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Organizational Group Dynamics

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“India is a Nation of Unfulfilled greatness. Its potential has lain fallow, underused. ” -Late Lee Kuan Yew, Former prime minister, Singapore

Manufacturing in India is one of the most classical cases of high potential-low on performance type of industry. 68 years and beyond India still is trying to find the right foot for its manufacturing sector. Back in 1950s, India had a great platform and could have set stage for a prosperous future. But it was marred by political instability, vicious fights for power, cultural prejudice, caste discrimination, lack of entrepreneurial vision and above all sheer will to understand the cost of success. The Indian concept of ‘jugaad’ is good but is it this what is required for the success of manufacturing industry?

The story till date: Not a happy start
Today manufacturing in India accounts for approximately 15 % of the GDP. In 1993 the manufacturing sector was also around 15% of RESTRUCTURING INDIA’s GDP DISTRIBUTION

Saurabh Kumar Singh
IMT-Ghaziabad

GDP. With almost negligible percentage of growth, countries like China or even Malaysia, Indonesia and Philippines have shown significant improvement in the last decade.
Since independence of India, the vision of the government never included good reforms for manufacturing industries. When it was the time for the Indian SMEs to understand that export was the key to ensuring their prosperous future, India was beleaguered by emergency and license Raj. China during this time was gathering forces which sky-rocketed their growth in the late 1980s. For example, the textile sector in India was a flourishing industry and the labour cost in India is almost half that of China, yet India’s apparel exports of 16 billion $ is mediocre in front of China’s 165 billion $.
Despite the underperformance of SMEs the results have not been too bad. SMEs for the back bone of Indian manufacturing sector. Despite of regulatory issues it has stood the test of time. The recent decline in the percentage contribution of the manufacturing sector is a matter of concern.
Prime Minister Narendra Modi’s push for ‘Make in India’ couldn’t have come up at a better time. Relying on low cost labour model was never sustainable for India’s economy. To make it a success all hands must join together and one of the major role in this unity for success will of the consultancy firms specially the Big 4 i.e. Pricewaterhouse Coopers (PwC), Ernst & Young (EY), Deloitte and KPMG.
Accessing India’s strengths
India in spite of its multiple criticisms has a lot of positives in its business structure. Indian companies specially the MNCs follow international norms of business and thus the ROI is higher here as against China. Moreover India’s capital market are more transparent and functioning than that of China. The legal system and the government structure though marred by multiple corruption scams is still better than its Chinese counterparts. IPR (Intellectual Property Rights) laws in India are stronger than that in China.
India has the biggest advantage in its most undervalued resource-the population. India is one of the fastest growing countries and s even ahead of China. The age of an average Indian is 29 years while that of its nearest competition, China is 35 years. With such diversified demographics and such varied culture, India provides the platform for industries to deliver their products to a large consumer base.

India’s population has never been its weakness but is an opportunity. The better skills current population possess, better is the chance of India to reach its potential. If we don’t take the advantage, this opportunity will soon turn into a burden.

Role of the Big 4 Consulting firms
The Indian Manufacturing Barometer, November 2014 revealed the top problems in the manufacturing sector in India.

Consulting companies India are likely to play a huge role in micro-analyzing the situation and come up with solutions for the above mentioned problems. The solutions however can be broadly categorized to target into 4 key areas.
Creating India’s brand identity
A brand which denotes the reliability, durability and the quality of the products made in India was very much needed.
One of the key reasons the Made in India campaign was a great initiative as it was the first time in the history of India that India was pushed forward as a brand. The logo was significant and was constantly reinstating India’s intentions.
There is a recent rise in sensitivity among consumers all over the world about the source of the products which they buy. Thus the branding should not be focused on just inside India. In the recent years Indian investors had lost faith in India and billion dollar scams have created a negative impression of India. The first step has been taken and it has been a positive direction. Following big conglomerates like Tata and Mahindra, who have already taken a step forward in this direction, the SMEs now need to invest more in exports. Compared to the German ‘Mittelstand’, Indian SMEs don’t rely on exports as a source of revenue. There are various factors which affect this myopia. Indian government needs to work with the SMEs and make it easier for them to export goods.
Outside India, the Big 4 consulting companies can use their global footprint and provide extensive market research to help India strategize better in terms of promotions in that region. Indian government on the other hand can also consult to find the most prospective sectors to invest in.
Reinventing skill development training and education in India India has been pioneer in employment guarantee schemes and such initiatives for youth. But these schemes never considered skill development of the youth as their prime objective. The education system in India is also haphazard. In spite of the multiple initiatives by the previous governments, India has had a low literacy rate.
The current population below 30 can be broadly classified into two categories
Category A - 0-15 years
Category B -15-30 years
The government must ensure education of Category A and the skill development programs for Category B. Indian government can ask the consulting firms to find out the best possible route to utilize their education and skill development budget.
Research & Development
India cannot work like China does. Actually India should not become like China (Refer to Appendix 1). But that doesn’t mean India cannot compete with China in the manufacturing sector. With proper research and development infrastructure India can deploy its huge talent pool of engineers and science graduates to work on technology. Consulting companies can help in establishing these institutions and also identify industries which can be targeted for R&D sector. With a history of Ayurveda behind it, India has great scope in Biotechnology sector as well as the Pharmacy sector. Apart from this the electronic equipment sector in India is small considering the huge consumer base. Semiconductor business has a huge opportunity and the target for the next five years can be to reach 10 % of the global share. The current growth rate is approximately 5.1%. Consulting companies can come in and chalk out the best strategy to move forward in the technology industry.
Relaxing certain regulations
India is a vast country and has been primarily known for its business norms. With the advent of multinational IT industries, the cultural shift has taken place. The manufacturing sector in India has primarily been held back by many regulatory norms.
India for long had been suffering from archaic trade laws and also had a nightmare in the form of license Raj. But even after two decades of easing of rules and regulations Indian SMEs lag behind peers in terms of exports. Also the government should encourage

Appendix: Competing with China – a perspective

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