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News Updates - 20 February 2007
India's next phase: Manufacturing - Forbes magazine
Made in China - New York Times
The way of no flesh - NYT/ Houston Chroncile/ Washington
Post
India's
Next Phase: manufacturing
16 February 2007,
Forbes magazine (Knowledge@Wharton)
In the global economy of the early 21st
century, the division of labor between
Asia's giants
is clear. China, the world's factory floor, makes things--everything from
shoes to computers. India, the world's back office, does things--from fixing
software glitches to chasing down credit card debt.
India's
services sector may be red hot, but the same can't be said for its
manufacturing. India has failed to make its presence felt globally, hampered
by expensive and unreliable electricity, poor roads, clogged ports,
bureaucratic red tape and restrictive labor laws--companies that employ more
than 100 workers and need government permission to fire them. According to
experts from the Boston Consulting Group, in 2005
India's
manufacturing exports were 6% of gross domestic product compared with 35%
for China. About 60% of Chinese manufacturing exports are by companies
headquartered outside China.
Beneath the surface, however, things have begun
to change rapidly, according to experts at BCG and Wharton. Driven by the
emergence of a vast domestic market and relatively low-cost workers with
advanced technical skills, more and more multinationals are setting up
manufacturing operations in
India. Ford,
Hyundai and Suzuki all export cars from India in significant numbers. LG,
Motorola and Nokia all either make handsets in India or have plans to start,
with a sizable share of production being exported. ABB, Schneider, Honeywell
and Siemens have set up plants to manufacture electrical and electronic
products for domestic and export markets.
In addition, a clutch of globally competitive
Indian manufacturing companies--many of them in the automobile
industry--have inserted themselves into the global supply chain. Sundram
Fasteners makes generator caps for General Motors. New Delhi-based Moser
Baer has established itself as a global manufacturer of data storage media
such as DVDs and CDs. An aggressive group of pharmaceutical companies-
India
has about 60 plants that meet the stringent quality standards of the U.S.
Food and Drug Administration, the largest number outside the
U.S.
itself--are opening new markets around the world.
According to the International Finance
Corporation's September 2006 rankings, it takes 35 days to start a business
in India, compared with 5 days in the U.S. and 18 days in the U.K. India,
however, is in the same league here as China (35 days) and Thailand (33
days), but way ahead of Brazil, where it takes 152 days to start a business.
"Over the past five or six years, many firms
have restructured their manufacturing operations and implemented world-class
practices," says Arindam Bhattacharya, director and head of the industrial
goods practice in
India in
BCG's New Delhi office. "Slowly but surely they have started building a
globally competitive manufacturing base in industries like pharmaceuticals,
auto components, cars and motorcycles. Hyundai has designated its Indian
plant as its only plant worldwide to make small cars, and it is shifting
production from Korea to this facility.”
The gradual scrapping of import licensing,
lowering of tariffs and a liberalized exchange rate regime have all
contributed to a sustained domestic, consumption-led boom. As a result, says
Saikat Chaudhuri, a professor of management at Wharton, global manufacturing
in
India is being driven largely by domestic demand. He points to mobile phone
manufacturers such as LG, Nokia and Motorola and to car companies such as
Ford, Hyundai and
Toyota.
The acute price sensitivity of the Indian market also adds to the incentives
to manufacture locally. Bhattacharya says the government's focus on
increasing manufacturing growth through special economic zones, private
participation in ports and massive investments in roads, among other things,
is already paying dividends.
According to BCG estimates, annual domestic car
sales have shot up from 265,000 in 1995 to 820,000 in 2005; in the first
eight months of the current fiscal year, domestic car sales were nearly
870,000. David Snyder, executive director of business development for Ford
Asia Pacific, estimates that
India's auto
market, including utility vehicles, will double over the next 10 years, from
about 1.4 million vehicles to 2.8 million. This is a quarter of the
growth--in units--that Ford expects in China, but more than the growth of
1.3 million new vehicles it expects to see in the Asean (Association of
Southeast Asian Countries) over the same period. With sales in North
America, Europe and Japan expected to remain flat, Asia-Pacific as a
whole--with a focus on China, India and the Asean--are Ford's priority
growth markets.
