Contributed by Ravi Srinivasan

Manufacturing has been India’s Achilles heal in the globalize market. It is due to a combination of several reasons – the competition from the neighbours, mainly the manufacturing behemoth that China is, our incapacity to reduce costs and increase efficiency beyond a certain level, a level which the aforementioned competitors have already achieved, and also to our infrastructural and policy shortcomings.

So far are we to catching up to the cost leaders, that various manufacturers in India now source their supplies extensively from China. But we should not yet write off our potential in manufacturing. We hold an advantage over China which if leveraged properly, will help us bridge this gap much faster than it would seem likely. This advantage is our open economy as against Chinas controlled one.

A recent UPS report (here) says that when asked about the current boom, many Asian SME leaders expressed concern over China’s growing dominance and mentioned that if given an opportunity, they would want to switch. Interestingly, the same report finds that these people express happiness over India’s success story and would very much like to capitalize and grow hand in hand with us. So, clearly, the other Asian countries themselves will support India if only we have the basics in place.

And what are these basics? Most manufacturing firms do not produce the entire line themselves. Any major manufacturer has an extensive list of suppliers, and this chain soon leads to SMEs being the foundation of any industry vertical. Hence we come to the apt repeated plea – that the key to even this competition lies in promoting better opportunities for SMEs, something where China beats India by a long way. So it is on the policy makers that we pin our hopes to ensure all they can to make India recognize the potential of its SMEs.