The recent border tension with China reiterated a stark reality that not only does that country dominate our trade basket, but our daily life as well. Be it phones, cars, durables, drugs, industrial components or apps, the Chinese hand is dominant everywhere. In such a scenario, the boycott China slogan ended in just being a jingoistic cry with both the government and consumers having little elbow space to deliver a hard punch. The helplessness was visible when all that the government could finally do was to ban some 59 Chinese apps.
The cause of our dependence on China on such a scale where even our industry becomes their ambassador when it comes to boycotting their products and how can we reverse the situation, can best be understood by going through RC Bhargava’s Getting Competitive, which points out in no uncertain terms that we can only become an economic power if we succeed in making manufacturing a big success. Bhargava, who is currently the chairman of Maruti Suzuki India (MSI) and was formerly its managing director also, is not just any industry leader management guru dishing out prescriptions of success. He served in the government as an Indian Administrative Service officer for nearly 23 years, worked in public sector companies like Bhel, and has been with Maruti from its early days, which gives him a well-rounded view involving key stakeholders—government, industry, workers, and consumers. As a result, his treatise reads eminently practical.
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The basic thrust of his argument is that despite the first prime minister, Jawaharlal Nehru espousing industrialisation as a vehicle for bringing about economic growth and social equity in a country that was beset with backwardness, poverty and disparities in income, we have failed on this count in the last 70 years. The current government led by Narendra Modi is also trying to do the same under the Make in India project, but then for it to be a success we need to learn our lessons correctly and apply the right medicines to the pain points.
The cause of our failure is well known and part of economic history by now. Nehru’s fascination with the USSR’s model of socialism where state was to bring both economic growth and social equity failed, as it was fraught with several loopholes. Agreed that while that was the dominant model during those times globally and was favoured by economists and experts alike, the failure to make the private sector a partner in growth, and not taking into account workers and consumers as stakeholders, was a big folly.
A reason cited by Bhargava for formulation of wrong policies and their implementation is that the ICS officers who were involved in them were trained in British administration of India where the primacy was law and order, not economic development. As such, they lacked training and experience in the latter. This continued even as the homegrown IAS officers took over. Secondly, at points where we saw that the policies were not yielding the right results, there was no attempt to identify the problems and set them right. In the process, vested interests grew and the section of businessmen, politicians, bureaucrats—which gained from it all—prospered.
So why is manufacturing important and how can it lead to growth, employment, and even social equity? The answer is simple: manufacturing not only creates jobs in factories where the products are manufactured, it also creates jobs in several service sectors. It is important to note this point, as several economists and experts at a point of time in our history have stressed on the service sector as a means for creating large-scale employment. At some point we even fell for it, only to discover that it did not yield the right results. As Bhargava points out, growth in manufacturing is the cause and growth in the services sector is its effect. To illustrate his case, he has rightfully given the example of the automobile industry in India. Production of cars creates jobs in factories; sales lead to transportation, which create jobs; for selling the product, marketing personnel are required, which creates jobs; financing and insurance are required, which create jobs, and the chain can go on to even travel and tourism industries.
The penchant for skipping manufacturing as means for growth was best visible during the early 2000s when the dotcom boom happened. It was common for experts to opine how the online age will deliver what we have been looking for long. It was easily forgotten that a product can be bought online but needs to be delivered by either rail, road, air or ship for which good infrastructure is required.
Of course, it can be argued that the other way of development could be importing manufactured goods and relying on our service sector to do the rest. However, the folly in this approach is that a country as big as India cannot do this because it would be impossible to meet the foreign exchange required for making such large imports and there are no export possibilities available to pay for essential imports, as well as for most of the manufactured goods.
Having established the case for manufacturing and industrialisation, Bhargava has dwelt on other measures that need to accompany it, warning that else we would meet the fate of the Nehruvian model. Manufacturing can only become a success if there are economies of scale, costs are constantly lowered, taxes are not very high, products are of high quality, not only domestic but even the export market is tapped, and there’s enough internal generation of resources. Alongside these measures, workers need to be seen as partners and stakeholders by industrialists and there should be enough competition in the market for products to be to the liking of consumers. The Nehruvian model failed on all these fronts, but even the course correction in 1991 and beyond did not set everything right. Therefore, real success still eludes us.
For achieving industrialist-worker partnership, trust is the basic precondition and to show how to forge it and take it ahead, Bhargava has given the case studies of Maruti Suzuki. He has also favoured the Japanese model of management where corporate salaries are not very high and industrialists and businessmen do not lead ostentatious lifestyles. For him the western model that we have adopted is not going to work.
The book is true to its subtitle—a practitioner’s guide for India—and should be on the table of policy makers and businessmen as a ready reckoner. However, there are portions that are quite repetitive, which perhaps could have been avoided with better editing.
Just to stress that Bhargava means what all he has said in the book, I would like to recount vignettes from my early reporting years of 1995-97 when he was managing director of Maruti. Never was a call to his office not answered by him and meeting him was never a problem—qualities and practices which still hold true for him.