Taming the Dragon!

This is intended to be a sequel to my last week’s blog– Return of the Dragon. If you haven’t read it, please read here.

The military standoff between India and China at the border is slowly turning into a diplomatic one with both sides waiting for other side to blink first. Marathon disengagement talks are going in parallel with coercive military build-up on both sides. And in India, we have set in motion a slew of things in an effort to “tame the Dragon”.  But what real options do we have to tame the Dragon?

I remember vividly that whenever we used to have these military tensions with Pakistan triggered by some terrorist attack, though we are a militarily and economically stronger nation, experts would say that a full blown war with Pakistan is not an option between two nuclear powered countries. At the same time, we were told that we must raise the cost for Pakistan to carry out terrorist activities, whatever that means. Since there is little economic activity going on between India and Pakistan, it doesn’t really make any difference to Pakistan even if we sever all economic ties.

Between India and China too, a full blown war is out of question considering the fact that we are both nuclear powers. The issue of longstanding boundary dispute can be resolved through talks and diplomatic efforts. But, since both countries cannot give up even a square inch of land, a solution to the boundary dispute is not coming any soon. Under these circumstances, the best option which is face saving for both is achieving Status Quo Ante!

At the same time, while pursuing diplomatic engagement to get the troops back to where we were before this round of escalation, it is necessary for India to raise the costs for China to deter it from indulging in border escalations.  This, I believe can happen only on the trade front.  On the trade front, I believe that China has more to lose than India if relations are spoilt.  And this is opposite to what the commentariat in the India media feel. That being the case, what are some of the options?

  • China is an exporting economy. For the past few years (coincidentally since Xi took over in 2012), the Chinese economy has been floundering, after years of high growth. Under the circumstances, it cannot shut business with a country like India which is poised to be the most populous country in the world soon. In 2019, we imported US$75 billion worth of goods from China. Those who say that this is miniscule compared to the total exports of US$2.5 Trillion China does, are missing the larger point. As globalisation weakens and Nationalism grows and in particular when large economies like the US, Japan and Germany are talking of de-risking from China in the wake of Covid-19, spoiling trade relations with India and denting the prospects for trade growth is the last thing China can afford. So, leverage on this aspect.
  • A quick look at the last quarter’s import data shows that Electronic Components, Telecom Instruments, Industrial Machinery, Computer Hardware and Peripherals are the top 5 categories of imports from China and take up almost 33% of total imports. As a country, we must roll out a solid, strategic plan for developing the domestic Electronic Hardware manufacturing industry. This cannot happen overnight. But can happen with a vision and a roll out plan in the next ten years. Considering the fact that the role of electronics, is on the continuous rise in every aspect of our life and every aspect of engineering, the scope for just catering to the domestic market and then emerge as a competitive, key part of global supply chains is huge. There has been talks in the past to build a globally competitive electronic manufacturing industry in India but this is the right time to translate those talks into actions on the ground.
  • Ever since, we lost lives of our soldiers in the border standoff, the cries of “Boycott China goods” have become louder and more visible. A total and real boycott of these is not neither feasible nor advisable under the current circumstances. Chinese components are a key cog in the Indian manufacturing wheel today.  Instead, whatever government does needs to be only “covert” and not overt. In short, kick off “Salaami slicing” in aspects of trade and commerce.
    • For example, for all government purchases, government cannot openly declare that it will not buy “Made in China” products. However, it can signal a preference to “Made in India” products.
    • Just last week, government made it mandatory for sellers to indicate the “Country of Origin” for their products offered on the GEM (Government E Marketplace) portal. While this was touted as a move to promote the Prime Minister’s Atma Nirbhar Bharat vision, that it was a move to identify products coming from China was not lost on trade observers. Government can do more covert actions like this.
    • For big infrastructure projects, go slow on Chinese companies. (There are many ways of doing this)

  • In the private consumption space, there is a groundswell of opinion among the common public against Chinese products. Usually this sentiment is very temporary. But now, as the government cannot take part directly in festering any Anti-China emotion, it can use the party, its loyal trade bodies and Non-profit bodies to do the job in keeping the sentiment alive for a long time. Though in terms of dollar terms, the reduction in imports in the consumer goods space may not be significant for China as a country, any reduction in demand and orders particularly with the weakening demand due to Covid-19, will affect the Chinese sellers. For example, for the upcoming festival season in India, even if the orders are reduced by half than usual for the many consumer items including domestic appliances, garments, plastics, gift items, decorative items etc. it will be significant blow.  And if that demand turns into orders for Indian manufacturers, it will also aid the economy here.
  • Creating stumbling blocks for Chinese origin businesses like more scrutiny of compliance matters is another way of covert signalling. For example, just last week, without citing any reason, India customs officials said that there could be delays in clearance of goods imported from China. Moves like these will raise the costs for those importing Chinese goods in India and indirectly act as a deterrent for promoting those products in India in the long run. Here, I would like to add that these moves cannot be sustainable in the long run. But, in the short term helps in messaging. And the Indian government doing this now is a smart thing to do. Manufacturing activity and demand in India is any way weak and tepid at this point in time. So, any delay of a few days here and there is not going the move the dial significantly. I am sure that this will be a short term prick rather than a long term change in process.

Now, there is a distinct possibility that China does retaliatory moves (we hear, it is already acting on delaying customs clearance of goods from India). But as I mentioned, today, India imports 5 times more than it exports. So, as of today, it hurts China more than it hurts India. Of course the imported goods are a part of the Indian economic activity and hence any delay or disruption affects those who are in that sector. It is a small cost to pay compared to the cost our defence forces pay with their lives at the border securing our sovereignty.

In conclusion, to tame the Dragon, we must first believe we can, punch above our weight and play to our strengths as a large consuming and growing economy. “Challenge is a dragon with a gift in its mouth. Tame the dragon and the gift is yours” goes a saying. Time to replace the word Challenge with China?

Return of the Dragon!

For few months now, China has been in the news mostly for all wrong reasons. First, due to the way it handled the initial outbreak of the Corona Virus and now for the LAC row.  Ever since the Corona virus became a pandemic bringing the entire world to its knees, there has been a perceptible anti-China sentiment in most parts of the world. In the midst of fighting this perception battle, China also has been engaging in turf wars.  The obvious question is, why would an embattled China engage itself in these activities at a time like this? I am no foreign affairs/Geo political/Defence/Strategic affairs expert. But as an avid follower of current affairs, it is not too difficult to understand the predicament of China, at least towards India.

