to talk about "Make for India".

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