As the success of companies such as auto-parts
maker Bharat Forge shows,
India's
competitiveness lies in relatively high-end manufacturing. In auto parts,
India's showcase in manufacturing, more and more companies have upgraded
their technology and processes and emerged as reliable suppliers of parts to
multinationals. In addition,
India's
pool of scientific talent allows its companies to de-automate, and locally
design and procure, some of the more expensive aspects of auto parts
manufacturing. Indian universities turn out an estimated 400,000 engineers a
year, second only to China. BCG estimates that such process engineering can
cut capital costs of component plants by 40% to 60%.
Over a dozen, among them Sona Koyo Steering
Systems, Sundaram Clayton, and TVS Motors, have won the Deming prize,
a prestigious Japanese award for quality. While most auto parts exported
from
India are simple, Toyota has begun shipping transmissions from its plant
near Bangalore. Sachin Nandgaonkar, a director in BCG's
New Delhi
office, points out "If I can have Japanese quality at a much lower cost,
then why not?" He adds that recent improvements in infrastructure and a move
toward greater efficiency in Indian export parks make him optimistic and he
also sees the emergence of a new generation of young entrepreneurs with
global ambitions and the savvy to realize them.
Dalip
Pathak of Warburg Pincus adds that the lowering of interest rates in India
in recent years and the advantage of well-regulated and efficient capital
markets, rated among the best in Asia, also add to India's lure. "In 10
years, India will have a meaningful footprint in global manufacturing," says
Pathak. Chaudhuri, too, is optimistic. "Every major company has India on its
radar screen," he says. "It's just a matter of timing."
Top of the page
Made in
China
18 February 2007, New York Times, By Jagdish Bhagwati
It is only 20 years since
Japan was
getting under the skin of many Americans. They feared that the 21st century
would be Japan’s, as the 19th had been
Britain’s
and the 20th America’s. And just as Great Britain had reacted with a loss of
nerve at the rise of Germany and the United States at the end of the 19th
century,
America
near the end of the 20th seemed to be in the grip of what I have called a
“diminished giant syndrome.” These worries appear astonishing now. For well
over a decade Japan has been deeply mired in macroeconomic failure, its
feared dominance having dissolved into dreary ordinariness.
Is
China now
poised to turn the 21st century into its century? Or will it, despite its
phenomenal nearly two-digit annual growth over the past 15 years, rejoin the
human race with a slower economy? Or is it possible that its powerful
locomotive will, as Japan’s did, shift into reverse gear?
Signs of looming difficulties are not hard to
find. Standard economic analyses indicate that
China is
likely to face problems with its exchange-rate policy, its financial sector
and the inefficiency of its state-owned enterprises. Will Hutton, the former
economics editor of the left-leaning British newspaper The Guardian,
certainly knows his economics, and any reader can profit from what he has to
say about many of these issues. But his central thesis is that China’s main
problem is not the inadequacy of its capitalist economics, but the
limitations of its Communist politics and lack of democracy. For example,
indiscriminate environmental destruction is turning the Chinese landscape
into a wasteland. Should this damage be factored into the statistics on the
Chinese economy, the result could well be to reduce China’s estimated growth
rate below its current levels. More important, the Chinese experience shows
dramatically, as the Russian experience did, that environmental damage is
likely to become ever more crippling in the future because there are no
democratic institutions like public opposition and a free press to
countervail and contain it.