Consider the following chronology of events (Aap Chronology samaj lijiye):

  • In 2013, China announces its One Belt One Road project (OBOR), now known as the Belt and Road Initiative (BRI). This was aimed at connecting China with important cities and ports in Asia and Europe through maritime corridors and shipping routes. All of the neighbours of India like Sri Lanka, Bangladesh and Pakistan with the exception of Bhutan have joined this initiative.
  • In 2017, India announced its decision not to join this China’s ambitious programme on account of strategic reasons – read as “National Interest”. Not just that, India did not send even a representative to attend the launch summit which was attended by many countries which were not part of BRI. (The project is in tatters with some participants expressing concern over the large debt trap they were walking into)
  • In June 2017, India and China got into a border standoff at Doklam when India objected to the alteration of status quo by China, in constructing a road in Doklam at the trijunction border area. “Operation Juniper” was launched by India whereby, several companies of Indian soldiers crossed over to the Doklam area of Bhutan to prevent the construction. The standoff continued for two months and after hectic diplomatic parleys between India and China, the standoff ended with the halting of the road construction.
  • September 2017: India relaxes its rules relating to obtaining forests clearance for infrastructure and army projects along the LAC in a bid to speed up construction.
  • August 2019: Fresh from the re-election, Modi government changes the status quo of Jammu and Kashmir. As part of that, Ladakh region becomes a Union territory directly under the Central government. Though this is an internal re-organisation, the impact of this move on China was not lost on anyone. During the parliament speech, Home Minister Amit Shah thunders that whenever he refers to Jammu and Kashmir, it includes POK and Aksai Chin.
  • In November 2019, India opts out of the negotiating table of RCEP (Regional Comprehensive Economic Partnership) ostensibly due to the China factor. One of the main reasons from the Indian side is to protect Indian industry and farmers from a surge in Chinese imports, if a free trade pact is signed.
  • February 2020: In the Union Budget, Customs duty on Toys was hiked from 20 percent to 60% to curb Chinese imports. Similarly 10 to 20 percent hike in few other product categories where China was the chief exporter.
  • Mar 2020: In the wake of Covid-19, QUAD (Quadrilateral Security Dialogue) originally intended to be among United States, Japan, Australia and India) got upgraded to Quad Plus to include New Zealand, South Korea and Vietnam. The conference calls, aside from discussing the fall out of the pandemic has also been seen as an opportunity for India to enhance its strategic weight in the Indian Ocean region.
  • April 2020: India revised its Foreign Direct Investment (FDI) rules to prevent “Opportunistic take overs” of firms who have become vulnerable due to Covid-19 triggered business slowdown. This was few days after People’s Bank of China increased its shareholding in HDFC. The move for obvious reasons irked China.

In between all this we also had informal summits between Modi and Xi in Ahmedabad, Wuhan and last year in Chennai, multi-fold increase in FDI from China into manufacturing and construction projects and start-ups and so on.

In Marketing and Public Relations, there is a strategy which is adopted by large corporations. Which is to “Say one thing in public and do exactly the opposite” in a bid to catch the competition on the wrong foot. I forget the exact name for this strategy but let me call it “Marketing by Deceit” TM for want of a better term. This strategy cannot be used by the same company repeatedly but to be used like a onetime Brahmastra!

If you see India’s strategy, it has been something like this. While, we have tried to engage with China to improve trade and diplomatic relations overtly, we have also tried to secure our National interests in matters of strategic concern. I am surprised that this point is lost even on expert commentators who keep referring to Modi’s photo-ops with Xi.

If I were an official in the Ministry of Foreign affairs in China in charge of India, I obviously would be concerned by the above timeline events. Combined with the pressures around the spread of Corona Virus, it is not an enviable situation to be in. As a wannabe dominant power, China wouldn’t like to show that it is embattled or weakened at this point in time. So, the approach of “Offence is the best form of defence” not just in the Indian borders but in Senkaku Islands, in Taiwan and South China seas etc.

Ergo, our attempts at the LAC to up our infrastructure has been faced with a belligerent China. For both the countries, this development comes at a wrong time. Not just India, but China also is facing the ills of a plummeting economy now for few years. Both the countries are also in the midst of fighting the world’s worst pandemic. Hence better sense has to prevail at both sides to avoid a full blown war.

For India and the government, it is paramount to protect the sovereignty of the nation without getting engaged in a bloody battle. In Arthasasthra, Kautilya aka Chanakya says, “Do not reveal what you have thought upon doing. But by wise counsel, keep it secret being determined to carry it into execution!” In line with this, I believe the government will do what it should in India’s National interest without being overt about it in an All-party meeting or in a media conference.  It is laughable that the opposition and the commentariat being hell bent to know what the government is intending to do to resolve the standoff.

In India, Bruce Lee’s film was released as ‘Return of the Dragon’ as a sequel to his earlier hit ‘Enter the Dragon’! But in Chinese and in the original version released in the United States, it was ‘Way of the Dragon’!  Even in real life, between 1962 and now, let there be no doubt that it is the “Way” and not the “Return”. So, our Statecraft must be prepared to deal with this.

Pic Courtesy: India Today

Locking down a tippler!

In India, in the last few days, two set of visuals are making the headlines. One, is the unending stream of pictures of migrants walking along highways trying to reach their homeland. The other is of the long and unending lines of people in cities and towns in different parts of the country in front of liquor outlets. Ever since many of the state governments who couldn’t control their addiction to revenue from liquor (to borrow this fine phrase from Pratap Bhanu Mehta) decided to open up liquor outlets, it has opened up a Pandora’s bottle! Point to remember here is that liquor along with petrol/diesel are out of the purview of GST still and are in the state’s ambit for tax collection. So, not surprisingly most of the states opted for revenue maximisation ahead of Corona minimisation!

In India, the narratives of the so called experts are drenched in Anti Modi’ism. So, in the initial days of Corona, the narrative was around why India is not locking itself down like China did with an iron hand. In a few days into Corona, Prime Minister Narendra Modi did announce a complete national lock down, unprecedented and unimaginable to pull off in a culturally lax country like India. When that happened, the narrative shifted to the lock down not being thought out properly. The pictures of migrants walking along main highways did support this narrative.

During this period, calls from the commentariat including in the opposition were to do a direct benefit transfer to the needy of anything between Rs. 5000 to Rs. 12000 per month so that, many of the poor who have now lost their jobs and income can sustain. Along with this, there was also the call for free distribution of staples. In fact, Nobel laureate Dr. Abhijit Banerjee went to the extent of saying that targeted money transfer be damned and pushed for transfer of cash to the entire bottom 60% of the economy. He felt that targeting at this stage would be costlier and cumbersome.

In a while when the states started getting their act together to reach food to the migrants, the story was about how livelihoods are being lost due to lock down.  In the past few days, many experts tired of the lock down now are veering towards “opening up” the economy, as a complete lock down is no longer sustainable.  And that’s when the decision to open things up, which is now in the hands of the states, was taken by most of the states, who were feeling the pinch of empty coffers. And the key item that got ticked off in opening was the opening up of liquor shops.

And when the liquor shops got opened what happened?

  • In most places, all the gains achieved with so many days of social distancing got neutralised by thronging tipplers who threw caution to the wind.
  • In Bengaluru, on a Monday morning, you could see youngsters’ queuing up to get their stocks of liquor. In their prime, their parents lined up often in front of ration shops to get their share of kerosene, rice, sugar milk and other essentials.
  • In parts of Telangana, in some pictures where you could identify the people as not very rich or even middle class, men were seen lining up in braving dry heat.
  • In Nainital, Uttarakhand, people were seen braving hailstorm to buy liquor at a shop on the day liquor shops were open.
  • In Delhi, a man was seen showering flower petals on people standing in lines outside liquor shops apparently to celebrate them for helping the country’s economy!
  • There was also an invoice from Bengaluru that went viral showing liquor purchases for Rs. 52841 one shot!

