Indian manufacturing gets currency boost

For about a decade, Indian electrical companies have been importing 16- inch table, pedestal and wall ( TPW) fans from China and marketing these in India, under their respective brand names. The reason: importing from China was cheaper than manufacturing these in India. China had the obvious advantages of economies of scale, cheap labour and a favourable currency. However, with the rupee depreciating 14 per cent this year and the Chinese currency, the yuan, appreciating 2.4 per cent to 6.09 a dollar, the pattern has started changing. About a year ago, electrical goods maker Havells India set up a TPW manufacturing plant in the country; this was the first such plant set up in the country in about a decade. “ We could foresee a correction in the Indian currency,” says Sunil Sikka, president, Havells India. “ About a year ago, when we started, we were at a slight disadvantage to our peers who were importing; now, we are at an advantageous position,” he says. For other electrical goods such as induction heaters, too, new manufacturing plants are being set up in India. “ We still have labour arbitrage, as it is cheaper than China. So, once scale is achieved, our import will shift from finished goods to specific parts and raw material,” Sikka says. Indian companies manufacturing induction heaters are still importing the glass needed for these products. However, this accounts for less than 10 per cent of the total production. To cater to developed markets in Europe, Havells acquired Frankfurt- headquartered Sylvania for $ 300 million in 2007. After the financial crisis of 2008, the company shut two of its five manufacturing plants in Europe and set up a joint venture manufacturing plant in China to supply LED products to Sylvania. About a year ago, the company set up a manufacturing plant for lighting fixtures in Neemrana, Rajasthan, to supply to Sylvania. Earlier, the company sourced lighting fixtures from Costa Rica and France. “India is a new sourcing hub for our European operations,” says Sikka. The company exports products worth ₹ 5- 6 crore every month and expects to double this in the next six months. The garment industry, too, is gearing up to avail of the new advantages over China. Raymond, the company best known for selling branded textile for men’s suits, plans to increase exports fourfold in the next five years, as the domestic market faces a relative slowdown. “ If I look at global manufacturing destinations for sourcing, India has improved its competitive position dramatically, especially in relation to China,” says Sanjay Behl, chief executive officer of Raymond, referring to the fact that wages in China have been growing faster than in India. The eight- decade- old company believes in its targeted markets, trade policies for import are being structured more in favour of India compared to China. According to the company’s estimates, India now exports $ 40 billion (about ₹ 2 lakh crore) worth of textiles a year. In 2012- 13, Raymond’s export revenue was about ₹ 250 crore. The company plans to invest about ₹ 1,000 crore through the next five years, primarily to augment capacities. Behl said the rise in capacity would help the company emerge as a major global exporter in the men’s wear and worsted textiles segments. “The depreciation of the rupee alone has not helped; it is also the appreciation of the yuan that has helped India become more attractive an export hub,” says Rakesh Shah, co- chairman ( foreign trade committee), Federation of Indian Chambers of Commerce and Industry. “ Today, we have an export advantage where we have our own raw material.” However, he points to the fact that China still has an advantage, in terms of manufacturing lowengineering, high- volume products due to economies of scale. But India has an obvious advantage in exporting smaller- volume products that require engineering input. Traditionally, India’s forging and automobile component industry has come under this segment and has benefited from the export market. “With the weak rupee and poor demand in the domestic markets, automobile component makers are concentrating on export markets,” says S G Joglekar, chief financial officer at Pune- based Bharat Forge. The company exports niche products for the automobile industry and doesn’t face much competition from China. “ Our exports to North America and Europe are doing better than the domestic markets; we plan to sweat the existing assets to our advantages for export,” he says. way2rading.Com is a leading B2B portal through which you can get updated information about indian manufacturers and indian suppliers. To know more about our services, visit manufacturers directory.

