India can be a lower cost producer than China if policies allow: Maruti Suzuki Chairman

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New Delhi: “India has the capability to become a lower cost country than China if the industry and the government work together,” says Mr R C Bhargava, Chairman, Maruti Suzuki India Ltd.

Mr Bhargava presented his ideas on making Indian manufacturing globally competitive at an online dialogue with the country’s management leaders organized by All India Management Association (AIMA).

The LeaderSpeak session, which was 33rd in the series, was moderated by Mr Harsh Pati Singhania, President, AIMA and Vice Chairman and Managing Director, JK Paper Ltd. Ms Rekha Sethi, Director General, AIMA anchored the session.

Mr Bhargava argues that the only objective of government policies has to be to increase the competitiveness of Indian industry so that it can make things at the lowest cost and the best quality in the world. “The more the industry can sell, the more jobs will be created in the economy,” he says. He points out that Maruti Suzuki produces more cars each year without adding to its workforce, but the increased sales of cars each year create more jobs in the service economy. He finds fault with the policy thinking that focuses on job creation by each sector instead of job creation in the total economy. Mr Bhargava is particularly critical of the states that reserve jobs in manufacturing for locals. “It is an anti-competitive step,” he says.

The protection for the MSME sector has been the bane of Indian manufacturing, according to Mr Bhargava. He argues that the MSMEs have to be as globally competitive as the large companies because the supply chain determines overall competitiveness. He wants the government to understand that the small-scale businesses in manufacturing and the services are different animals and must be treated differently by the policy makers.

Indian industry cannot be competitive unless the promoters and managers treat workers as partners, argues Mr Bhargava. He points out that Maruti owes its success to explaining to its workers that they will prosper if the company grows and backing that with policies and actions that delivered income and career growth to the employees. He says that Indian workers had been protected and pampered by the government and the courts before 1991 and the managements themselves had made no attempt to educate workers about what would they gain if the company grew. Mr Bhargava was critical of the sort of caste system based on education and social strata where managers consider it beneath them to make an effort to partner workers in running a company.

Indian industry struggles with high cost and low efficiency in every area because of the nature of politics in the country, according to Mr Bhargava. He says that not only the logistics, India’s competitiveness is lower through entire infrastructure because of government control. The cost of finance is also high in India because of government ownership of banks, which results in high lending rates and loss of competitiveness of Indian industry, he adds.

The lack of trust between the people and the industry is a major constraint on policy making, says Mr Bhargava. He says that when people see promoters and their families using companies for own benefit instead of benefit of all stakeholders, they suspect politicians who support the private sector. However, he expressed satisfaction with the Modi government for supporting private industry and talking about building trust. “Big industrialists have to win trust. The government cannot do it for them,” he says.

Mr Singhania mentioned that he had done a presentation on making Indian manufacturing competitive 10 years ago and much of that presentation was still relevant today. He said that while the current government and the previous government both talked about raising manufacturing’s contribution to the GDP to 25%, the target continues to be elusive. He agreed with Mr Bhargava on the need for building trust between the industry, the government and the people. “It is only through trust that we can succeed,” he said.

 

The interactive session was also livestreamed on AIMA’s social media channels and close to 900 business leaders and management professionals joined the dialogue.

 

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