The Competition Isn't Just China Anymore

Article excerpt

INDIA IS STRENGTHENING IN MANUFACTURING, TOO. BY MANU BHASKARAN

Take a poll among coinmentators and talking heads and you will find that most have the simplistic view that China will be the manufacturing superpower while India will at best be a supereompetitive services provider with little impact on global manufacturing.

India's manufacturers are beginning to show just how wrong this view is. Why is this happening? The country's emergence as a manufacturing hub is driven by two powerful forces: improvements in top-down policy and vigorous efforts by corporate India to re-engineer itself in the face of growing competition.

Indian policyniakcrs have realized just how badly poor policy and horrendous infrastructure have handicapped India's exporters and defeated government ambitions to provide jobs and raise living standards. Consequently, governments have started removing or diluting self-defeating restrictions on Indian manufacturers such as limitations on industrial scale to protect small-scale producers or excessive protection for workers. Huge infrastructure schemes are under way and the efficiency gains have been remarkable.

Take the massive highway program now coming onstrcam as an example. Transportation costs are tumbling as the drive time from Delhi to Jaipur has been cut to about three and a half hours from more than six hours before. Port capacity and operating efficiency also have improved markedly in recent years. These improvements have boosted cost efficiency. With large investments now being made in more and better roads, ports, airports and power systems, those cost improvements will continue. With this year's budget promising even more liberalization of industrial and labor market rules, such gains in competitiveness will multiply.

But the real story is how corporate India has risen to the challenge of global competition. As governments reduced trade protection, Indian producers of all kinds of goods-from pharmaccuticals to auto components - have restructured. They have cut bloated work forces, upgraded factories, adopted new technologies and become more focused in their product range. For instance, in 1999 Tata Motors made 129,000 cars with 35,000 workers. Today, it makes more than 300,000 with 40 percent fewer workers. …