Whichever way you look at it, there is something fundamentally wrong in what we saw as an after effect to the opening up of liquor shops. And here’s why:

  • What are the young men and women (who we can assume are working in IT or ITES companies) doing in front of liquor shops in Bengaluru on a fine Monday morning (1st day of the week) when their companies expect them to “Work From Home”?
  • In the other case of poor people crowding the liquor shops, what about their source of money? Did we not hear that many of them have lost their jobs and not getting paid due to lock down?
  • Or is it that they are using the little amounts transferred by the governments to quench their thirst for liquor instead of using it to buy ration and other essentials for their households?
  • Domestic violence reached an All-time high during the lock down period. The sheer number of men in the lines made us think of the women they go back to.

I was disappointed to see once again the media narrative on the above scenario. In the “liberal” worldview, calling for a prohibition is of course untenable. But, at least during these extreme situations of Covid related lock downs, I would have expected a strong questioning of the timing to open liquor shops. Instead what we saw in most media stories were:

  • What happened to social distancing norms in liquor shops? Why did the government not think through this?
    • Really? Even in normal shops, maintaining social distancing is a herculean task. And how can one expect discipline in liquor shops that are opening after many weeks?
  • Instead of opening the liquor shops, why can’t the government arrange for home delivery of liquor thro apps like Zomato, Swiggy, etc.?
    • Yes, the authorities in the midst of fighting the health hazards due to Covid must also spend their time on discussing with Zomatos of the world to ensure efficient door delivery of liquor to nook and corners of India including remote villages. Is it? If such efficiency can be attained in India for booze delivery, why can’t that model be put to use first to deliver essentials to people would be my question!

The fall out of this untimely and stupid decision is there for us to see. Mumbai has rolled back the decision. In Tamil Nadu, Kamal Haasan headed outfit along with few others challenged the decision in the court and obtained a stay on selling liquor for now. The state has now knocked at the doors of the Supreme Court! Few states have slapped very high taxes, which I don’t know will make any difference.

It is not very clear as to which is more dangerous? People’s addiction to liquor or the Governments’ addiction to revenue from liquor? And who has to give up the addiction first? My personal view which could be an unpopular one too is, it is high time governments view this issue in perspective. That is, to look at the so called revenue from Liquor and tobacco versus the money spent on health care to take care of ailments related to smoking and drinking. And when that is done over a longer period of 20-30 years along with the cost of social ills, it will be as clear as daylight that, in a country like India, prohibition in “some form” is essential. Which answers my question as to who should give up the addiction first. It is the State.

Winston Churchill apparently said, “I have taken more out of alcohol than alcohol has taken out of me!” in reaction to those who critiqued him for depending too much on alcohol. It will be however wise to realise that in the case of governments, it is the otherwise.

COVID-19 aftermath – Time to revive two flagship programmes of GOI

If there is one quote which has been oft repeated by commentators of all hue in the past few weeks as the world grapples with the COVID-19 crisis, it is this. Winston Churchill’s “Never let a good crisis go to waste”! As India locked itself down in its fight against Corona Virus, the lessons for future are many. And indeed it must learn those and never let this crisis go to waste, once things settle down. In India, we have a tendency to move on quickly from natural disasters and other calamities without learning the lessons and putting them to practice for future.

In the context of COVID-19, once we are out of the crisis completely, two programmes of the central government which were launched with much fanfare in the 1st term of Modi Sarkar but which lost steam or didn’t take off the way they were envisaged come to mind. It’s time to revive them and re-launch them with added rigour. And in the aftermath of the Corona virus pandemic, I do believe that the chances of them now doing well have got better.

On the 15th of August, 2014, when Prime Minister Narendra Modi announced the launch of Swachh Bharat Abhiyan, it caught the imagination of the public by and large. “A clean India would be the best tribute India could pay to Mahatma Gandhi on his 150 birth anniversary in 2019,” declared the Prime Minister. This was the first time, cleanliness entered public discourse since Independence. Immediately after the launch, there was an air of excitement and flurry of activities. I remember voluntary groups and public carrying out weekend shramdaan to clean up the neighbourhood. Celebrities did their bit by participating in symbolic photo ops with brooms to spread the message of cleanliness.

What started off very well, soon started losing steam with the typical Indian attitude of laxity creeping in, after the initial enthusiasm.  From the government perspective, we also saw that Swachh Bharat Abhiyan from the original goal of a “Clean India” by 2019, moved to making India “Open defecation free” by 2019!  So, accordingly the focus turned towards building toilets across the country and giving the poor access to toilets even in the remotest of villages.  In his address to the parliament in Jan 2019, the President announced that over 9 crore toilets were constructed across the country under Swachh Bharat Abhiyan program and that the coverage of rural sanitation went up from less than 40% in 2014 to 98% in 2019.  While these are commendable data points, we were not close to becoming a clean and hygienic country by Oct 2019, as envisaged by the Prime Minister when he kicked off the programme.

While not taking any credit away from the government for pursuing this initiative, I have always maintained that Swachh Bharat Abhiyan is not about cleaning and more cleaning but, reducing the need for cleaning in the first place. That essentially means developing instinctive disciplinary traits and attitude toward cleanliness like for example, the Japanese.  This calls for a huge attitudinal change among us as we are by and large happy to keep our own four walls clean while not being concerned about littering in public.

It is undisputable that COVID-19, in the last few weeks has increased awareness of self-hygiene as well as community hygiene in a big way in India. Use of sanitisers hitherto seen as a “NRI tantrum” while in India, has now got into the collective conscience of India. I do believe that thanks to social media like WhatsApp, the ills of a pandemic like Corona Virus have reached the nook and corner of India and hence messages concerning the need to maintain cleanliness may be received with more seriousness than before.  By the end of 2019, looking at the way the programme sort of petered out, I concluded that a “Clean India” may be a few decades away when the current student generation with more awareness from childhood stages take to public cleanliness more seriously.  However, now I feel that COVID-19 has given us a great opportunity to reach our goal of a “Clean India” probably a few years earlier and it is important that we as a country seize this opportunity.

Weeks or months later when we get over the COVID-19 crisis, the governments – Centre, States, local municipalities and panchayats should step up the gas on Swachh Bharat Abhiyan once again.  The government must use all the communication machinery at its disposal to build up on the Corona Virus messaging of “washing hands” to start talking about keeping one’s surrounding absolutely clean and safe to prevent further epidemics like this. We should move from friendly nudges to slapping heavy fines for offences like littering in the open, urinating on the side of the roads, Open defecation when toilets are available in the vicinity and spitting on the roads and walls. We must remember that making India a “Clean India” is not just the look out or job of the government of the day but is in the hands of the public. So, as a society, we must not let this good crisis go waste on the hygiene front and make our march towards a “Clean India”!

