How to fix manufacturing: Follow Germany,not China
India's manufacturing sector has been sickfor long. Despite the reforms of the 1990s, which boosted overall growth,India's manufacturing could not improve its competitiveness.
At 15% of GDP, it is much smaller than China's 30%, and smaller too thanGermany's 21%, though Germany has much higher wages and a much strongercurrency. The trust deficit between employees and managers within Indianmanufacturing enterprises, manifest in many incidents of industrial unrest,some resulting in deaths as well, does not bode well for a recovery.
We need to understand root causes and should be careful that surgicalinterventions, such as recent demands to make it easier for employers to fireworkers, do not make the patient even worse.
Some suggest that we should aim for what China has: very large, labourintensivefactories such as Foxconn's , which employ many thousands of people on a singlesite. For this, they urge the new government to amend India's land and labourlaws. We may have the same vision as China , but our paths to it will have tobe different, because our starting points are very different.
China began by usurping all land rights to the state, and taking awaydemocratic freedoms to form associations and free speech. India took adifferent path, of giving land rights and enshrining democratic freedoms in itsConstitution.
Now, the Chinese government is slowly giving some rights, which is easier to dothan taking away what is already given, which these economists are urgingIndia's leaders to do. If India has to change its laws, it must win the supportof people. For this, it needs good processes for engaging and consulting allstakeholders, not just political will to take decisions.
Some say that the Prime Minister should emulate Margaret Thatcher, the"iron lady" who stamped on the unions . The surgery did not have ahappy ending. Britain's manufacturing sector became even weaker. It isBritain's financial services sector that grew with the freeing of markets.
Germany has taken a different path to grow and compete in manufacturing : muchless confrontation, much more collaboration. Strong unions, with a place onhigh tables. Strong and responsible industrial associations. Consultationsmandated before laws are changed. An effort to maintain continuity ofemployment through recessions, and to use slack periods as opportunities tostrengthen skills, coming out of global lean periods even stronger than thecompetition, as Germany did from the recent meltdown.
In the German way, skills of managers and workers, and the quality ofrelationships amongst them, are the sources of sustained global manufacturingcompetitiveness.
India's democratic and political structures are more like Germany's thanChina's . Also, we would rather have the outcomes that Germany has obtained forits manufacturing sector than what Britain got from its confrontationalapproach. Recently, France changed its labour laws. The French ministerexplained it was easy for the government because the unions and employers,taking a lesson from Germany, rather than Britain , sat down and worked outtogether what should be done, which made the government's work easy.
Shopfloor being the arbiter
India's labour laws are antiquated , there are too many, and they are badlyadministered. The approach to the laws should follow three principles . One,simplify the laws and improve their administration: use technology , reduceprocedures, make processes transparent. This is a winwin for all, includingunderstaffed government departments.
Two, focus on improving regulations and industrial relations closer to theground, in states and in enterprises. Competitiveness springs not from nationallaws but from what actually happens within industrial clusters and enterprises.
Three, build better institutions of representation along with better processesfor consultation and collaboration . Such processes will not only build moretrust amongst stakeholders but also enable the right changes to the content ofthe laws that meet all stakeholder needs.
There is a lot of workers' unrest, arising from a trust deficit. But it is goodto know that in the last six months, the central trade unions and employers'federations have engaged , outside the glare of media attention , in a dialogueunder the aegis of the India Backbone Implementation Network, agovernment-sponsored initiative, to improve collaboration and find solutions toproblems that are the causes of this unrest.
That includes uncontrolled use of contract labour on unfair terms in largeenterprises , suppression of labour unions and poor social security foremployees in small enterprises.
These have to be changed for manufacturing to grow. Hasty surgery by top-downlaw reforms will increase mistrust among workers and managements and weakenmanufacturing further.
Amirthanathan Arulappan (Nagercoil)Brahmin chickens like you dare not even tryto play MAN's SPORT Soccer, . The Ghana players will like hell pulverize thechicken bones of the Brahmin boys to be sprinkled in Holy Ganga
Vijay Dani (India)In the minds of normal Indians nation hasno place. Everyone works for himself and his family. Our ties go maximum to themohalla where we stay. So we are not a committed force and thus lack expertise.Even German way of working will not work here because we are neither Germansnor Chinese. Foe example in pune one 30 metre under way is being made for last5 years and is still not ready. The reasons are poor contractors,corruption,poor workmanship, poor material, and no commitment. We have to findour own solution. Recently I was in china and saw the working of maglev train.Amazing!
