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‘R&D, right policies key to build a capital goods factory for the world’

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The time is ripe for India to enter the big league of global manufacturing in capital goods, as multinational companies increasingly adopt a China-plus-one strategy to diversify production. Currently, the capital goods sector contributes 1.8% to India’s GDP, and accounts for almost 12% of its manufacturing output. However, India needs to have the right policy frameworks, accent on research and focus on supplying to foreign markets to make the best of these tailwinds, panelists at the Mint Zetwerk Smart Manufacturing dialogue said.

The discussion, titled ‘Building a globally competitive, self-reliant and sustainable capital goods industry’, held in partnership with Zetwerk, turned the spotlight on what India needs to become a global leader in manufacturing. Shalil Gupta, business head of Mosaic Digital, an HT Media Group company, moderated the session.

“For India to be globally competitive, one of the biggest challenges is whether we have the IP or the core technology. Another major challenge in manufacturing is getting the right talent and upskilling it to work for you,” said Neelesh Tungar, chief operating officer, defence and aerospace, Bharat Forge Ltd. According to him, India is moving in the right direction but not at the right speed. To have the right IP, India need to move R&D to India to devise new technologies, automation, bots and unmanned operations. Despite sophisticated Indian companies holding 600-700 patents, R&D is not an area of focus for the country, he said.

Vishal Chaudhary, co-founder, Zetwerk, agreed with the need for greater research. “China’s contribution to R&D spending was 2% 25 years back, and it has gone to 27% in 20 years. Ours has gone from 1.8% to 2.9% in the same period. So, how do we expect to compete with China when our R&D spend is not there? This is where countries like Germany and Japan have invested in developing those technologies. The machines didn’t come suddenly,” Chaudhary said. India missed the industrialization phase as it shifted from agriculture to services, but, right now, the policy tailwinds are strong, he added.

The discussion also dwelt on how India needs to focus on manufacturing for the world. For this, the country needs to be the best in terms of quality and costs. India is slowly moving in that direction, with policies being framed to support it. However, the industry cannot operate in silos. Infrastructure needs to be scaled up, and manufacturing happening in nodes needs to be shifted under one unified shed, and this needs technology.

Experts on the panel also pointed to how MSMEs and start-ups bring a lot of new technology to the larger companies.

“The growth pattern of China has gone down as they use the capacity of the steel industry, which has reduced. Europe has gone down because of various reasons. There is a total shift in manufacturing capability across the globe. There is positive support from the government. The speed at which they are adapting themselves and changing policies seeing the global scenario was never heard of earlier,” said Sumit Bardhan, vice-president and head, SCM, transport tnfrastructure at Larsen and Toubro Construction.

Despite possessing all raw materials and being self-reliant in the first stage, India is doing ‘bad job’ on lifecycle management, experts on the panel said.

“Encouragement of R&D is the first thing, but it only happens when there is a policy from the government that specifies how much of the revenue should go into skill development. Every individual is a revenue hour, and R&D is a cost. The day we start seeing R&D as revenue/ investment, it will change the perspective,” said Barun Pal Chowdhury, COO, Ashoka Buildcon.

The country also lacks access to the right talent pool with exposure to global companies. For this, the industry needs to reach out to colleges and drive syllabi and research programmes to suit its needs, and create centres of excellence.

“With the inflow of fresh talent from the start-up ecosystem, most corporates today are more open to trying fresh ideas and experiments. We have worked on a standalone programme where we had global start-ups work on solutions. Now, these are happening at individual corporate levels and need to be scaled up at the industry level,” said Anton Arputhanayagam, head, commercial and SCM, electronics, Vedanta Ltd.

The discussion concluded with some final thoughts about the future of the capital goods industry. Direction-wise, it is on the right track. Policy tailwinds are strong, and a new breed of talent is coming up. Today, the needs of industry are the right speed to power change, the right execution, and leadership that adapts to the changes around it.

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