“Make In India” is another flag ship programme launched by Modi Sarkar way back in September 2014 with a view to give boost to the manufacturing sector in India with an eye on creating lakhs of jobs. Initially conceived to cover 16 industries, the scope was expanded later to include 25 identified industries. Five years hence, when one looks at the outcome of the programme, it’s a mixed bag. “Make In India” has seemingly done well in mobile phone and allied manufacturing with around 268 units producing phones and related accessories in India as of November 2019. This was just 4 in 2014. We are now the 2nd largest manufacturer of mobile phones in the world.  But beyond mobile phone manufacturing, other electronic manufacturing has not taken off in India as yet.  We are nowhere close to the objective set of making manufacturing contribute to 25% of our GDP. With the economic slowdown in the last few quarters and the disruption due to COVID-19, the outlook for manufacturing looks even bleaker.

This is where, COVID-19 could provide a window of opportunity to India in next five to ten years. COVID-19 which erupted from China with the industrial province of Wuhan as the epicentre, has ended up disrupting the global economy in more ways than one. When the virus spread was around China in the month of February, the talk was about how the global supply chains particularly in the Automotive, Pharma and electronics sectors have been disrupted. With the contagion now spreading alarmingly all over the world, COVID-19 could emerge as the single largest cause and effect on the global economy in many years. It is estimated that the global GDP could shrink by 2% this year.

The COVID-19 crisis has hastened the shift of global supply chains out of China actively a move, which gathered momentum in the height of US-China trade war last year and increasing labour costs in China over the last few years.  As we saw in reports, the Japanese government has announced support to companies shifting production from China back to Japan. Korean companies are reportedly exploring options with India to expand their capacities. The US and EU will eventually follow suit.

For India, this is a great opportunity to tap into this shift out of China.

It is good to see the Indian government sensing the opportunity and looking to further the cause of Make in India. Just recently, we saw a package of incentives being announced for the Electronics manufacturing industry with a focus not just on finished goods production but also developing downstream production units. Similarly package was cleared by the cabinet on the 21st March for incentivising production of chemicals and raw materials that go into bulk drugs production.  Initially these moves may help in softening our own dependence on China for imports of electronics and pharma goods but over a period of time will give a boost for exports once the ecosystem in put in place. So far so good. But these are not enough. Making India a part of global supply chains requires a well-co-ordinated (between Centre and states) 360 degree action plan to launch Make in India 2.0 in the light of COVID-19 that covers diplomatic, economic, commercial, human resources and even marketing front. This also requires changes in some of our laws (for example land acquisition) that can make ease of doing business a reality on the ground.

COVID-19 crisis is panning out in front of us as we speak. While we fight the health and immediate economic after effects of the same, it’s time to work on re-launching “Swachh Bharat Abhiyan 2.0” and “Make in India 2.0” in a couple of months and not let this crisis go waste.

Dear India, make 2021 the next 1991!

COVID-19: Turning the crisis into an opportunity!

COVID-19 has turned the world upside down. What started off as an outbreak in Wuhan, Hubei province of China is now a pandemic that has spread in more than 130 countries worldwide as we speak. In India too, the number of people who have detected positive has been multiplying by the day. Most of the state governments are waking up to the reality and state after state have been shut down.

In this sombre time, it may not sound so appropriate to talk about tapping opportunities that may arise. But then, one of the key jobs of strategic experts in counties is to always look beyond the obvious, see ahead of today and tomorrow and peep into the future.  In India, if such experts do that, they will see a window to turn this crisis into a long term, game changing opportunity.

Few weeks ago, when Corona virus had not spread like it is today, other than the human calamity, discussions were about how global supply chains have been disrupted due to the outbreak in China. Today, with China controlling the spread quickly using strong arm action and with the virus spreading all over, discussions around supply chain disruption have receded.  The focus today is around containing the spread as country after country have found people inflicted by the virus. However, when the dust and storm around the pandemic settles down in a few months, policy makers and industry experts will start pondering over putting all manufacturing eggs in the Chinese basket. De-risking from China for future would be top in the agenda.  Already, we are beginning to see some noise in that direction.

For countries and manufacturing companies, de-risking from China is nothing new. Many of them started doing it ten years ago when China, in the back of around 10% GDP growth for few years in a row from 2003 to 2011, was on fire as an economy. High economic growth also means increase in wages which shot up from CNY 750 in 2007 to CNY 2420 in 2018! Coupled with raising wages was the non-availability of skilled labour. A factory manager in Shanghai way back in 2012 told me that after the Chinese New year holidays, half the workforce would not return as they would end up joining companies which are located in provinces with higher minimum wages and with more overtime potential. Invariably mobile phones and other high demand product manufacturing units would suck up a lot of skilled manpower leaving other production units to scramble for trained manpower.

The logical option was to expand facilities out of China, if not to shift the entire production. Many Japanese companies who had put up factories in Thailand, Malaysia and later in China went and invested in Vietnam. It was a golden opportunity for India to have tapped that wave in that period. But we missed. Vietnam in spite of not boasting of very high skilled manpower but with relatively low labour cost managed to take advantage of the Japanese expansion plans. I was told that companies used to travel to interior Vietnam provinces and literally call out in the streets with microphones like in the feudal days as part of recruitment drive for factories!

India with its low labour cost and abundance of skilled manpower, still couldn’t feature in the agenda of companies looking at de-risking from China. And there are many reasons for the same.

It’s a myth that foreign companies just go by low labour cost when they try to invest in manufacturing facilities outside of their existing country bases. What they look for is whether the entire manufacturing eco-system is in place. China showed the world as to how to put that kind of eco-system in place that includes availability of low cost land in plenty, abundant skilled and low cost labour, low interest rate regime, tax benefits/holidays, access to ports, high quality infrastructure in the form of roads, highways, airports and sea ports, access to vendor base (this is particularly critical for Electronics and Automotive production) and more importantly what I call as the “hygiene factor”.  And this is the comfort factor which expatriates develop for the country where they want to set up production.

In India, we do not attach much importance to this while planning but, in my experience this becomes the key, tilting factor when choosing between options. If the team of expats who spend time in the country looking at options, do not feel comfortable about being able to lead a decent quality of life, they would never recommend that country. We should not forget that when a large production facility is set up, there will be hordes of expats who will be spending time during the project set-up phase and also later at supervisory/managerial roles when the unit is up and running.

That’s why I would not squabble if our governments spend money and resources to put their best face forward when foreign leaders visit here. For, many a times, there is a delegation of corporate chiefs who accompany these leaders and it is important that they carry a good impression of India as a country when they visit. In a Japanese company I worked earlier, the decision to invest in India which was lingering around for a while was finally taken when the group Chairman visited India and got impressed seeing the campus and Golf course of Infosys in Bengaluru!. I am talking of 2005 and fortunately the traffic situation then wasn’t as bad as it is today!

Coming back to the hygiene factor, this includes availability of good international schools, safety for women, availability of their country cuisines and even stuff like “Not a dry state” or “No Beef Ban”…!

