New Delhi: India needs institutional reforms to improve its regulatory regime and has to go that extra mile to develop in-house technology and innovative processes to gain a competitive edge in manufacturing, which is struggling in the face of policy inaction and lack of technology advancement, according to policymakers and corporate leaders who participated in a Clarity Through Debate event organized on 30 October by Mint in partnership with Siemens AG’s India unit.

Participants included Arun Maira, member, Planning Commission; Rajat Kathuria, director and chief executive officer (CEO), Indian Council for Research on International Economic Relations (ICRIER); Dinesh Tyagi, CEO of CSC e-Governance Services India Ltd; M.V. Kotwal, director and president (heavy engineering), Larsen and Toubro Ltd (L&T); and Indu Shekhar Jha, director (projects), Power Grid Corp. of India Ltd.

On policy in the manufacturing sector:

“We need three things to address this issue. India hasn’t done any institutional reforms in the recent past. We need to improve our regulatory environment and need to work on the process of getting stakeholder alignment," said Maira.

He said there was a need to relook at the way policies for the manufacturing sector were being made and implemented. Policymakers have failed to communicate with the industry, he added.

“Not enough planning is done. People who are implementing the policy are not involved in making it. On the industry front, they need to play their own role to aim to do more complex things more competitively. Industry and state, neither is learning as fast as the rest of the world. Key to industrialization is the capacity of both partners—state and industry—to learn and to learn together," Maira said.

Kathuria of ICRIER agreed that institutional reforms were the need of the hour. “We need good institutions to build good infrastructure," he said.

A redesign of the role of state and industry is under way, Kathuria said. “The state no longer withdraws, but changes its role. State needs to create good regulation. We need a robust regulatory mechanism, which is independent. We need regulators like Trai (Telecom Regulatory Authority of India) for sectors like ports, civil aviation, railways, roads and urban transport," he said.

“In India, we need to isolate the regulatory process from political interference, then we will begin to do a lot better," he added.

Touching on the over-dependence on the services sector to drive India’s economic growth, Kathuria said, “The services sector is not the complete answer. Manufacturing is the missing middle."

Jha of Power Grid said, “Manufacturing in itself is not lucrative. Whatever regulations come in, it directly or indirectly hits the manufacturing sector."

“The Centre and the states have different sets of rules, which is the reason why (a) lot of issues arise. And that is the reason many good manufacturers have shifted to being traders," he added.

On manufacturing skills:

Tyagi of CSC e-Governance Services India, said there was a need for reforms in institutions such as the Industrial Training Institutes to develop skills of employees in the manufacturing sector.

“Fortunately manufacturing growth is not 25%. Even with a lower growth, we don’t have enough skilled people," he said.

Tyagi said employees tend to find manufacturing an unattractive sector to work in compared with the services sector—a problem that needs to be addressed. “Working on a lathe machine is not considered as good as working as a salesperson in a retail store," he said.

M.M Singh, chief operating officer, or COO, (production) at India’s top car manufacturer Maruti Suzuki India Ltd, said employees tend to find production work to be monotonous.

“I passed out in 1978, getting a manufacturing job was a prime choice, but today the first option is services jobs," he said. “Where will good managers come from?"

Atul Bhatnagar, COO of the National Skill Development Corporation, said that for the mindset of parents to change, future employees in the manufacturing sector have to be equipped with skills that lead to jobs. The industry, for its part, needs to provide better remuneration to highly skilled workers, he added.

Mechanisms for training in soft skills are missing, according to Pradeep Chauhan, commandant at the Indian Naval Academy.

“You must ask yourself questions about what is that you really want (from training)—do we want manufacturers who are also leaders or leaders in manufacturing," he said.

Soft skills and communication do not figure anywhere, but complex concepts requiring serious articulation require these skills. Skilling of mid-level and senior-level leadership has to be much more holistic, Chauhan said.

On technology and modernization in the manufacturing sector:

Lines are getting blurred between traditional manufacturing companies and technology firms in an effort to bring in manufacturing competitiveness, according to some leading manufacturers.

Jens Cattarius, managing director (MD) and CEO of Mercedes- Benz Research and development (R&D) India, said auto companies are becoming more like technology firms. “Car makers are talking about how do you create a smartphone experience inside a car. Now auto companies seem more like technology companies rather than car makers," he said. “We should try to link the subject of technology to the manufacturing competitiveness."

The company, which started R&D in India in 1996 with 10 engineers, now has close to 1,500 engineers working on automotive technology.

Kotwal of L&T, who was a part of a group that worked on varied projects including India’s first nuclear reactor, satellite launch vehicle and fertilizer equipment, said the company, with no foreign collaboration of any kind, didn’t have an option but to develop home-grown technology.

“We actually started with a simple factor of having no other option. We were left with the situation where we had to deliver something very complex, which neither we as manufacturer nor our customer were clear on what to expect," he said. “This is a completely different way from a top-down approach. You take a step and you have a team of people who learn the hard way."

Manufacturers also agreed that there was a need to create an environment that can drive innovation.

“When I started in 2010, we had filed for five patents in nine years, which is a ridiculous number for an R&D centre. Then we started something called innovation campaign," said Cattarius. “We were able to file 50 patents and this year we are looking at reaching about 75-100 patents."

“Creating that environment is crucial and manufacturing is the link of innovation and consumption. This is the magic circle that empowers growth and prosperity of any nation in the world," he said.

Kotwal said the first and foremost thing that L&T did was to create an atmosphere that encouraged and recognized innovation. “We involve workmen-level groups to solve problem. We just give them some available knowledge and let them develop their own thinking process. This is what really works for us," he added.

Some manufacturers say that the technology component in manufacturing companies is not growing as it should have been.

“Technology flow and development in the country has taken a beating...after 1991, we have almost become importers," said B. Prasada Rao, chairman and managing director (CMD) of Bharat Heavy Electricals Ltd.

“Technology doesn’t only mean IT (information technology), but the basic core technology for products, processes and systems," he said. “We have not invested much on R&D. Even if we invested, there was no encouragement for such R&D to be deployed. If there is no opportunity for deployment, R&D cannot go open-ended."

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