Similarly, because
China has an
authoritarian regime, it cannot fully profit from the information
revolution, thus inhibiting the technology that is at the heart of growth
today. The PC (personal computer) is incompatible with the C.P. (Communist
Party). So India, with its robust and chaotic democracy — what V. S. Naipaul
has called a “million mutinies” — has moved dramatically ahead of China in
computer technology. Hutton points out that from 1981 to 1995 China had 537
scientists and engineers doing research and development per one million
people while India had only 151, and that
China
had three times as many personal computers as India and a 4-to-1 lead in
Internet usage. Yet by 2001, India was producing one-fourth more software,
and exporting most of it. “So despite massive investment,” Hutton writes,
China “trailed far behind India.” He points out, too, that
China
damages itself by seeking to control and stifle what its citizens can learn
and disseminate. “Yahoo, Microsoft and Google are part of the cultural yeast
of globalization,” he says, “yet each has been at the receiving end of
China’s Internet firewall of censorship.”
And it’s not just growth prospects that are
handicapped.
China’s
authoritarianism creates political uncertainties that are equally
problematic. Democratic governments facilitate orderly change; Communist
regimes do not. Marxists may claim to believe in historical determinism,
leaving no room for the randomness of events, but they are no less affected
by the contingencies of history than anyone else. Asked many years ago by
the economist Robert Heilbroner how China would evolve, the Sovietologist
Padma Desai answered: It all depends on whether Mao Zedong or Zhou Enlai
dies first.
What’s more,
China’s
authoritarianism is a breeding ground for corruption. As Hutton says, “The
morality of revolution — that the end justifies the means — becomes a
morality that justifies corruption.” Consider how the phenomenon of
“takings” — commissars and their cronies appropriating land from peasants —
has led to numerous disruptions. In a political system lacking the essential
attributes of a functioning democracy, social groups can’t turn to a free
press to take up their cause, or an independent judiciary to appeal to, or
opposition parties to embrace their complaints. Revolts are what they have
left.
All of these are problems within
China. But
the lack of freedom is likely to affect its trade strategy as well. As its
flood of exports leads to ever increasing fears of job loss and reduced
wages in the United States, there will be a strong temptation on the part of
the American government to exploit human rights violations as a way of
rolling back Chinese goods. When Japan was the perceived threat, those who
feared competition, like the carmakers in Detroit and the chip manufacturers
in Silicon Valley, had no convenient basis for their
complaints and were forced simply to demonize
Japan as a
wicked trader. In
China’s
case, the protectionist critics can credibly assail its lack of democracy
and human rights abuses.
But
the question, frankly, is: How does one make an 800-pound gorilla move in
the right direction? Offering it Jessica Lange isn’t going to make any
difference; and kicking it in the rear, a course Hutton rightly counsels
against, will not accomplish much either. In the end, no matter what the
West does, China is going to make its own choices, the way it did when,
after nearly three decades of really bad economics, it turned to reforms
under Deng Xiaoping. The giant everyone had expected to rise up in the 1950s
continued snoring until the 1980s. Now it has awakened, and all the rest of
us can do is watch as it takes its own faltering steps.
Top of the page
The Way
of No flesh
4/ 25 February 2007, Reviewed by Mark Kurlansky/ Michael Kammen/ Ed
Rothstein, Houston Chronicle/ Washington Post/ New York Times
Both
scholarly and entertaining, Tristram Stuart's book “The Bloodless
Revolution -
A Cultural History
of Vegetarianism From 1600 to Modern Times”, is a huge feast
of ideas -- ideas from India and France and America, from ancient Greece and
Thoreau and Emerson, from Rousseau, Hobbes, the Kabbalah, the Old Testament,
The French Revolutionist Marquis de Valady, Erasmus Darwin and French
naturalist Comte de Buffon, Descartes and Darwin, vegetarian John Harvey
Kellogg’s invention of cornflakes, to name just a few of the better-known
sources that weigh in on the meatless diet.