In the wake of COVID-19, it is my belief that India must put its best foot forward in pitching itself as a robust manufacturing destination to the world which is looking at options.  And for this the government must move on a “Mission” mode quickly and activate “Make in India 2.0”!  We may not be able to scale up the economies of scale of China but then we are not looking at China completely. Our pitch must be to position India as an augmenting base.

Compared to the 1st decade of this century when India missed the opportunity when companies were de-risking, I believe that we now stand a better chance overall and hence it’s worth taking a shot now. Our roads and highways infrastructure is getting better though it’s a work in progress. We can now boast of world class airports in all the metro cities. The ports infrastructure have improved leaps and bounds and our customs clearance processes have smoothened.  We could still do much better on the “Ease of Doing business” front, though!

Ergo, I do believe that with a focussed approach towards getting companies to invest in setting up production facilities in India, India can be a good option for companies contemplating to de-risk from China. For India, which is in desperate need of a boost to the economy, nothing works like expansion in manufacturing as it increases direct and indirect jobs.

Author and Economist Shankkar Aiyyar in his book, The Accidental India has documented how in India every landmark game changing event since independence happened as a response to a crisis. Going by that track record, we are in the throes of another crisis with COVID-19 and hopefully we will come up with a response that is game changing!

The last booster shot for the Indian economy came in the beginning of this millennium and that was due to a global threat of a bug! The Y2K phenomenon opened the flood gates for the Indian Software industry and helped erect a pillar for our economy called the “Services”! Twenty years hence, now, a virus could provide the booster shot for the economy if India gets its act together. That of getting the manufacturing ecosystem in place and tap the opportunity which could present itself in the coming months. It’s not easy. But then its not impossible either.

Covid-19 in the world and Comvid-20 in India!

Since the advent of Social media, “Going Viral” is considered the ultimate thing! As we speak, the world in general and India in particular are reeling from something that literally went viral. The Corona virus pandemic which is now being called by WHO as Covid-19 which started from the Wuhan region in China, has now been spreading rapidly across the globe.

In China where it all started, we understand that things are getting under control. The new cases are reportedly fewer which is a key indication of the virus not spreading further. The Chinese government has been swift in taking tough decisions including shutting down towns and cities in a bid to arrest the spread very early.

As one can expect in a globalised world as it is today, while the situation is getting better in the origin (China), there are other countries where Covid-19 is taking a huge toll. First Italy, then Iran and now Korea have been under the onslaught of the Corona virus in the last couple of weeks. And those who have visited the affected places like Italy and those who came as tourists from these countries into other cities have become silent carriers of the virus. So, countries like America and India have also come under the affected list. Though the numbers are low at this point in time relatively, considering the population in these counties and the viral nature of the contagion, the risks associated cannot be dismissed away.

The approach of the countries to the pandemic is also a reflection of these societies. In highly disciplined and if I may add, regimented countries like China, Korea and Japan for example, the governments moved fast, enacted tough strictures and the public fell in line. The results are there to see. On the other hand, in flexible and If I may say, slack societies like Italy, the government has been slow in action and reaction. It’s only today that we read of Italy taking a call to shut down parts of the country which have been affected. The damage is already done.

From the perspective of economy, it’s already been well documented as to how the global supply chains with its epicenter in China and in particular Wuhan have been disrupted globally. It is believed that Covid-19 will impact global GDP by over 2% negatively in 2020 and this is huge.  As the Corona virus signalled the first decline in demand of oil, Saudi and Russia decided to pump more oil in a battle of market share! Result – Price crash to the extent not seen in 25 years! The chain of events have led to the carnage in the stock markets worldwide. After a long while, we saw the circuit breaker being triggered at NYSE yesterday!

Apart from manufacturing industries affected by Covid-19, the other worst industries are those that deal with people. Travel, Hospitality, Tourism and Events sectors will see an impact worse than the Lehman crisis time! It would be sad if the next summer Olympics being planned in Tokyo in July 2020 is called off due to the Corona virus. As can be only expected, Japan has been super ready for the event for a  few months now and will be a pity if all those efforts go down the Corona drain!

After the Lehman shock of 2008, Covid-19 is the next best example of a globalised world rising and perishing together in ironic harmony. There are very few countries which are immune to this today. The synchronised interest rate cuts by the Central banks a few days ago, I am not sure will help. Because what we are seeing is a supply side disruption and constraints arresting human movement. This is a not a demand problem or a capacity building issue where capital infusion could do the immediate trick. Of course any softening of interest rates is welcome! While the world struggles to get into terms with the aftershocks, I do believe that China from where it all started, may recover faster than expected. Already people have started going to offices after a long break since Chinese New Year and factories have started brimming with activity from last week. Again, at the risk of being repetitive, being a disciplined and a regimented society which China is, we should not be surprised if China gets back to normal by June while other affected countries still continue to struggle to get back to their feet!

Coming to India, along with Corona virus, we had another thing which has been going viral in the past many weeks – the “communal” virus” or Comvid-20! Ever since the Citizenship Amendment Bill got passed and became an Act followed by the government’s “chronological” intent to take up NRC (National Register for Citizens) all over India, the country has been on the edge.

The CAA protests also took almost the same route as a virus spread.  What started off as peaceful protests in different parts of the country essentially college campuses, soon spilled over to the streets. A hitherto unknown entity to those outside Delhi – Shaheen Bagh, entered the daily vocabulary and a subject of Prime time loud debates. And finally culminated with full blown communal riots in Delhi in the 1st week of March.

For Modi Sarkar which prided itself of not facing a communal riot in the country for 6 years since 2014, the Delhi riots have come as a huge blot on its image. That the riots happened in the first place, that too in Delhi which is the capital of India with its heavy security apparatus and when a big diplomatic event that of the US President Donald Trump’s visit was in progress, is an embarrassment. The coverage of the Trump visit therefore turned “split screen” globally with beaming faces of leaders and burning streets of Delhi, side by side!

That today, Social media has a huge role to play in spreading this communal virus is unmistakable!  Images and counter images, Videos and counter videos were just going viral in what I call as a battle of narratives! In sum, even today, we are yet to get a final answer as to who lit the spark first. And in spite of all the media and social media explosion, we may never get it, in our lives! Everything that went viral finally did their bit to mobilise mobs, fuel frenzy and finally celebrate madness.

Covid-19, with the world putting its might behind it may soon get a vaccine and a cure! However, Comvid-20 with its epicenter in India and to do with the majority community Vs minority community wrangle ingrained in our minds for decades, may not get a vaccine soon. Unless, we become a truly secular society where religion is personal and ceases to be a vote bank. Welcome to Utopia!

Turning the GDP (Gross Disappointing Product) tide!

Many years ago on my visit to China, I found most of the newspapers there giving a lot of attention in their front pages to decline in GDP, tapering of FDI into China and other such economic issues. In a blog post that visit, I rued that in India, our media doesn’t still focus on economic Roti, Rozgaar issues but spend disproportionate amount of columns on mundane political news and views. For the past few months, it has been good to see in India too, the media at last waking up to the slow down blues in the economy.  For more than a year or so, the entire country was pre-occupied with the Modi re-election issue and everything else did not matter.