SahaGurudas (Delhi)The authority shall not be biased regardingcountry. The working system and work culture which produce increasing prospectsof manufacturing sector, may be of any country, shall be adopted and normalizedfor Indian industries.
Dilbagrai100Rai. (Chandigarh)None like Germany in the ManufacturingSector
Lt.Col.(Retd) (BANGALORE)INDIA is a subcontinent. Germany is anation with tradition build by great personalities who could thinkstrategically and place their country's interests above their own party. We areyet to develop that culture. We cannot copy Chinese model either, because it isa totalitarian regime. We will have to make our own model, keeping in view ourlevel of expertise. However, the best practices from both in Indian back groundmust be our aim.
Karthik C (Unknown)THIS IS REALLY A BEST THOUGHT...MANUFACTURING SECTOR SHOULD ONLY PUSH THE GDP.. SERVICE SECTOR SHOULD JUSTSUPPLEMENT IT
KUmar Gururajan (Chennai)A good thought and certainly Germany iswhat we need to look at for just not fixing the manufacturing sector but also tobecome innovative and competitive. While legislation and politics on one handhas ruined Manufacturing sector , the other equally inward reason that has alsocontributed to woes of Manufacturing Sector is the our lack of quest forperfection. We seemed to be OK with something that is 90% OK and have acceptedit as fact of life. While we do have companies who are world leaders and arepassionate of perfection , most of the companies are more bothered about theoutput rather than correct output. This calls for a total change in the mindset- something Japan did in 1960s.
GauravGupta (Bangalore, India)India should follow its own policy withgood lesson from their own and others. do not replicate one other countrymodel.
Joaquim (Ad) Replies To Gaurav GuptaIt should replicate work ethic and moralfrom japan , china , south korea
Daffa Daf (India)India can neither follow Germany or China.The Indian mind set has to change totally to come out of the mess India is in.The contribution of NDA is going to make the mind set worse. What Germany does.Germany makes high value, high value added products, with a massive Brainwashing that German products are superior . In the end products get a highervalue. What china does make products in very high volumes, at low prices , moreinnovative with near zero marketing cost. World buys china products , china donot market the products. The Indian attitude is make below china quality ,price it better than Germany. market aggressively , skim the market foolinggullible buyers. pay the politicians to block the out siders and get a captivemarket. Every thing in India from Govt, media, workers, owners need to changeto make manufacturing in India for world.
Balu Iyer (Unknown) RepliesTo Daffa DafHow right ! We should concentrate onQuality , Volumes will get churned out if the right investments are made
DaljitSingh (Unknown)It has to be more innovative model, mix andmatch of Germany and China's model. Following footsteps of only Germany orChina won't help.
Ram Joshi (NewDelhi)Article overlooks the lack of trainedworkers in the Indian markets, without which the Indian manufacturing segmentcan not be even fractionally competitive as Germany has been. Germany has arobust system of apprenticeship which ties in neatly with the education systemallowing students to acquire vocational and technical skills right out ofschool. The concept "Shopfloor being the arbiter" is a non starter inabsence of a system to train workers and skilled workforce.
Dinesh K Takyar (New Delhi)We can learn from China, Germany, UK, US,Holland but we need to find our own way based on our democratic system andsituation.
J.K.AhujaAhuja (Jabalpur, Madhya Pradesh)Germany is a highly developed country,andIndia at the present stage cannot adopt or follow its path to become amanufacturing hub. Germany has a big stock of highly skilled workers,whereasour country has only semi- skilled or unskilled workers in huge numbers. Authorafter author writes that India should follow on the path of Germany,US,Japanetc., which become developed countries some decades ago, therefore India shouldtake the example of Korea,Malaysia,Brazil,Taiwan, and last not least the hatedChina, which as per latest figures has a GDP of 5 times that of India.
Aryabhata (Kusumapura)Germany is the real manufacturing superpower not China.