Manufacturing sector contracts for second consecutive month in September: HSBC

India's manufacturing sector activity contracted for the second consecutive month in September as both output and new orders witnessed a decline, an HSBC survey said on Tuesday. The overall rate of contraction was, however, marginal and eased since August, when it had slipped sub 50.0 reading (below which it indicates contraction) for the first time since March 2009. The HSBC India Manufacturing Purchasing Managers' Index (PMI) for the manufacturing industry stood at 49.6 in September, higher from 48.5 in August, but remained below the crucial 50 mark (below which it indicates contraction) for the second consecutive month. Manufacturing activity continued to shrink in September, albeit at a slower pace. Order flows remained weak, especially export orders, and employment fell," HSBC chief economist for India and Asean Leif Eskesen said. Faced with fewer projects, companies reduced their workforce numbers for the first time since February 2012. indian suppliers "Reflective of a further reduction in new order levels, Indian manufacturers cut their staffing levels in September," HSBC said adding that "the latest fall ended a period of job creation that had lasted for one-and-a-half years". Although new orders fell at a slower and marginal pace, the contraction of export business was very significant. According to HSBC, a depreciation of the rupee versus the US dollar had resulted in higher prices paid for inputs and limited firms' ability to price "competitively". The findings of the survey comes at a time when the country is battling slower growth rate, wider current account deficit and a battered currency. free business listing According to official data, high imports of gold and oil pushed current account deficit (CAD) to 4.9 per cent of GDP at $21.8 billion in the April-June quarter of the current fiscal. "Despite the weak growth readings, the build-up in underlying inflation pressures suggests that the RBI has to keep its inflation guards up," Eskesen said. The Reserve Bank of India, in its September 20 policy review, had unexpectedly raised the policy rate by 0.25 per cent as it kept its focus on controlling inflation. Driven by costlier food items, wholesale price inflation rose to a six-month high of 6.1 per cent in August. Although new orders fell at a slower and marginal pace, the contraction of export business was very significant. According to HSBC, a depreciation of the rupee versus the US dollar had resulted in higher prices paid for inputs and limited firms' ability to price "competitively". The findings of the survey comes at a time when the country is battling slower growth rate, wider current account deficit and a battered currency.

indian manufacturer

What are your views on the penalty to Ranbaxy and do you believe the $500 million payout was too harsh? It’s unfortunate. The company lost over $500 million in business opportunities, which may be the highest for any generic company, but the Food and Drug Administration (FDA) penalty has been higher for many global leaders, like GlaxoSmithKline (British) which signed a consent decree in 2005 to post a penal bond of $650 million for violation of manufacturing standards. In 2011, the FDA issued a consent decree to McNeil Consumer Healthcare, a Johnson & Johnson (US) subsidiary, over its repeated manufacturing problems (for drug Tylenol), indefinitely closing one plant and placing oversight over the two others. In another consent decree, Ben Venue Laboratories, a subsidiary of Boehringer Ingelheim (German), was restrained from manufacturing and distributing drugs from its Ohio facility until FDA determines that its operations are compliant with the Federal Food, Drug & Cosmetic Act. The loss of business and reputation is a greater risk than the penalty payable. Does the closure of this case impact the Indian generic drug market?indian manufacturers The consent decree puts a lid on the case. The company (Ranbaxy) can now start afresh and focus on its business. It is unlikely to have any spillover effect on other Indian companies. The US FDA processes are very objective and thorough, but unbiased. The fear of collateral damage is from the foreign competition. They may use this episode to contain the challenge of safe, affordable and quality generics from India. What are the learnings Indian companies can take away from Ranbaxy’s issues with the FDA? The first and most important lesson is not to compromise quality and safety of medicines. The second and more important lesson is not to cover up, even if the error is inadvertent. In this context, Johnson & Johnson’s response to owning up to the responsibility for manufacturing and quality defects in an over-thecounter drug Tylenol is noteworthy. Has the case damaged the reputation of the Indian generic drug market, and Ranbaxy in particular? Will exports from other Indian companies gain from their disgrace? One cannot rule out collateral damage by foreign competitors, but all Indian companies will have to work together to prevent such damage. After the consent decree, when the company (Ranbaxy) is able to resume supplies,indian manufacturer it is unlikely that other Indian companies can take away their business. Whatever was lost, was lost before the consent decree (was signed). Falsification of data and violation of manufacturing process guidelines were charges leveled against Ranbaxy. Are those widespread problems in India? Regulators from different jurisdictions have not come across such practices which confirm it is not a widespread problem.,indian suppliers Cases of adulterated medicines have been reported from the Indian market as well. Why aren’t our norms as stringent as the FDA? The National Drug Regulatory Authority is a product of the milieu. It evolves by national priority and is generally in conformity with the standards of general hygiene, sanitation and drinking water. India is moving towards improving these standards and has made significant progress in the last decade. However, we still have a long way to go. In the meantime, companies looking at the developed markets adopt appropriate standards to suit their business requirements. In the US and other developed markets, there is a robust system of recalling all consumer goods, including medicines. What do we have in India? Rules 54 and 55 of the Drugs & Cosmetics Act have provision for freezing and destroying stocks of sub-standard medicines. Rule 74(j) of the Act empowers the licensing authority and obliges the manufacturer to recall medicines not conforming to the standards. Companies follow strict guidelines for the export of medicines. Why can’t they then abide by the same standards in their home market? India does not have different standards for different markets. However, the manufacturers comply with the standards of the respective markets where they are selling their products. The h a r m o n i z at i o n o f standards is a major challenge. Political leadership and drug regulators need to work on it. Some progress is made under the ICH (Inter national Conference on Harmonization), but there is still a long way to go.