Since the re-election of Narendra Modi and his government that too with a majority better than last time, the euphoria and the resultant expectations have been very high.  However, the party has been cut short by the bad news coming in on the economic front, day in and day out. There was a great opportunity for this Government with a new face as the Finance minister to have seized the opportunity when she presented the Union budget on the 5th of July and fire the economy. The budget was a decent one but one that was devoid of Out of box, bold ideas which would set the economy on fire. In doing away with the brown brief case and opting for the bahi kaatha, Nirmala Sitharaman’s budget was a ritual breaker but, was not a path breaker! Hence, ever since the budget, there has been quite a few negative reactions as manifested in the tanking of the markets, depreciation of the rupee and a massive FPI pull out!

The initial reaction of the Government to these reactions were in expected lines that our economy was still resilient, one of the fastest growing and hence no need to panic. However soon enough, with bad news emerging on the Automotive sector first and then even on FMCG, the Government was forced into action and from then on we have been seeing a slew of measures, cabinet decisions and sops to revive the economy. Q1 GDP at 5% turned out to be the last straw.  Coinciding with the Q1 GDP results, the Government announced the merger of PSU Banks as a way forward in banking reforms. Economy was finally on top of the news cycle and the Government’s attention, Kashmir notwithstanding!

It was widely expected and hoped that some of the important initiatives of the Modi Sarkar in the 1st term like the thrust on Highways construction, massive investments in improving Railways infrastructure, improving air connectivity to the smaller towns, making electricity available to the last village and so on would start yielding results in terms of improving economic activity and fuel growth in the country. Added to this, Modi Sarkar has been constantly increasing outlays on MGNREGA in every budget. Why these measures have not started yielding results on the ground both in terms of economic growth and job creation is mysterious. It may be a good idea for the Chief Economic Advisor to come out with a White paper on the outcomes achieved for the massive outlays in Modi Sarkar 1.0.

In the back of all these, the question becomes, are the measures so far announced by the Government enough to resuscitate the economy? The reversal of some of the proposals in the budget are certainly welcome moves but those just contain the damage.  And the other measures like opening up of FDI and so on are necessary but not sufficient to get us back to where we were last year (8%) and then hit our dream goal of 10% GDP growth which increasingly is becoming a pipedream.

During Modi Sarkar 1.0, the Government leveraged well on the windfall it had from the crude prices and not passing on the entire benefit to the consumer to “manage” the economy with heavy public investments. The hope was that gradually the private investments will pick up once the sentiments change. But unfortunately, due to the NPA and the overall banking crises, it did not fire up the economy so much but, just kept the wheels of the economy going. Now, under the current circumstances however, continuing of public expenditure alone may not be sufficient. The recent red herring on the increasing debt of NHAI may in fact become a dampener here. For India as a country, the next few months are supposed to be very high on economic activity with the impending festival season. And the fact that the monsoons have been bountiful for most parts of the country notwithstanding the floods in some parts, there is still hope even for this year.

So, in order for the economy to fire up, ways and means have to be found for increasing private investments and individual spending/consumption. I am no economist but here are some thoughts:

To get private corporate investments going:

  • Modi Sarkar should bite the bullet and announce 100% FDI in Multi Brand Retail. Though India as a country missed the retail bus 10 years ago, it is still not late. Some of the global retail majors may not be as bullish today as they were a decade ago on India due to our policy flip flops and the current industry shift to E-Commerce. But still considering the country’s size and the potential it offers, India is still an exciting market for say specialised vertical retail stores. In announcing this, we should do away with the myriad sourcing conditions and allow the retail water to find its own level. Retail gives fillip to low end jobs, manufacturing industries as well as commercial real estate.
  • Copy the STPI (Software Technology Parks of India) strategy that helped in boosting the software industry in India in the 90s and come up with a similar framework for boosting Electronic hardware manufacturing in India. This will help India in becoming a preferred country for those who are looking at alternatives to China. Again we are late in this game and today Vietnam has emerged as an alternative to China for low cost manufacturing. But still considering the long term view, I believe we still have opportunities here.
  • Every Government recognises the potential of Tourism as an industry to provide jobs and improve economic growth. However, to unleash and unlock the true potential of India, we need massive capacity building in hotels, recreation facilities, connectivity and infrastructure. Government should provide time bound tax cuts for investments to private sector in this area to targeted locations in India which need infrastructural boost. The tax cuts must be linked to time bound completion of projects.
  • As a purely short term stimulus, any capacity building in manufacturing industry by way of new factories, expansion of plants,.. should be provided with tax relief.

To improve consumption and spending:

  • Holiday season is upon us. Provide relief on Income tax to individuals for money spent on holiday travel and stay in select locations in India which require boost on tourism (Uttaranchal, North East, Leh for example) with a cap of say Rs. 1 Lac. This will motivate public to take vacations and boost tourism in certain locations which have potential, decent infrastructure and connectivity but are untapped. Usually this has a spiral effect. When more people throng these places, automatically investments start pouring in for development.  For every 3 years, the locations can be changed in order to make it widely spread.
  • On the real estate front, today the supply is high and the demand low. This is mainly because the property rates are artificially pegged high and the home loans still high. This jinx needs to be broken. Though I have seen the Government announcing a slew of measures in the past few years, the housing market has not taken off. Considering the fact that the private real estate lobby is not going to cut prices ever, there is a need for the Government to intervene and disrupt the market. Like in countries like Singapore, Malaysia,.. Government must float either own companies or joint ventures to construct affordable housing in a massive scale and allot to citizens who do not own a single house in a transparent manner. The Government can offload its equity and then exit after say 20 years from these companies once the overarching objectives are reached. This will also disrupt the existing real estate industry and make it fall in line in terms of pricing and best practices, both of which are found wanting in the current scheme of things.

To revive the “animal spirits” in the Indian economy. Animal spirits are related to the points mentioned above i.e. both consumer and business confidence. I have put this separately as there are some low hanging fruits here which can be taken:

  • Sell Air India as of day before yesterday!
  • Get going on “Actual” disinvestment of Public Sector units already identified as non-strategic. Identify another Arun Shourie to make this happen in this term!
  • It is not enough to merge PSU Banks but to offload equity, get professional management and turn them to “HDFC Banks”!
  • Today many of the Government’s grand projects are stuck or going slow due to land acquisition issues. Identify the issues and fix them by bringing about the necessary changes in the Land bill!
  • Use the current crisis of job loss to build consensus around Labour reforms. Adopt the “GST council” approach for labour reforms. Today all state governments will eagerly come on board considering the pressure all states have on generating jobs.

As I write this blog, I am seeing that the Finance Minister is addressing a press conference. This is her 3rd one in the last 2 weeks. Glad to see the Government demonstrating the needed sensitivity to the economic situation and willingness to take steps. Our only urge is that instead of incremental small steps, we need big leaps.

Only that will ensure we turn the tide over Gross Disappointing Product and achieve real Gross Domestic Product rates quickly!

For more Olympic medals, need more Raghuram Rajans!

