Prime Minister Narendra Modi’s ‘Make in India’ plan confirms that he is a pro-growth leader. There is no doubt that manufacturing must be promoted if the economy has to surge ahead.
On a long-term basis, the raising of the GDP growth rates for India will depend on how fast the nation can grow in the fields of manufacturing, science and technology.
To do this, India needs to invest in research and development (R&D). If we don’t do that the big danger is of intellectual property rights and patents accruing to other nations and we languishing as technological slaves. If that happens, India will remain a low-value added commodity-type producer with low pricing power.
More R&D requires government support and leadership. We spend less than 1% of GDP on R&D while developed nations spend around 2% or more. With greater R&D, the productivity gain from the impact of technology will increase the demand for skilled employees. This will lead to educational institutions producing more ‘work-ready’ students. Modi is pushing for increased domestic manufacturing across the board. If this produces a mixed bag of products, some of which are markedly inferior to what foreign competitors make, then the ‘Make in India’ image will be tarnished. Also the production of inferior products leads to misallocation of resources.
Leading countries have companies with Sustainable Comparative Advantage (SCA) through development of superior products: Take for example, Germany and cars, France and perfume. India should encourage our industries with SCA: Information Technology, gems and jewellery, medicines (ayurvedic/homeopathic) and textiles. They have a good track record and a culture in which many of us take pride. Look at their strengths, weaknesses, opportunities and threats and have a group of leading business leaders, professionals and government officials make the selection.
SCA must be strengthened with brand equity and good design. Advanced global players build brand equity for their country and firms. Furthermore, in today’s world of overproduction and international competition an outstanding differentiating factor is design.
As incomes rise in many countries, customers are searching for better designed products. For example look at the success of Armani, and Scandinavian/Danish wood furniture. Modi’s support for our industries that have SCA will bolster the ‘Make in India’ image.
VH Manek Kirpalani is a distinguished professor of marketing and international business at the John Molson School of Business, Canada
The views expressed by the author are personal