Route
to growth
The
R&D tool alone could ensure market leadership and double-digit growth
for the manufacturing sector, maintain Paul Swamidass and Balram Avittathur
Several
experts have urged the Indian industry to evolve a new paradigm of competitiveness
that is based on entrepreneurship, innovation, technology, R&D-based
core competence, new markets and global orientation. They agree that
innovation and R&D are essential to elevate the annual GDP growth
rate to 10 per cent, and also gainfully employ more of the technical
graduates India produces each year. This is particularly critical in
the context of the immense pool of poorly or under-utilised engineering
talent that the country possesses.
A
substantial percentage of the well-educated engineering talent is now
misapplied in information technology (IT). The software sector is indebted
to engineers for its stupendous growth from $174 million in 1991 to
roughly
$8.5
billion in 2001. This sector has contributed immensely to India's GDP
growth, exports, employment generation and reputation on a global scale.
Consequently, firms like Infosys and Wipro are market leaders across
the world. While the Indian IT software industry has been successful
in a relatively short period of time, Indian manufacturing has been
less successful in its rate of growth and in garnering international
reputation. To turn this around, Indian manufacturing sector must seek
a new form of entrepreneurship, innovation, new markets and global orientation.
It
is true that manufacturing entrepreneurship in India is more challenging
than IT software entrepreneurship, given that the latter has lesser
hurdles in the production process: bureaucratic controls, multitude
of taxes, militant labor unions, unreliable electric power and material/product
logistics like sales tax points, custom duty points and congested transportation
infrastructure.
However,
this difference between running a manufacturing firm and a software
firm in India is not the prime reason why Indian software firms have
a dominant global orientation. From the outset, for Indian software
firms, there was little scope for growth by focusing only on the domestic
market.
Naturally,
from the beginning the IT software industry focused on foreign markets
for growth. It trained itself to satisfy world markets with world-class
quality and delivery requirements. This is very similar to the transformation
process in Japanese manufacturing in the fifties when Japanese manufacturers
elevated their quality and delivery standards to world-class standards.
The rest is history.
In
Indian manufacturing, lack of global orientation is one major reason
for not cracking open the global markets. In the four decades after
independence, we saw a period of extensive government controls and many
protective measures. Further, owing to capacity shortage in many industries,
producers dictated the price, quality and service to the detriment of
the industries themselves.
The
low level of competition at home created semi-monopolistic markets with
low incentives for product and process innovation, and meaningful investments
in R&D suffered. Today, many world-class manufacturing firms like
IBM, GE, Intel, P&G, Sony and Toyota bring out innovative products
regularly at affordable prices for the sake of business growth and profit
margins. Recently, it was reported that Sun Microsystems of US spends
nearly 15 per cent of its sales revenue on R&D.
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