Make in India – the much awaited tagline for the manufacturing sector?

make in india logo

The recently launched Make in India campaign, is a bold and innovative step that is set to redefine brand India in global markets. “This is the step of a lion…Make in India”, is the statement made by the Prime Minister during the launch of the campaign. The campaign, which started as an investment drive to attract foreign capital has transformed itself into an umbrella for all industrial transformation agenda, set for India. With repeated push by PM Modi in international forums, the agenda gained exponential promotions in global media. The project even featured in ‘100 Most Innovative Global Projects’ of KPMG. What makes this campaign unique and different from similar campaigns, run by previous governments?

The launch of this campaign could not have come at a more opportune time. Despite an ambitious National Manufacturing Policy (NMP) of 2012, which set out plans for the manufacturing sector to reach 25% of GDP and create 100 million additional jobs by 2022, the share of manufacturing sector in overall Gross Domestic Product (GDP) remained static at 15% in the last few years. The Indian manufacturing share in the global GDP has fallen from 2.2% to 2.0% in the last five years (2009 to 2013).

Also the “Made in India” brand stands insignificant and commands lukewarm response in international marketplace. It is also the time when Global brands are producing “Made for India” specific products to leverage the youth market in India. In global surveys, India ranked poorly and scored a rank of 142 in the ‘ease of doing business’ survey, conducted by World Bank. This campaign is to counter those perceptions and push the government authorities to act as business facilitator for investors rather than being bureaucratic signatory authorities.

India’s strength lies in growing demand, low cost labor and increased entrepreneurial base. These advantages were completely marred by the poor infrastructure, power shortage, complicated labor laws, cumbersome policies and taxation. Unlike the yesteryear marketing slogans, the current tagline sets a clear and emphatic mission of setting up business-friendly environment in the country. It also provided a huge tonic for Indian manufacturers to hit the market confidently with “Made in India” tagline – like the recently launched Zoho tagline, “Made in India. Made for the World.”

While these initiatives have definitely turbocharged the sleeping lion in manufacturing sector, a strategic and systematic implementation is required to ensure that the plan is realized. The brand India should also be cautious to not suffer the fate of “Made in China” products.

Recent government projects like the Diamond Quadrilateral project (connecting the metros Delhi, Mumbai, Chennai and Kolkata) of Indian railways, to establish high speed rail network in India and National highway program are laudable steps in tackling the freight problems suffered by manufacturing sector. Opening up Foreign Direct Investment (FDI) in railways and defense sectors, promotions of MSMEs with “Make in India” pavilions in global events and labor reforms are some of the other strides in making a business friendly environment.

While the planning is good on paper, the execution is extremely tricky as Indian government projects are synonymous with delayed timelines and corrupt practices. The mission “Make in India” will kick-off to the next level, only when there is de-centralization of objectives from central to state governments and a strong push towards public-private partnership in expediting and completing the projects. Digitalization of government procedures and simpler single taxation structure are mandatory steps in tackling the corrupt practices and providing a secure environment for investors. The journey has begun, but the road ahead for “Make in India” is tough and requires consistent and determined measures to realize the fruit.

Make in India – The intent is made clear and a red carpet is thrown to global investors and entrepreneurs; the execution awaits…

*This article was reproduced from my post in truthdive.com news magazine.

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The story of Indian E-commerce portals

e commerce

Diwali Shopping had been an age-old custom for all Indian families. The festival of lights is also the time of year when shops record maximum visitors and sales. The shop owners anticipate and plan months ahead for Diwali season. The interiors and exteriors of the shop will be grandiosely decorated and new products will be lined up to attract customers to the store. The trend hasn’t changed much this year as well, except that the retail stores recorded maximum footfalls without revenues. The footfalls to revenue ratio started dipping despite huge discounts offered to buyers.

A major portion of this effect is attributed to customers visiting physical stores only to compare the products and prices so as to buy online. A few other buyers push the sales person to sell at lower than dealer rates for the on-store products. That meant the products are sold over and above the discounts in-order to complete the targeted sale. It is not because of the decrease in shopping interest; also not because of increased confidence of the customer; not even due to competition as well; but due to dawn of E-commerce marketplace portals (aka etailing) in India, which is slowly capturing the market and mind share of the Indian youth. How do these portals manage to sell products on profit? Is this E-commerce trend a fad or a revolution?

India represents a $3.5 billion E-commerce market and growing at around 60-70% every year. This still constitutes only 4% of the total retail market (source: Gartner). The mobile commerce constitutes around 5% of the total digital commerce. The future of the E-Commerce industry is promising as this market is said to reach $6 billion in 2015 and likely to grow at a rapid pace. These figures are possible by increased access for consumers to internet through broadband and mobile data connectivity. The market potential thus provides space for newer E-commerce companies to start business as the competition is not in just capturing the market share but also to increase the overall market size of E-commerce. The “Big Billion Day” sale by Flipkart and Diwali sale offers from Amazon and Snapdeal are just an indication of the trend that is expected in the future of E-commerce in India. So is everything rosy about these E-commerce companies?

Amazon had been in this E-commerce business for nearly two decades and hasn’t booked any major profits till now. While the $75 billion revenue generating machine continues to make major investments in emerging markets like India; it also exhibits record losses with the recent one at $437 million. The same is true with the Indian Amazons like Flipkart and Snapdeal.  Flipkart,which pegged itself at $7 billion,records an accumulated loss of Rs.281 crores(source: Business Standard Report) in its balance sheet for the year ended March 2013. Snapdeal reported a loss of Rs.264.6 crores for the year ended March despite five times jump in revenue to Rs.168.1 crores in 2013-14 (Source: livemint).  The losses are attributed to lower margins and heavy discounts offered on the products. The investments do not seem to stop either: with Flipkart raising $1 billion, Snapdeal with $233.7 million and Amazon with a massive $2 billion for the year. Huge loss at one end and huge investments at the other may defy the business logic of any regular investor, but the story is set to continue for next few years as well.

“We believe India can produce a USD 100 billion company in the next five years, and we want to be that. Whether it takes 5 or 10 years, we are here for the longer-term,” Flipkart co-founder and CEO Sachin Bansal told CNBC-TV18 after the fund raising.

With increased infusion of Internet in our day-to-day lives and increased market for smart phone-backed Internet, online retail sales are expected to cross the $30 billion figure within the next five years (Source: Moneycontrol). The etailers had also gained the trust of the customers with transparent door delivery process, newer payment models such as cash on delivery and easy return policies. These options were not available for the regular customer in the brick and motor shops. The E-commerce companies also cater to the tech savvy Indian youth, who are impatient and wants to shop at their convenience. This trend will only move upwards, as we expect increased adoption of data in smart phones across the country. The valuations for these companies are not based on sales, but on Gross Merchandise Value (GMV) i.e. the value of goods sold on the site. Hence the investors are even ready to digest huge losses recorded by these companies in an effort to raise a golden goose.

The top-line of E-commerce portals seems to be over the hills while the bottom-line is well under the deep oceans.

*This article was reproduced from my post in truthdive.com news magazine.