The Loud Mumchance

A fortnight ago I came across an article of Swaminathan Aiyar. Amidst all this high talk of Make in India, he highlighted a very valid difference between Make & Manufacture. Now in common lingo one may ask “Isn’t that the same thing”? I too thought the same till I pondered over the matter and dug a little deep into it.If you have seen the back of an iphone it proclaims to have been Designed in California while Assembled in China. Commonly thinking one may presume that the cost of designing as compared with that of manufacturing would not be that high and hence Apple would be sharing more revenue with the Chinese vendors. However, as quoted by S. Aiyar to drive his point home, when Apple started selling the iphone for 300 $, China’s share in it was a measly 7 $ while Apple garnered 150 $ through innovation, marketing and profits. Rest was split among component suppliers (including Chinese as well), transporters, retailers etc.  Now if China’s share was so less in the total cost, Was this phone really Made in China or merely Manufactured in China? Well we can say it is Made in US while Manufactured in China. (I think so Apple has been telling this to us in a more subtle manner through its tagline at the back of the iphone!)
But this (China’s low share in the product value chain) in no way undermines the great economic change China has brought in the past couple of decades.  History has showed that every developed nation has gone through a manufacturing boom phase. Japan started the industrial overhaul after the Meiji restoration in late 19^th century.  South Korea took off half a century back after the reforms ushered in by Park Chung Hee while Singapore strode ahead during the past 4 decades lead by late Lee Kuan Yew. Deng Xiaoping awoke the Chinese dragon from its slumber a quarter century back. Western Europe & US were already ahead as Industrial revolution germinated/spread there. Most of the nations started with low skill - large scale manufacturing during their early phase of development. Over a period of time the quality of manufacturing got finer and the nations then graduated to high tech manufacturing and knowledge intensive service sector.
But India has come out as an interesting exception to this pattern (Aren’t we the grandmother when it comes to diversity and contrast..?). We have languished behind in manufacturing while being the back office of the world. US IT firms like IBM, Microsoft have largest R&D workforce in India. A recent survey has put India at 3^rd position in the startup arena just behind US and Israel. Manifestly we are creating niche knowledge jobs for our brightest minds but are failing to provide for the million hands which may feed the huge populace. Manufacturing as a profession, in India, is not considered glamorous enough. Ask any engineer out of an Indian college and he/she will mostly pray for an office job. This disdain for a ‘dirty’ job has its roots in the Indian psyche. We people have always respected information over labor. Our scriptures put Brahmans who dealt with vedic knowledge at the highest echelons of social hierarchy while the Shudras who labored for petty chores were put at the lowest rung. In contrast to this, dignity of labor is held in high esteem in the western hemisphere. Regarding the infrastructure, there is a huge gamut of work to be covered out there. The present govt. therefore has put a pressing emphasis on creating a manufacturing base here.
But in line with the facts shared in the 1^st para, many scholars have doubts regarding the value that India will initially be able to scoop through manufacturing a particular item. It may be on a lower side but it is imperative for the nation to embark on this plan for mammoth job creation. Indian mobile manufacturers presently design and brand the phones in India while they get them manufactured in China. Now they have shown inclination to Make in India. But there is economics behind this. A fully manufactured phone when imported from China invites an import duty of 12% while the components when imported separately are only subjected to a duty of 1%. The components then can be assembled in India. Skeptics may cry that no substantial benefit will be accrued to India in this process. But even a basic assembly plant will entail investment, give rise to numerous direct jobs and help develop tertiary jobs in hordes. Same is the case with defence equipment to be manufactured in India. No defence vendor will ever fully transfer its technology to India. But the assembly plants will have to be competitively advanced to manufacture the peripherals. The LCA Tejas which is the first Indian make supersonic fighter jet is fitted with a GE engine and approx. only 51% cost of the plane goes to the Indian vendors. But this in no manner undermines the great efforts put in by the Indian agencies to put this plane up and flying. India has made its mark globally in providing frugal solutions and she can affirm her position in manufacturing as well.
So what if India does not become a gold standard in high tech manufacturing right away but as they say, a journey of a thousand miles begins with a step…