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India Can Be A Lower Cost Producer Than China If Policies Allow: Maruti Suzuki Chairman
R C Bhargava, Chairman, Maruti Suzuki India argued that the only objective of government policies should be to increase the competitiveness of the Indian industry so that it could make things at the lowest cost and the best quality in the world.
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"India has the capability to become a lower-cost country than China if the industry and the government work together," R C Bhargava, Chairman, Maruti Suzuki India said while presenting his ideas on making Indian manufacturing globally competitive at an online dialogue with the country's management leaders organized by the All India Management Association (AIMA).
The LeaderSpeak session, which was 33rd in the series, was moderated by Harsh Pati Singhania, President, AIMA and Vice Chairman and Managing Director, JK Paper Ltd. Rekha Sethi, Director General, AIMA anchored the session.
Bhargava argued that the only objective of government policies should be to increase the competitiveness of the Indian industry so that it could 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 said. He pointed to the fact that Maruti Suzuki produced more cars each year without adding to its workforce, but the increased sales of cars each year created more jobs in the service economy. He said he found faults with the policy thinking that focused on job creation by each sector instead of job creation in the total economy. Bhargava was particularly critical of the states that reserved jobs in manufacturing for locals. "It is an anti-competitive step," he said.
The protection for the MSME sector has been the bane of Indian manufacturing, Bhargava pointed out and argued that the MSMEs had to be as globally competitive as the large companies because the supply chain determined overall competitiveness. He said he wanted the government to understand that the small-scale businesses in the manufacturing and the services were different animals and must be treated differently by the policymakers.
Indian industry cannot be competitive unless the promoters and managers treat workers as partners, he argued. "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 said. Bhargava pointed out that the Indian workers had been protected and pampered by the government and the courts before 1991 and the management themselves had made no attempt to educate workers about what would they gain if the company grew. 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 the high cost and low efficiency in every area because of the nature of politics in the country, according to Bhargava. He said not only the logistics but India's competitiveness is also 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 the Indian industry, he added.
The lack of trust between the people and the industry is a major constraint on policymaking, says Bhargava. He says that when people see promoters and their families using companies for their own benefit instead of the benefit of all stakeholders, they suspect politicians who support the private sector. However, he expressed satisfaction with the Modi government for supporting the private industry and talking about building trust. "Big industrialists have to win trust. The government cannot do it for them," he says.
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 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.