Though
the word “vegetarianism” was coined only in the 1840s, Stuart shows how
Western civilization evolved through the values and views of eccentrics,
missionaries, doctors, poets and philosophers, all of whom fervently went
the way of no flesh. Pythagoras the ancient Greek philosopher (active around
530 BC), was often cited as a spiritual and dietary model as the debate over
vegetarianism entered the West’s philosophical mainstream through such
figures as Descartes and Bacon. Pythagoras believed in the transmigration of
souls from one individual body to another, even of a different species.
Vegetarianism reinforced by European knowledge (acquired in the 16th and
17th centuries) of Hindu dietary practices, would provide a persuasive
rationale for famous figures as diverse as Carolus Linnaeus, the influential
Swedish botanist and classifier; Sir Isaac Newton; Rousseau; Voltaire; the
Romantic poet Percy Bysshe Shelley; and many others. Shelley believed his
vegetarian writings could help restore harmony in nature. For those with a
more secular and scientific bent, like the abbot Pierre Gassendi, compelling
evidence was found in human teeth because they resembled those of herbivores
rather than being teeth for tearing flesh, like those of carnivores.
One of
Stuart’s most important discoveries is that Western vegetarian ideas were
largely influenced by travelers’ tales from India. After his 1689 journey,
the Rev. John Ovington called India “the only public Theatre of Justice and
Tenderness to Brutes, and all living Creatures.” Such accounts administered
a kind of shock to the Christian ethos. The Western belief was that only in
Eden were animals not eaten.
In his
tireless quest to wean England from meat in the early 18th century, Dr.
George Cheyne, “the most influential vegetarian in 18th-century Britain”,
set out to poison the novelist Samuel Richardson. But Stuart suggests that
one reason Cheyne deliberately used this deadly treatment on his patients
was that it felt so good when it stopped. And it usually stopped just in
time for Cheyne to undertake his proselytizing against “Beef-eaters,”
“cannibals” and “Flesh-eaters,” luring his weakened patients onto a diet of
milk and vegetables with promises of “Purification and Regeneration.”
By the
middle of the 18th century, in fact, vegetarianism had become a secular
religion. Stuart describes it as a “countercultural critique” advocated by
“medical lecturers, moral philosophers, sentimental writers and political
activists.” John Oswald, the son of an Edinburgh goldsmith, for example,
arrived in Bombay as an officer in 1782 and was repulsed by the behavior of
his countrymen. He became a strict vegetarian and brought his revolutionary
passions to France.
The
American Vegetarian Society was founded in 1850 by William Metcalfe, who had
immigrated to the United States in 1817 and became an ally of Bronson
Alcott, the eccentric Transcendentalist in Boston and Concord, as well as
Sylvester Graham, the diet reformer who believed that spicy foods encouraged
an excessive thirst for alcohol and hunger for sex.
By the
middle of the 20th, fascists were added to the mix. Hitler would interrupt
political meetings to lobby for vegetarianism. Heinrich Himmler, Bormann and
possibly Goebbels were advocates of vegetarianism. Rudolf Hess was so strict
that he wouldn’t eat the non-organic vegetables cooked by Hitler’s chef.
Vegetarianism illustrates the tremendous impact that India had on British
culture but also the impact of the British on India. Powerful stuff: when
Gandhi came to England in 1888, he was determined to one day convert India
away from vegetarianism, convinced as he was that “if the whole country took
to meat-eating, the English could be overcome.” Instead the British
Vegetarian Society, in a return of influence, inspired him to become a
“born-again vegetarian.” This is vegetarianism’s lure and vegetarianism’s
trap. Along with its heightened awareness of the value of life, it brings a
heightened desire to bring a new world into existence. Vegetarians believed
they were ushering in a new age, answering to a higher law.
But
we have to eat something. Today, many people accord feelings, emotions and
thoughts to animals, but that has not stopped most of us from eating them.
Even if we someday discovered that vegetables also have feelings, we would
not starve ourselves because of it. In Hinduism, it is said that a true
saint would live on nothing but air and that humans are incapable of such
perfection.
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