Make In India - The Kaizen Way

Since the day Prime Minister Narendra Modi coined the term 'Make In India' , it has become viral in the country. It is the buzzword in all corporate circles and is mentioned quite lavishly across media. There have been numerous suggestions to make this work, impediments on the road etc. It is good to read about it along with your morning cuppa.

But take a moment to think as to what is the purpose of this phrase. Is it to make India a world-class manufacturing destination or to convert the economy from a primarily agrarian one to an industrial one or simply to eat into the pie of a competitor country? Or possibly a mix of them all? Or something else? The government website dedicated to Make In India  says it is "a major new national program. Designed to facilitate investment. Foster innovation. Enhance skill development. Protect intellectual property. And build best-in-class manufacturing infrastructure. There's never been a better time to make in India.' There are sections for 'Sectors' 'Live Projects', 'Policies', 'Query/FAQ' and 'Contact Us'.

I decided to take a look at the 'Policies'section and clicked on the tab. There were four further tabs and I clicked on 'Foreign Direct Investment'. There are further sections and if you were to go through it with some time in hand, it would give you quite clearly the regulatory requirements for investing in India. I was quite elated on pouring through this. But then I saw India's dismal performance in the Doing Business Project undertaken by the World Bank.

This year our country has slipped two ranks to an unbelievable 142nd rank in the World Bank's Doing Business Report 2014. Although we keep hearing that India is a fast-growing economy having high investment prospects, the stark reality comes to the forefront in this report. Whatever said and done, it is the perception of foreign investors that India is a difficult place to do business and India's complex regulatory regime and corrupt environment are huge deterrents.

Let us step back in history and take a sneak peak at another country whose economy was floundering and in a much worse shape. This country was almost destroyed by the end of the Second World War. Its production capacity was almost zero due to concentration of war-related production. The agricultural production (predominantly rice) had reduced significantly.

There was heavy dependence on overseas funding, which was the only means of survival. The levels of unemployment had become alarming. All in all it painted a gloomy picture of a country shattered upon being defeated in war. It is really anybody's guess which country we are referring to here - Japan.

A relatively smaller country isolated from the mainland with not much access to natural resources, its very survival depended on 'outside help'. And boy, did it not get 'help' from the greedy western countries. America had its own benefits in mind when it extended funding making Japan heavily laden with debt. Further, America's requirement of weapons for participating in various wars to combat the Soviet advances gave Japan an opportunity to get into mainstream production. During this period there was large-scale technology transfer from America.

However, Japan was not to be subdued by American policies only. It was quick to grasp the need to stimulate the change from within. There was no way that outside dependence could last for long. Hence it overhauled its own policies and converted opportunities out of its strengths. Around the same time, two important factors, provided ironically by America to give Japan economic liberation, acted as catalysts - improved labour relations (in the form of lifetime employment system) and abolition of subsidies .

Japan, not being a 'western' country, was way ahead of its times in visualizing, planning and implementing manufacturing techniques and ideologies. It realised economies of scale would boost productivity. It imbibed the 'Just in Time' inventory system to improve bottom line and efficiency. It negotiated with trade partners to acquire foreign technology at reduced cost, which led to infusion of newer concepts and outflow of better products from the manufacturing sector. A combined effect of these initiatives led to total factor productivity growth. The concept of 'kaizen' or continuous development, followed in most organisations now, has been gifted by the Japanese to the world. After two decades of evolving and sustained policies, Japan marched ahead to economic supremacy. It is no wonder that for years we have been in awe of Japanese technology and products.

Japan's quick learning from its interaction with foreign companies and in turn creating indigenous industries speaks volumes of the will of its government and its people. This was perhaps a true example of what we call today as 'global best practices'. Having worked closely with Japanese companies and clients for more than five years, the author has found Japanese people to be extremely efficient, hardworking and loyal to their companies. Their attention to detail is nothing short of remarkable. To cite an example, while working on a FDI-related assignment, I was astounded to see that my Japanese manager (who had been on the job for about a year), without being a lawyer or having any background to the Indian legal system, was fully aware of the applicable laws and compliances relating to that assignment.

The Indian government also recognizes Japan's capabilities. The key agenda in Modi's visit to Japan in September last year was to convince the country to 'make in India and invest in India' . More recently our Communications and Information Technology Minister, Ravi Shankar Prasad declared that India and Japan are natural partners in the field of information and communication technology (ICT) and Japan should take part in the 'Make in India' initiative.

In today's competitive and information sensitive world, simply coining a phrase or launching a website will not change things overnight. The government needs to roll out policies and initiatives that have long-term benefits. The cost of production needs to be progressively lowered to enable India to compete with other countries. Having a single-window system and structured and transparent process for setting up a business is the need of the hour. Corruption and red tape, black spots which have continuously pulled us down in all global reports, needs to be strictly tackled both by the taker and the giver (yes, we common people). A burgeoning youth population will only add to our woes till they are educated, skilled and employable.

To set up more industries we need more land, which generally comes from agricultural land. Let us admit that land reforms in India have not been successful and remains a sensitive matter. We have seen numerous and often violent and ugly disputes on this 'land grabbing' issue. It is puzzling to a foreign investor to see that on the one hand the government is sending invitations to set up industries and on the other hand there are multiple issues to obtaining land for setting up such industries! If we are to progress on the 'Make In India' front, the stakeholders i.e. government and farmers, need to evolve a well-defined and mutually beneficial policy which will make land acquisition a smooth transition. We can take lessons from Japan in this regard, where agriculture co-exists peacefully with its more famous (manufacturing) cousin.

The so-called developed countries are still smarting from another round of recession. Most countries, Japan included, are keen on investing in India. We are on the threshold of making history. If we make the right moves now, we can indeed take a quantum leap ahead of others. If the 'Make in India' initiative is to succeed, the Indian government and its people need to be partners and support each other. We, the people of India, need to put a concerted effort to market our country as the most desirable destination to do business. Just like Japan did, we need to take revolutionary steps quite unheard of in these times.

Sourish Mohan Mitra is Principal Consultant at PwC