Small is big: SMEs on overseas drive

What kind of a paradigm shift are you planning in India? First, we think that the Indian market is going to witness a strong and sustainable growth for the next 10 years. This market should reach six million cars a year in 10 years down the road. This means we are going to move to six million cars from two million. Somebody has to build the four million capacity. You need more cars and you need more taste. We want to bring in the Nissan and Renault taste. Second, a product like Micra is a very modern and very sophisticated one. You will see it big from inside compared with any car in this category. It is probably a champion in terms of fuel efficiency and emission, it is already a champion in Europe and Japan. It is going to come at amazingly low cost because it is localised in India. indian manufacturer Thirdly, Indian entry is a paradigm shift for us. We think the ‘A’ segment that exists in India is unique to the Indian market. I don’t think there is any market in the world which has a ‘A’ segment like here. This ‘A’ segment might be migrating to other emerging markets. The best place to learn how to make these cars is India. What are your plans with Indian partners? indian manufacturers The multiple partnership in India is something we feel at ease with. Each partner is working on a different project. M&M is working on the Logan with Renault, Ashok Leyland is working on an LCV (light commercial vehicle) with Nissan, Bajaj is working with Renault and Nissan on ultra low cost (ULC) cars. We don’t have partners with whom we do competing projects. India is a very sophisticated market, very specific market. A global manufacturer is not going to learn India by sending a bunch of expatriates to India. Having multiple partners help us understand what is going on, learn and compare the practices of one partner with the other. It can help us to have, maybe, multiple practices instead of one. We came to India to learn more about frugal engineering and frugal product planning. If we are to mature and the day we become ‘Indian’, the day Nissan and Renault have an extensive understanding of India, maybe then we can say we don’t need so many partners. We are the fourth largest car marker with a 10% market share. We are less than 1% in India. So in order to move from 1 to 10, we need the help of partners. Each partner can bring something to the table. We will give something to them. It will be a collaborative effort. How frugal or cheap is India compared with other locations? indian suppliers India is not the cheapest country in the world. One can always find cheaper countries than India. What India offers is a low-cost market model. The Indian mindset is embedded with frugality. Not all the countries are like this. The attractiveness for us is not the low cost. I had a meeting with one of the partners. He came with his engineer for the product. I brought mine. I asked both the engineers how much investment is needed. I was shocked by the difference. What my Indian partner promises to do it with one, my engineer tells me we need five to complete this project. The difference is huge. It is a completely different approach. That’s is why we think Indian engineering and product planning is such an important thing. We want this spirit to conquest other markets.

MONDAY MUSINGS RAVNEET GILL CHIEF EXECUTIVE, DEUTSCHE BANK INDIA

 has done what it could. When we talk to MNCs with a set up in India, all of them say they would like to buy back floating stocks in the Indian market. They believe in India’s economic potential and would like to capture as much of the economic upside. The only reason why they are not being able to buy back is because of high valuations. So you have a very strange situation, people are believing in the long-term India story, you think the economy is going to hold on but still saying that the valuations are too rich.
Isn’t there a disconnect somewhere?
indian manufactrers That’s precisely the point. As a nation what is India’s expectation of itself? No point lamenting over the last thirty months, what is more important is what we are going to do. Everybody used to put aside India from the rest of the world on the basis that India had supply-side constraints which are surmountable. The demand side is still there, it has not disappeared, may be it has shrunk a little. Why is it that an FMCG giant has recently put in fresh money to buy back equity?
Is it that the consumer story and the investment story are differing?
The demand is coming from demographics and will determine more enlightened policy-making. The fact is that 10 million Indians come into the work stream every year, just to find 10 million jobs, you need to grow at 8%. Political leaders are increasingly recognising that it is all about job creation. I think India’s demographics are a strong force and will compel our policy makers to believe that good economics will be good politics.
Investors are getting jittery and there seems to be neither good politics nor good economics? Some policy makers even believe that hiking FII limit in debt is the cause of the rupee fall?
I don’t think the recent FII redemptions have been exacerbated by increased limits. It was more of a yield play vis-a-vis the US markets. At the end of the day, the entire redemption was about $7-8 billion, which is immaterial. In addition to cultivating different constituencies of investments, India needs to now go back to building a more manufacturing DNA. India has made a name globally in the services sector. However, we need to bring back manufacturing in a big way so that employment generation gets accelerated and the economy picks up all over again.
How do you get it back? indian manufactrer For instance, look at the DMIC project. It will not just be a trade corridor. The project envisages 7 new cities, each having national manufacturing zones, with a lot of incentives to encourage companies to set up manufacturing facilities. So work is happening already. So far we have gone overseas and looked for capital… we now need to look for manufacturers to come and set shop here. We need to provide an ecosystem that is much more efficient and where people can get off the starting blocks more quickly than they have so far.
Investments from Japan or any other region have not been really big. And even the DMIC project seem to be facing issues?
indian manufactrers .We need to recognise that the world has changed post the crisis. Maybe it is time to relook at where we are investing our rupees, dollars and where are we attracting foreign investment from. Historically, our capital has come from the West, maybe now it is time to look at Japan and the Middle East as well. We need to open up our thinking and build more strategic relationships