By: Faisal Kawoosa, Head New Initiatives, CMR
Promotion of manufacturing has always been a priority of recent governments. With ‘Make in India’ launch, it got further impetus and as a result, we have achieved a lot from, near all-imports to SKD and now CKD level of manufacturing. However, the inherent economics of manufacturing demands volumes to sustain and succeed. Such volumes vest only with either large players or else when several small players pool in by adopting contract manufacturing.
No doubt, exports can consume some levels of production, but, initially, the manufacturing has to be supported by local consumption as it takes time to arrive on global manufacturing landscape and seek the attention of other markets.
The present state of domestic brands is no secret. With every quarter, they are losing market share for various reasons but, the encouraging part is they have stabilised, though the scale of operations has shrunk. At this juncture incentive available would not do well for them. The reason being they have to first perform and earn the incentives. When stressed, they cannot perform at levels that would earn them incentives.
So, what is the option out there? The government has to do an extra bit and partner in their growth rather than keeping incentives available to them. To help Indian brands in particular and the entire ecosystem in general, the government should get into a PPP model and develop a large manufacturing cluster for mobile handsets. This cluster should not be just notifying land with some expected industrial infrastructure. Rather, all common facilities including of procurement, logistics, testing, packaging, skilling and other such requisites should be invested and developed by the government. Even the SMT line could be built by government or a SPV created for this purpose. The brands could be the tenants responsible for designing, marketing, sales and after sale service.
This model may not change the government outlay substantially. Only what is currently envisioned to go through incentives will be invested directly in creating ready to operate infrastructure. With the hardships and challenges being faced by the domestic brands, this support from the government would not only help them to revive but also achieve one of the important goals of ‘Make in India’, which is to create India IP and brands. Else, the incentives would go primarily to foreign players as they would qualify and the domestic ecosystem will further be pushed towards jeopardy.