In 2005, well-known management guru Kenichi Ohmae told an Indian newspaper: “Indians are not good at manufacturing. Even if they do what we tell them to do, they always need to understand why they are doing it that way. They are more inquisitive than the Chinese. Maybe it’s because of their ability to find zero in the numbers. But in manufacturing when you have a successful formula, what you look for is implementation, right? Indians always ask these fundamental questions.” On being asked what he thought about the fact that Indian enterprises are acquiring manufacturing firms in cross-border acquisitions, his response was: “how do you say ‘good luck’ in Hindi? I wish them good luck.”

Is Mr. Ohmae right in his assessment that Indians don’t have what it takes to manufacture quality products. Well, a few decades ago the same perception could well have applied to the Japanese but not any more. Let’s look at some facts. Indian manufacturing’s contribution to the economy has lagged that of the services sector – increasing marginally from 25 per cent to 27 per cent during the 1990-2005 period. In contrast, services’ share of the economy grew from 37 per cent to a spectacular 52 per cent. According to the Boston Consulting Group, manufacturing exports were 6 per cent of GDP ($37 billion) compared to 35 per cent ($712 billion) for China. Nearly 60 per cent of China’s manufacturing exports are by firms based outside China.

Clearly, going by the statistics above, one would be prone to go by Mr. Ohmae’s assessment. However, there are huge changes that are taking place. One of the major ones is in the manner that some Indian manufacturing companies, particularly in the automobile sector, have begun to compete globally and make their presence felt. The $6.7 billion auto components industry is projected to grow at a CAGR of 15 per cent per year and is expected to touch the $17 billion mark by 2012, according to the Automotive Components Manufacturers Association. From a primarily small-scale-sector oriented industry in the 1980s, the auto ancillary industry has transformed into a high-technology-driven, global player.

Manufacturing experts expect the Indian manufacturing scene to develop very differently from the way in which China’s manufacturing sector has developed. Global manufacturing in India is not being driven by the Chinese model where labor-intensive manufacturing of toys, watches and other low-cost products helped China to become the ‘factory of the world’. Cellular phone manufacturers like Nokia, Motorola and LG and car manufacturers like General Motors, Volkswagen, Federal Mogul, Toyota, Ford and Mico Bosch are using India as a manufacturing base for car components as well as a base for their R&D facilities to develop cheap cars. Automobile manufacturers like the Korean Hyundai Motors have already made India a manufacturing hub for its small car. The Indian arm of the world’s second largest car maker – Ford – has emerged as one of the largest exporters of cars. Tata Motors too has signed up with the UK-based MG Rover Group to export an estimated 100,000 cars over the next five years. Many Indian manufacturers of auto components have acquired international companies as part of their strategy to expand their global operations. For example, Bharat Forge Ltd, which is the second largest forging manufacturer in the world, has acquired the German forging company, Carl Dan Peddinghaus. Amtek Auto’s acquisition of two UK-based auto component companies and Sundaram Fastners’ acquisition of the European Dana Spicer make it quite clear that Indian manufacturing has global aspirations.

Electronic manufacturing services (EMS) or contract manufacturing is one of the biggest opportunities for India. Worldwide revenues for this sector were estimated to be about $90 billion in 2003. India supplied $774 million worth of products to the EMS market in 2003 and according to a study by Ernst & Young this figure could grow to $2 billion by 2009, registering a CAGR of 21 per cent. The global trend towards nanotechnology and microsystems offers an emerging opportunity for Indian manufacturers. More than 40 research institutions in india are conducting advanced research and 30 of these have been shortlisted by the Indian government to conduct research and training programmes in nanotechnology. The target areas for research include generic exploration of nano-particle synthesis to specialized areas such as micro-electromechanical systems (MEMS), nano-electromechanical systems (NEMS) and drug delivery.

The other interesting aspect of Indian manufacturing is that it is being driven by domestic demand rather than export markets. Take for instance domestic car sales. According to the Boston Consulting Group estimates, domestic car sales have gone up from 265,000 in 1995 to 820,000 in 2005. In the first eight months of the current fiscal, car sales were nearly 870,000. According to one estimate, India’s auto market including utility vehicles will double over the next ten years from 1.4 million to 2.8 million vehicles. Moreover, Indians buy more than 3 million new mobile phones every month. Market analysts expect that India’s manufacturing sector will continue to service the domestic sector largely – and hone its manufacturing prowess and skills-driven global competitiveness – until the benefits of the infrastructure projects that are currently being undertaken by the government start kicking in. The government’s focus on increasing manufacturing growth by setting up Special Economic Zones, getting private participation to build ports, roads and airports is expected to put India firmly on the road to global manufacturing. Perhaps, some of the ‘good luck’ that Mr. Ohmae wished for Indian manufacturing would still be required to help India accomplish its global ambitions. But clearly, it’s time that Mr. Ohmae – and other experts – acknowledge the fact that the Chinese model of economic and manufacturing growth is not the only way ahead.