There’s much optimism in India about the transformation of a small hamlet of paddy fields and wetlands in the south of the country into a global electronics hub. Local media say India may have found its equivalent of China’s Shenzhen, or at least a miniature version of it.
It’s indeed possible that Sriperumbudur in Tamil Nadu may start churning out as many mobile phones in three years as Shenzhen in southern China does now. That won’t be a mean feat, considering Shenzhen makes one out of eight handsets sold anywhere in the world.
The question is whether India has the political will and the administrative savvy to take Sriperumbudur to its full potential. It took a leader of Deng Xiaoping’s foresight, and the might of China’s command-and-control economy, to create Shenzhen. Who will bat for Sriperumbudur, which sends one lawmaker to the 545-member Parliament?
The cluster of overseas-funded telecommunications and personal-computer investments emerging in Sriperumbudur is too valuable an opportunity to be left to chance. Tax breaks aren’t enough. The industry must be supported with world-class public infrastructure such as expressways, railway links and an airport, and private amenities, including hotels, apartments, shopping malls and entertainment sites.
This is where things get tricky in India.
Bangalore and Tirupur, both in South India, are good examples. The evolution of Bangalore from a staid, state-dominated military-industrial complex to a youthful computer-software powerhouse was almost entirely spontaneous. No authority planned the change; and when it did occur, no one at any level in the government was prepared to provide the required amenities. A case in point is the sorely needed new airport in Bangalore. It will finally be ready in 2008—a full 17 years after construction tenders were first floated.
Tirupur, which exports almost $2 billion (Rs8,800 crore) a year in knitwear, or 70% of India’s total, has it worse. It has mostly broken roads, no decent housing options for workers and almost no good hotels for international buyers. Once again, no one in the government envisioned Tirupur as an industrial cluster; no one even now is providing for its future.
Bangalore has been successful even with the city’s shortcomings. Tirupur is constrained by its inadequacies. What will Sriperumbudur’s fate be?
The existence of Sriperumbudur was virtually unknown even within India before prime minister Rajiv Gandhi was assassinated there during an election campaign in May 1991. Fifteen years later—in November 2006—his widow, Sonia Gandhi, who is president of the ruling Congress Party, looked on as the 20 millionth handset came off the assembly lines in Nokia Oyj’s eight-month-old factory in Sriperumbudur.
By June this year, seven component manufacturers—including Taiwan’s Foxconn Technology Co., Finland’s Salcomp Oyj and Britain’s Laird Group Plc.—will begin work from the 210-acre Nokia Telecom Park in Sriperumbudur.
Some 20,000 people will be working on the campuswhen it’s fully operational next year. Thousands more will be employed at the nearby industrial park being set up byFlextronics International Ltd. Flextronics will do contract manufacturing for, among others, Sony Ericsson Mobile Communications, which plans to make 10 million of its phones in India by 2009.
Separately, Motorola Inc. is cooperating with the government of Tamil Nadu in a 300-acre special economic zone, which will house a $100-million manufacturing unit for handsets. Samsung Electronics Co. plans to invest $100 million over five years in Sriperumbudur to make refrigerators, washing machines and televisions. Dell Inc.’s proposed $30-million factory will make desktop computers and servers.
Shenzhen became the world’s factory because Deng, then the paramount leader, selected it in 1980 as the launching pad for his open-door policy. Driven by his vision, the municipal authorities put in place the key amenities long before international investors took the bait. What in 1979 was an agrarian backwater of 3 lakh people is today a bustling metropolitan city of 1.1crore.
Shenzhen now has the world’s fourth-busiest container port and China’s fourth-largest airport. Expressways connect the industrial areas to a vibrant downtown. A subway system became operational in 2004.
New towns are constantly being built, distances are getting squeezed. If supply created its own demand in China, the reverse is waiting to happen in India.
After China and the US, India is the world’s third-biggest wireless market by users. It’s also the fastest-growing, adding 5 million new mobile-phone subscribers every month. By 2010, when India has more mobile users than China has now, it should be possible to make at least half of the handsets domestically, provided Sriperumbudur can attain scale.
The national, state and civic authorities must be able to see 20 years ahead and build accordingly. Just because it is 40 km from Chennai doesn’t mean it should be seen as an appendage that will draw all its sustenance from the larger city.
There’s much discussion in India about devolution of power to local bodies; there is very little attempt to get municipalities to implement a national agenda.
This needs to change. Rather than repeating the mistakes made with Bangalore and Tirupur, the Indian planners ought to see Sriperumbudur as a test case for a new model of more proactive economic development. That’s what Deng did. He built and the investors came.