As I write this piece, the situation is slightly better. Only slightly. A tally of 2 medals – one Silver and one Bronze at the Rio Olympics for India. Just a couple of days ago, as a country it was all despair.  We were staring at a situation of returning empty handed and that was something for a proud and populous country like ours – ‘bilkul Shoba nahin deta’. The usual diatribes ensued. – “A country of 1.3 billion and just 1.3 medals!” “As long as we laud Cricket and applaud only Cricketers, there’s no hope for Olympic sports!” “So long as we keep praying for Engineers and Doctors in maternity wards, athletes will be hard to come by!” “As long as sports administration is in the hands of politicians, there is no chance for medals.” So on and so forth.  And these are nothing new. Every time our contingent returns with a modest performance it’s usually a repeat of the above template outrage.

Our rather modest performance in sports events historically could indeed be due to one or combination or all of the above causes. But I do believe there’s one more important bullet.  And that is the size and state of the economy. As we speak, USA is at the head of the medals table at Rio Olympics followed by Great Britain and then China. In terms of GDP, USA is at No. 1, EU of which Great Britain is a part as of now is at No. 2 followed by China. Russia which is at No. 4 has been a past economic super power.  The medals table at London Olympics looked almost similar.

olympics , gdp

China which has been at the 11th rank in terms of medal tally at the 1988 Seoul Olympics, has been at No.3 or better since 2000. Around the same time when China was deemed to have shrugged off the developing country tag and took guard as an economic powerhouse.

By this logic, we have hope. One would have thought that our good performance at the London Olympics in 2012 would be the tipping point as a country in so far as Olympic performance is concerned. However it seems that’s not to be. Drawing a parallel, doesn’t our economic performance mirror this?  A country which was on fire around 2011/Mid 2012 and gradually sort of lost its way and now seems to be on the recovery path once again.

While I am trying to draw a parallel here between the state of the economy and our sports performance, it could be just a coincidence.  But where I am coming from is, for a country to excel in sports and be at the top 10 of the medals table, it should be doing well economically.

Excelling in sports is today an expensive affair. It is not enough to have strong willed, talented and focused individuals. It calls for financial resources to be poured on infrastructure, training, coaches, equipment and the like.  And in a country like in India not just in cities but in fledgling towns as well which are now throwing up talent like never before. We keep hearing tales of talented girls stopping coaching sessions because of ill equipped toilets. Or those who give up when they cannot afford to spend money on professional coaches or facilities. And those who still cross all these hurdles and arrive at the National scene – need to be exposed at International levels for which you need to invest on foreign coaches or send them abroad for training for longer stints all which costs a lot of money that too when you need to do this not for 1 or 2 but 100’s of individuals.

An Abhinav Bindra did not have the need to fall upon the state or other sponsors to chase his Olympic dream. He was more than financially sound to acquire for himself the ecosystem required to win an Olympic Gold. But then all are not Abhinav Bindras. Ergo, you need the support of the state or private sponsors to adopt potential medal winners and provide all the support required without counting the last paisa.  Even for a noble movement like Olympic Gold Quest (OGQ) spearheaded by champs like Geet Sethi, V. Anand, Leander Paes, Padukone Senior,.. with a clearly stated mission “To Support Indian athletes in winning Olympic Gold Medals” the biggest challenge is to raise funds to achieve their mission. A fledgling economy doesn’t count the last rupee to sponsor a Sakshi’s stint abroad or a Narsingh’s 24*7 nutritionist. A struggling economy on the other hand will be hard pressed to focus on other priorities.

In much of our or water cooler or these days WhatsApp discourses, parents who think that their wards are better of chasing an Engineering / Medical dream than that of sports are at the receiving end. I do believe that in general, parents think of only the well-being of their kids. So if they do feel that a career in athletics is not remunerative enough to have a decent life, they can’t be blamed.  However this can change and it is changing. Olympic sports unlike in the past have started getting the attention from corporates who are willing to support athletes for a longer period of time. And just as we saw a few days back the bronze medal winner from HaryanaSakshi Malik is already a dollar millionaire based on the many announcements we heard. This kind of commitments are possible for both the Government and private players if their coffers are growing with tax collections and profits respectively.

So as a country as we transition ourselves from a “developing” country to a “developed” country in the next couple of decades our economy will be in a better position to afford to support the needs of churning out Olympic champions.  So we are back to Bill Clinton’s 1992 campaign theme – “it’s the Economy, stupid” here as well. Our country has to continue to grow as an economy, lift millions of people out of poverty, collect a lot of taxes which will help pour money on giving birth to Olympic champions. So, for more Olympic medals, we need more Raghuram Rajans to help steer the economy on a continued growth path 🙂 🙂

Waking up “Make In India”!!!

In a week from now, Mumbai will host the “Make in India Week” – an event planned to give fillip to one of Modi Sarkar’s flagship program – Make In India. This was aimed at reviving the interest of domestic and MNCs in setting up/expanding manufacturing footprint in India – a sure shot elixir to tackle the unemployment malady and create millions of jobs. When this Govt. kicked off this initiative, one would have expected more cheers than jeers. However the reality was different. Leaving aside the noises from the opposition which anyway criticizes what the ruling Govt. does in India (this is irrespective of who is in power and who is in opposition), the naysayers included reputed economists and thinkers. They were of the view that it was too late for India to board the “Manufacturing” bus. China is already in the driver’s seat being the “factory for the world” and global companies are already heavily invested in China. Also the general view that with increasing automation in the shop floor, you don’t need much of low cost labour for manufacturing. So betting on manufacturing to generate millions of jobs may not be a cool idea any more. The session during the recently concluded World Economic Forum in Davos about “The Fourth Industrial Revolution” powered by Connected devices, 3D printers, Super Smart Robots and the like,… probably put paid to this idea of the critics. So instead of playing the catch up, the cynics’ view was that India should play to its strengths namely “Services” and invest further in developing soft skills to scale up further.

There is probably merit in this argument. However if one analyses the different states of India in terms of the economic condition it is clear that no state can hope to survive and grow by just focusing on services. For a diverse country like India with a huge disparity in income and social strata an even economic growth can be achieved only with a mix of manufacturing, services and agricultural activities. The top states in terms of GDP in India like Maharashtra, Tamil Nadu,.. have a very healthy mix as I noted in one of my earlier posts on “Car manufacturing” in Chennai (Read here). A fourth Industrial Revolution may augur well for developed countries with shrinking population, ever rising wages and diminishing demographic dividend but in India we still need to reap the benefits of the 2nd and 3rd.

