How can India transform itself into a manufacturing hub like China?
Answered this question on Quora first. Took me a long time to put my thoughts together, but I was finally able to do it. So thought of publishing it on Medium as well.
You are absolutely right, China is indeed a manufacturing hub, and largely because of that one factor, it has been making amazingly accelerated economic development. Because of that, India has been looking up to it for some time now, and the Indian manufacturing industry has been setting them up as a performance bar that it is aspiring to achieve to emerge as the next big global manufacturing hub.
What will be the factors that can aide India in making this dream come true?
- Better infrastructure
- Economic reforms
- Improved power generation/distribution
- Proper planning
Now let us look at this subject in a detailed view in the, probably not required, yet a comprehensive outlook, also known as — The Long Answer!
If our objective is to get where China is today, let us first try understanding what has brought China into this position; then probably we would be in a better position to understand how can we (and if we should) get into a similar standing:
Distribution of natural resources that are being tapped right now in China:
As you can see, majority of natural resources that are being tapped right now are situated alongside the North-Eastern, Eastern, and South-Eastern sides of China. As a result it shouldn’t surprise you that with the exception of few refineries that are set up in the northern and north-western areas, all the industries are situated in these regions.
Manufacturing and Professional clusters in China
China’s primary manufacturing hubs are not just located close to the natural reserves, they also have easy access to the sea — which aids them in a highly important aspect of becoming a manufacturing giant — Transportation. China relies heavily on its ports for all kinds of transportation services, and with the infrastructure China has built to provide assistance to the manufacturing industries, that has helped them grow at a phenomenal rate. The industries that are located on the interior side leverage both road transportation as well as the rivers to aid them with their transportation requirements.
Then comes the second much needed requirement for any industry to thrive — Electricity (Power). China has so far been depending primarily on thermal power plants, and once again, to facilitate the growth of the industries, the power plants have also been situated in nearby areas. This helps the industries with having uninterrupted power supply helping them thrive.
But, given a choice, I would not want our nation to be tracing the footsteps of China. Why? In order to explain that, we would need to first of all understand the problems with China.
However, while listing them down, I will exclude the one party socialist regime and the tightened policies from the list of problems; because well, if you start listing them down, then this already long answer will simply get out of hand.
The Problems with China:
China has many problems — some of which it couldn’t have avoided (e.g. topographical and political).
A large chunk of its mainland area is comprised of difficult terrain, which has forced a good percentage of people clustered around limited regions. That, and the obvious employment opportunities present near the industries has resulted in a humongous population density in those areas as compared to the rest of China.
But, there are people inhabiting the other areas as well; and almost half of China as you can clearly see in darker shades is decently well populated. However, as far as their financial state and economy is concerned, the well off are fairly restricted to the manufacturing hubs. Let’s have a look at a map to display the regional contribution of different provinces to the overall GDP.
What is noteworthy is that even in these regions, there would be a lot of economic disparity, and while some would be earning beyond all measures, the workforces would not be so well off. Despite that, if the manufacturing hubs are considered ‘well off’ when compared to the rest of the country, you can understand what the rest of general populace must be going through.
More than 600 millions of Chinese citizens are living in a state that can be best described as “impoverished”.
To put things in perspective, we are talking about a population-size almost equivalent to the whole of Europe.
Next comes the environmental concerns. So far China has been largely dependent on thermal power plants — which have been consuming coal at an alarming rate resulting in China being the forerunner in the list of countries that are the most polluted. This has resulted in a degradation of quality of life, a disastrous environmental impact and affecting the health of the inhabitants.
And with these thermal plants located in the same areas where the density of population is the highest, the health ramifications are beyond measure. This scenario has brought China to a point where it had almost become a ticking time bomb. But now, finally China is waking up to it, and has started to look for alternate power sources. The future power-generation plans laid out by the government clearly indicates that.
As you can see, while there is still a proposed increase in the number of thermal power plants, but the increase is fairly minuscule if you were to consider the proposed increase in the natural gas-based, nuclear, and other renewable plants. China is betting immensely not just on nuclear power, but on wind and hydro as well, and there are many good reasons to do that.
Now, let us turn our attention to India
We can potentially learn from what China has learned the hard way, and given the state of our affairs and the state we are in versus the state we want to reach at, we are in a much better position to plan and position it in a better way. Let us look at some of the distribution maps for India.
Better distribution of natural resources:
Current Distribution of Power Plants:
While India is increasing its power production capacity with every passing day, there is a lot of ground that it needs to cover.
- India is not producing even close enough to the amount of power it requires. The overall energy deficit was 9.8% during FY11. During FY07 to FY11, the energy requirement increased from 693.1 BU to 861.56 BU while the energy availability increased from 624.7 BU to 788.35 BU, thereby increasing the overall deficit. The deficit depends on many factors such as proper inputs majorly coal, T&D losses, distribution infrastructure, unaccountability in metering and billing, cross subsidies, etc. The power sector needs to get a grip on this concerning deficit issue, which is primarily being caused because of unavailability of plants and load shedding.
- India is still largely dependent on thermal power for its energy requirements. This needs to change if India is looking at meeting the energy crisis in a long run. The good news is, we have ample alternate energy sources available, including solar (bless our geographic location), and an even better news is — India has started to take steps to start harnessing the renewable sources.
- Nuclear power contribution is still too low, and needs to increase — Once again, we are making progress on this front as India has started betting big on nuclear power. China has been going the nuclear way to meet up with its energy + environment problems, and India is a few steps ahead of it in terms of when in the overall curve has India started on with the process, but much behind China as far as the extent of nuclear power generation capabilities are concerned. This needs to be sped up!
Working with the assumption that the energy problems are solved, India will still need to strengthen a lot of infrastructural facilities if it is to address the concerns of the manufacturing sector — primarily on the side of transportation (on all three fronts — ports, railways as well as roads). We have a good stretch of land having easy access to the sea, and if we ramp up our efforts on that front, Sea can prove to be a much more powerful medium for transportation particularly for exports. And as compared to road-networks, it is a medium that can potentially give a faster turn around time and can be scaled up much faster, if planned properly.
Then comes the part of setting up the industries at the right places so as to take the benefit of the improved infrastructure and power-generation, but still leaving the general population safe from the fallback effects of pollution. Liberal and well planned economic reforms and special zones for manufacturing could go a long way in this process.
Lastly comes the economics.
India is fortunate enough that it does not face as critical an issue as China when it comes to topography, and even more fortunate when it comes to a good distribution of its natural resources. This has resulted in a relatively much more even regional distribution when it comes to GDP contribution from different parts of the country.
The need is: To scale this up further!
Now, let us take three real simple and basic questions!
Q #1: Is India in a position where it can be the manufacturing powerhouse?
A #1: Hell Yes! What else have I been talking about.
Q #2: Will this be an easy process?
A #2: Hell No! It would require shit-loads of effort and hard work on all fronts
Q #3: Is it worth it?
A #3: Absolutely! And more than that, it isn’t just worth it; it is the need of the hour!
Link to the answer on Quora: Abhishek Anand’s answer to How can India transform itself into a manufacturing hub like China?