Fixing the quality problem of Make in India

India needs to enforce stringent quality norms for goods produced within the country for both domestic and international consumers if it wants to become a manufacturing hub

Why hasn’t India managed to become a global manufacturing hub yet, despite the incentives and programmes announced by the government from time to time? The production-linked incentive schemes are again an attempt to make India an attractive global manufacturing hub, but will they be any more successful than previous such attempts in doing so? This question is important to answer for a couple of reasons.

One, the global supply chain disruption and geo-political tension of the last few years have made it imperative for all countries to reduce dependence on China. In early 2020, when the pandemic and the attendant lockdowns in China hit almost every global product manufacturer, a number of countries were seen as being potential alternative hubs that could reduce dependence on the Middle Kingdom. India was one of the names touted, along with Malaysia, Indonesia, Vietnam and a few others, as having the capability of becoming a global hub. But the progress in attracting big global strategic manufacturing investment to India since then has been disappointing. India’s own dependence on China for both inputs and manufactured goods has only increased.

Second, without the manufacturing sector flourishing, it is unlikely that India will find a solution for its rising unemployment problem. Services growth alone will not create enough jobs. Even manufacturing activities today require less manpower than earlier, but manufacturing still remains a key portion of job creation across the world.

Multiple hurdles have come to the fore when analysts have dissected the inability of the country to get its manufacturing act right. The common ones are infrastructure issues, the cost and ease of doing business, high taxes as well as frequent policy changes. One major factor that often does not get the attention it deserves is India’s regulatory failures in enforcing quality consciousness among manufacturers. Whether it is pharmaceuticals, food, consumer electronics or automobiles, the Indian government and regulators have adopted lower standards than developed countries. Worse, they have been lax in even enforcing those lower standards. It is hard to remember a single instance of manufacturers in any sector having had to undertake large scale recalls, or when manufacturing facilities were forced by regulators to improve their quality norms even in sectors as critical as food and pharmaceuticals.

In setting standards, Indian regulators have often thought more about the problems that would be faced by manufacturers if more stringent quality norms are prescribed rather than whether consumers are being short-changed. In automobiles, Indian manufacturers routinely export products with higher safety features and safety norms to other markets than the ones they sell to domestic customers. Yet, the models sold abroad often cost less in those markets than their domestic variants because of taxes and a host of other reasons.

Similarly, in pharmaceuticals, where India boasts of being a generic manufacturing powerhouse, firms seeking to export to the US and other markets often have to meet stringent norms and pass inspections of their manufacturing facilities from regulators of those countries. Indian drug makers exporting medicines build and operate manufacturing facilities that pass the US Food and Drug Administration’s inspections, but the same medicines sold in the domestic market have far less regulatory scrutiny and made in factories with fewer quality controls.

The excuse often proffered for prescribing lower quality standards is that stricter norms could increase costs sharply. This is an entirely misleading argument because it is often the taxes and infrastructure issues that add to the costs rather than higher quality standards. Indeed, most countries which end up becoming big exporters find that adopting quality practices actually help in reducing costs.

So why don’t the government and manufacturers in the country focus on producing uniformly higher quality products? Why does China with higher manpower costs than India still manage to produce better products at lower costs in most sectors? Like many other countries, when the Japanese quality revolution swept the global manufacturing community, many Indian manufacturers also proudly adopted everything from TQM to Kaizen to Six Sigma. Despite that, few Indian manufacturers have become known for setting the highest quality standards even in sectors such as automobile ancillaries where they have done well.

Part of the reason is because, till at least the economic liberalisation started in the 1990s, Indian manufacturers did not have to worry about quality. Even when the economic reforms started, the gap between what the Indian consumer expected and what consumers in developed markets demanded remained fairly large. The Indian middle-class consumer often lapped up products that their counterparts in developed countries would shun. (The Indian rich, however, demanded international quality but shopped abroad when necessary).

The government could have stepped in and benchmarked the quality standards in all sectors to those in developed markets. It however never thought that quality was critical to becoming a major manufacturing hub. It focused on many things but entirely neglected the quality equation. It was a big mistake that continues to hamper us from our goal of becoming a global manufacturing hub.

The writer is former editor of Business Today and Businessworld, and founder of Prosaic View, an editorial consultancy