Ready for the transition

June 30, 2015 2:57 pm

When it comes to automobile and its components, India is well positioned to strengthen and expand its position as a global auto hub.
Ameer Ahamed Munaff Managing Director, FEIN Power Tools India Pvt. Ltd.
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 GST introduction will be the biggest contributor to ‘Make in India’ initiative.
FEIN India, belonging to the machine and power tools category and being a supplier of power tools to the metal, automobile and other manufacturing industries, sees this ‘Make in India’ campaign as a much needed intervention from the government to boost the GDP in the manufacturing sector.
Commenting on the ‘Make in India’ initiative as far as machine and power tools industry is concerned, Ameer Ahamed Munaff, Managing Director, FEIN Power Tools India Pvt. Ltd. says “The overall outlook is positive, with leaders across the industry expressing confidence in this economic revival through this campaign. FEIN products are manufactured completely in Germany hence this campaign does not impact us directly, but indirectly we are expecting a good growth as our tools are widely used in the manufacturing industries which will create a demand for our machines when the industry picks up growth.”
India is the seventh largest producer of automobiles in the world with an average annual production of 17.5 million vehicles from 4 large auto manufacturing hubs across the country. “Now that more such hubs are in the planning stage and FEIN power tools having a good patronage for fastening tools in the assembly line production in the automotive sector, we are set to use this pace to push automotive range of tools,” Mr Munaff says. “When it comes to automobile and its components, India is well positioned to strengthen and expand its position as a global auto hub given that India has all of the major ingredients like steel and other non-ferrous metals required for manufacturing automobiles.”
Road to success“Make in India” campaign has all potential to be a successful long-term plan for growth, yet the strategy, while commendable, is not easy to achieve as the world is fast changing with the imbalance in the manufacturing between the developing and the developed countries that is leading to changing economies, observes Mr Munaff. While continuous change in wages, energy costs and productivity are shifting the global standings on cost competitiveness, factors other than cost are becoming more and more important for companies to decide the location for sourcing and manufacturing. China is facing with its rising wages and increasing cost of production which might lead them in to losing its battle over cost advantage. The European market on the other hand is subduing their share of the global manufacturing by giving a tough competition in terms of cost and beating other players over quality. India, in this competitive global environment is starting from scratch, where, even its peers like Indonesia and Malaysia are performing fairly better.
In this situation, Mr Munaff feels, “India needs to invest more on infrastructure development and education to foster the semi-urban and rural areas thereby giving them a fair chance to enhance their skills to get a job in the leading manufacturing sectors, including automobiles, chemicals and textiles. The major reason why any company would outsource their manufacturing requirements to another country is cost and if India could maintain the cost advantage, quality and constantly keeping a tab over the increase in wages and other factors like power and infrastructure; there is nothing that could stop in investing in India.”
ChallengesThough ‘Make in India’ campaign has received applauds across the industry, challenges are many. According to Mr Munaff, “The easiest of the tasks that needs to be achieved is cost driven production but the toughest challenge would be to address competitiveness in non-cost factors.” To gain investor confidence and attract high FDI in the future, India would need to fix its poor infrastructure by investing considerably in highways, ports, railways and power plants. New labour laws and a simpler tax structure could work better in lot many ways to constitute a better relation with the investors. “India will need to show dramatic improvement in its ease of doing business,” Mr Munaff adds.
Resolving these non-cost factors and building a positive image around these improvements in the international arena are crucial for India to succeed in future. “India should break free from the jinx to truly show what it is capable of. India must create a brand image or USP that puts our products in the lime-light. The next big challenge would be ‘Buy Indian’ to create the demand as the supply will be surplus,” Mr Munaff opines.
A latest survey in U.S showed that Americans purchased more “Made in USA” products for patriotic reasons like keeping jobs to themselves. This trend if employed properly can help succeed the “Make in India” campaign.How to dealCommenting on the steps to be taken by the govt to promote domestic manufacturing in the machine and power tools sector, Mr Munaff says, “Tax seems to be a very complex problem for the investors and new entrepreneurs as the tax percentages varies from state to state. A unified system will create more transparency and better understanding of the procedures.”
The biggest of the problem faced in many Indian states is power shortage. Infrastructure is the backbone of any economy, and is arguably the single most important factor that separates the developing country from the developed. The right infrastructure ensures a timely and effective supply chain of raw materials to electricity to the manufacturing process which also creates a seamless link across production hubs and end markets—both domestic and global. Unfortunately, India lags behind in this key area. Over the past few decades, even when growth paced, the country has failed to match the investment in infrastructure development.
Over the last 20 years, Indian manufacturing sector has only grown from 1.2 to 2.5 per cent along with the overall economy whereas the IT-BPM sector in India grew at a compound annual growth rate (CAGR) of 25 per cent over 2000-2013. The number of jobs in the manufacturing sector has also remained low over the last 20 years, increasing only by 1.8 per cent per year from 37 and 53 million. This contrasts with the IT sector, which has increased by 6.5 per cent per year during the same period, growing its share of India’s labour force from 22 to 31 per cent and now accounting for 150 million jobs compared to approximately 80 million in 1993.This shows a trend in people preferring to white collar jobs over the jobs involving physical work leading to a shortage of the skilled labours. “This void should be bridged immediately as the ‘Make in India’ campaign will open up more jobs in the manufacturing industries,” Mr Munaff said.
FIEN’s initiativesIndia is a very strategic market among the global FEIN group. FEIN India was set up in 2009 as a hub for sale and service of power tools for metal, interior construction and automotive sector. Subsequent to that, FEIN has now set up an offshore unit for design and development centre which supports FEIN global corporate office.
Explaining the company’s expansion plans, Mr Munaff said, “Our next step would be setting up a manufacturing unit for which the proposal is under serious consideration. Things are looking positive especially after the first measures by the government to increase the efficiency of government functions aimed at increasing the ease of doing business. If in the way everything goes as expected, we would also engage in the “Make in India” campaign.”
The government has announced reforms to boost manufacturing growth to 10 per cent per year by promoting “Make in India”, an initiative aimed at creating 100 million jobs over the next decade and bringing manufacturing up to 25 per cent of Indian GDP. To fill-in the demand for skilled labour force in India, FEIN India is in the process of starting FEIN Tech Institute as a part of its corporate social responsibility programme. This institute will train the economically disadvantaged and deserving students in power tool technologies and equip them with vocational skills for employment. “India has a large percentage of youth who have not been able to complete their formal education and also lack the required vocational skills to be gainfully employed and this FEIN certified programme can help in filling this void and make them eligible for employment,’ Mr Munaff concludes.