Lack of standardization and quick export-import processes might leave India behind in tech manufacturing.
In the last two years, the pandemic has fuelled the need for self-sustenance and further de-globalization of production networks in order to reduce industry-level vulnerabilities. At the same time, it has also laid bare India’s piecemeal approach to increasing its meager contribution to the global value chain (GVC).
Citing a reason for India’s near non-participation in GVC, Mithileshwar Thakur, Additional Director General, Ministry of Commerce and Industry, said India cannot ensure fast export and import clearances. “Products manufactured in the GVCs contribute to 60-70% of the world’s trade. GVC manufacturing involves production collaboration among firms, in several geographies. The components and sub-assemblies manufactured in one country are exported to another country for processing and then another for manufacturing. This process repeats at the same level as goods travel across the border several times through different airports. So, to ensure efficient production, the system binds all participation to just-in-time production and supply chain. Now, this requires real quick export-import clearance at each stage and that is where India falters.” he said, speaking at the Business Across Borders 2022, hosted by Dun & Bradstreet.
Providing some solutions, he said the government’s policies should target all parts of the GVC smiling curve — a business management theory showing how the value of a product is created. Among the countries in the GVC, the US, Germany, Japan and South Korea are at the higher end of the curve because of their quality R&D but China is always at the bottom where the assembly takes place, the Additional Director General explained. Therefore, India should try to target all parts of the GVC smiling curve. “Because we have the expertise in R&D, in system design, and also at the low-end of the segment of manufacturing, we have expertise in each of them,” he said.
To help with the clearance issues, the country should set up a national trade network to enable all export compliances online. This would allow all exporters to file information at one place and run to multiple agencies or port authorities to get their work done.
Among other reasons for India’s poor show in this is the lack of standardization. Speaking at the panel discussion, Yaduvendra Mathur, Vice-Chairman, Consulting Engineers Group Ltd, said the country is not making products of global standard. India has many leading export champions in sectors such as two-wheelers and electric vehicles. However, Indian companies are not willing to become a part of the global value chain, because they see a massive opportunity in the domestic market itself. They see an opportunity with a lower standard of products, he claimed.
The bigger problem is that stakeholders don’t talk about standards but only about tariffs, costs, and logistics. Indian private companies need a push for this though they are more than ready to take on the challenge.