So I think that this Govt. is right in pursuing the Make In India initiative particularly at a time when China is facing economic headwinds. The labour in China can no longer be termed cheap with wages ever-increasing to keep pace with the aspirations of the people. Many of the global corporations do not want to put all eggs in one basket that too Made in China😁😁. I know for sure that the Japanese are expanding into Vietnam in a big way for production. So could be other countries like the US, Germany,…,.. soon. So the moot question is are we positioned well to make them Make In India??

logo 2

As the logo of India’s Make In India program demonstrates, there are many cogs in the wheel for a country to be successful in manufacturing that too for the world. Cheap and Skilled labour, Vendor base, Access to cheap raw material, Quality awareness, Access to ports and logistic hubs (particularly for exports), flexible labour laws, Ease of doing business (which applies not just for mfg.) and above all a very efficient infrastructure (Roads, airports, ports, broadband connectivity,..,…) in short a “pro manufacturing eco system”. And for India while all the other cogs could fall in place over time, the biggest challenge is in infrastructure. One would argue that the eco system will be in place when growth picks up and factories are set up. Necessity is the mother of everything you know. For example wasn’t Gurgaon just a “Gaon” before Maruti?? Today it is a recognized Auto mfg. hub. Similarly there are many examples of PSU Units which were set up first which then turned out to be manufacturing hubs in course of time. Goes the argument. No argument can be more specious than this. Maruti was set up at a time when India was a protectionist state where the promoters (in this case the Govt. of India) can patiently wait for more than 10 years for the 1st car to roll out! Same is the case with many PSU units where the overarching mission was upliftment of the society rather than shareholder value or profits! Not in these “QSQT” (Quarter Se Quarter Tak) days!!!😁😁 And in these days of strict WTO regime the Government cannot slap high duties on imported goods to protect the local manufacturers.

So for Make In India to succeed India needs to get the Eco system right first up. While India has a natural advantage in some aspects like availability of not just cheap labour but also skilled, large Engineering pool,.. the road is long for areas like “Ease of doing business” and Infrastructure as I mentioned before. And fortunately the Govt. has rightly recognized these challenges. Its’ for the 1st time that a Govt. website has spotlight on “Ease of Doing Business” like in the Make In India home page, I reckon. See here. It was a pleasant surprise to see the list of initiatives already taken and ones on the way when I clicked on “Ease of Business” tab. And it is also great to see every day in Newspaper one state or the other hosting Investor summits to lure potential investors with Make In India being an important aspect. So while pitching for investments is all right, I think the state Govts. must also focus on getting the infrastructure in place in their respective states which helps not just manufacturing but in general fosters economic activity. Today inspite of higher labour costs if many companies are still outsourcing mfg. to China it is because of their fantastic infrastructure overall which helps to keep indirect costs lower. India’s labour costs is lower but the indirect costs due to poor infrastructure weighs us down.

I think now the world is quite convinced on the intent of the Modi Sarkar to promote Make In India. Now the time has come to morph the intent to reality by focusing on Infrastructure for which the states have to work in tandem with the Centre. That’s what will wake up Make In India and not the raking up of intolerance debate every other morning😩

Make in IndiaToon courtesy: Satish Acharya

“Chinpressions” – Impressions from another of my China visit – Part 3!!!

It was about 3 years ago that I made my 1st visit to ChinaShanghai and wrote the 1st part of Chinpressions. Read here. In between that and my last visit this week, many more visits to China happened. Ergo, 3 years hence what are my impressions?

The visit this week coincided with Narendra Modi’s another foreign tour – this time to China. So obviously India was in the news. As is the wont these days in our PM’s abroad visits, he was in “Rock star” mode in China as well with local Chinese craving and crowding to take selfies with him. It’s obvious that in the last 1 year Modi has single handedly changed the perception of India for the better outside of India.

I had mentioned that in my last post that Shanghai was devoid of emerging market symptoms like touts at the airports,… I realized now that it’s not the case. There were the touts on arrival at the airport chasing you for taxi/hotels,… just that they were of the “suited and booted” types 😜 😜. Similarly I had the impression that Taxis were on meters always. Well, yes most of the times. But not always. This time much to our chagrin, we realized that beyond 10 p.m the cabbies were upto fleece passengers demanding 4 to 6 times the normal fare!!! While on cabbies, I couldn’t understand why the driver was always enclosed in a cubicle of sorts making it difficult to communicate with him/her even in sign language. (Trying to communicate in English is a horror left unsaid 😦 😦 )

For all the heavy duty infrastructure and the investment led growth strategy Chinese government has been adopting all these years with a fair degree of success, it is now clear that the growth is stuttering.  A 7% growth is being touted as the new normal. Print media is agog with articles questioning if the world’s 2nd largest economy is heading towards a protracted period of subdued growth.  China has now become the latest example to explain the Economics theory of the Middle Income Trap”

It’s clear that despite the pretensions of the Government taking China to being in the league of developed nations, it is still haunted by a few trappings of developing/underdeveloped countries. Which the people are yet to shrug off it appears.

  • Like the locals not caring about courtesy to others and smoking to glory in public washrooms.
  • Like the drivers continuing to smoke while driving in cars inspite of requesting them not to. (Blame the language)
  • Like invariably the noisy scenes you get to see in restaurants when Chinese get together to dine and drink. (Something like we Indians I must say).
  • Like the rounds of bargaining one has to do some times starting with 10% of the quoted price to purchase stuff mostly the imitations at the fake markets hawking branded stuff from I phones to watches to bags to clothes to everything. China’s tryst with IP regime may prove to be its Achilles heel sooner or later. Just couple of days ago while in China I read the news that top brands like Gucci were suing Alibaba the E-Com giant for sale of counterfeits through its marketplace.Like getting to see touts trying to sell I Phones at US$100 around to gullible passengers even inside the Shanghai’s Pudong airport terminal!!! I was surprised to see these guys inside the airports after the Check-in Area moving around looking for their customers!!! (This doesn’t happen in India even)
  • Like being amused to see empty chairs placed in sides of the road meant as parking lots. Something like placing the chair to reserve that lot. Reminded me of our Indian habit of placing towels/kerchiefs,.. in buses to block seats 🙂
  • Like for all the fascinating sights at “The Bund” at Shanghai (Clean, colourful, Hawker free,..,…) the urinals are still the old world style not seen even in towns in India these days.
  • Like finding grills in windows in residential apartments a la India type just that they were more uniform and still not spoiling the elevation of the building unlike in India where grills of all types and sizes spoil the frontage of most buildings.

Most of the above fall in line with the definition of “High Context Culture” as defined by Edward T. Hall in his seminal work – Beyond Culture, I feel. So not surprising.

But, these are just symptoms waiting to disappear soon I guess. Despite the current ills like ever rising labour costs, China continues to be the factory of the world. Global companies don’t have an option but to court the Chinese. Like Apple’s Tim Cook was attempting to do when he was in China last week logging on to “Weibo” – the Chinese microblogging site akin to Twitter. (Modi did the same on his run up to his China visit). The ever increasing aspiring class is a segment of the world’s largest population that just cannot be ignored.  But one thing which continues to amaze me in China even after being the world’s largest populous country is – Where are its people?? For example in Shanghai the world’s most populous city – you don’t get see crowds in the roads, in the malls, in super markets, in train stations,.. So where are they???

Let’s see if that mystery unravels in the next visits.

3 years hence, the impressions are still very good but may be the shine has worn a little bit.

 Postscript: Heard that the PM’s baggage on foreign tours will now have a “Selfie stick” 😜 😜