Posted by: John Elliott | September 7, 2007

On the Road: Why India can win on some points against China

 While I was in Mumbai and Pune last week, I talked to engineering companies about how they can sometimes compete successfully with China – and why. One strong theme about “why” was that India’s openness, its democracy, and its people’s flexibility enables companies to be entrepreneurially better.

Put another way, those aspects of India that frequently drive investors crazy – especially its chaotic democracy, general confusion, and lack of discipline – can be turned into advantages that encourage the entrepreneurship and flexibility needed to be successful.

No one is of course claiming that India can beat China overall, but the views I heard are interesting because they show the growing confidence in some Indian companies that India has some special advantages.

M.V. Kotwal, a director of Larsen & Toubro (L&T), India’s largest and most international heavy engineering group, said that China is a “regulated economy which means suppression of independent thinking, and that limits entrepreneurial activity.” Kotwal knows the market – L&T has sold ten coal gasification plants totaling $350 million to China in the past three years. By contrast, in India “there is a lot of freedom of thought which means that talent is available, and people come out with solutions whenever they are given a chance.”

A similar view came from someone else with direct China experience – Anand Mahindra, managing director of Mahindra & Mahindra, a tractors-to-cars company that has bought a tractor plant there. He said that though Chinese workers on machine tools could beat deadlines, they did not have the flexibility to switch instantly to a different machine. “The Indian mind is not fazed by confusion and apparent disorder,” he said, “If there is a wrinkle on a dye, an Indian engineer will sort it, but a Chinese will want to fly in an expert.”

Baba Kalyani, chairman of Pune-based Bharat Forge, the world’s second largest forgings company which has a joint venture in China, made the same point when he told me that India won in manufacturing in “areas with multi-technological touch-points such as high grade metal castings.” But he warned that this was “the only advantage that we have” and that it “wouldn’t last long.” China would catch up fast.

I discussed this with Nandan Nilekani, a founder and co-chairman of Infosys, one of India’s top three IT companies, at a Delhi party this week, and he said that “for genuine innovation, you need an open society.” When I scribbled that down on the back of my invitation card, he said it wasn’t that profound a remark. Maybe he was right, but it’s interesting that it’s now being cited by engineering entrepreneurs to explain why they can beat China.

A different point came from Rajiv Bajaj, who I talked about in my last post. He said that “China does not have the same incentive to innovate because someone down the road copies you.” He cited as an example that, while Bajaj Auto is the only company producing its Pulsar motorbike in India, “there are six copies of Pulsars in China.” (Ironically, two days after he told me this, Bajaj became embroiled in a legal patent battle over motor bike ignition technology with another Indian autos company, TVS of Chennai).

Mahindra also made the point that China beats India massively with its vast and efficient network of highways and ports that enable raw materials and components to be delivered to factories, and products to be taken on to other destinations.

That India lacks such infrastructure was apparent when I was being driven last week to Bharat Forge’s Pune headquarters. Twenty minutes before my appointment with Kalyani, we were only moments away from the factory gates, but then we hit a traffic jam at a railway crossing. Twenty five minutes later we hadn’t moved as many yards so, after agonized phone calls between the driver and Kalyani’s office, Indian innovation came into play. I walked through the worsening gridlock of cars, dilapidated trucks, motorcycles, and bikes to the other side of the jam, where I was picked up in a motorized auto-rickshaw and chugged along to my interview, twenty minutes late.

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Responses

  1. To the latest commentor Melvin Pereira, India is a leader in what exactly…

    I myself have achieved the two of the highest ideas in computers, design of an my own Operating System and Microprocessor. All the GITs ( Great Indian IT industry ) has achieved is unnecessary computer software that is not actually required.

    As to Spacecraft, the American company SpaceX created by Elon Musk just eight or so years ago has its latest rocket capable of carrying more luggage than any rocket of the what forty-year old Indian Space Research Organisation. Add to which SpaceX has its Dragon capsule which is designed to carry seven humans. The I in ISRO can stand for other words too…

    As to weapons design, don’t ask, don’t tell.

  2. I know I am a bit late on the whole comment for the post, but your post is even more relevant today, than I guess 2007. India has taken the train, we are leading innovation in many fields. But the chronic problems of infrastructure and a corrupt government show their ugly head every once in a while.

    Nevertheless I am a firm believer that the sleeping tiger is waking up, slowly but surely.

  3. Democracy is ideal & yet illusive. It is not a panacea for all the social ills. It only work much better if the society is homegeneous. Is the Indian society “homegeneous”?
    On the Look up Kenneth Arrow theorem, – Arrows’s Paradox – I believe he is a Noble Prize recipient for his work. Also and of couse , Nash for his game theory.

  4. IN YOUR ADAM BRIDGE STORY, YOU HAVE MENTIONED THE EPIC PERIOD ABOUT 4000 YEARS AGO. WHILE IN FACT, THE MYTHOLOGY SAYS RAM WAS BORN AROUND 10,000 YEARS AGO AND LORD KRISHNA BIRTH IS STATED AROUND 5500 YEARS.

    sltalwar@yahoo.com

  5. Democracy doesn’t t assure prosperity or good governorship. It only gives the citizen multiple choices of leadership.

    An average Chinese Citizen is not keen his democratic rights or choice to elect their leaders unlike India , as long as the government gives him enough room to generate wealth.

    To me autocracy helps in bring in change and may result in prosperity in the short term.
    Where as Democracy can only bring in stability in the long term.

    Mathew George Sankaramangalam
    India

  6. I would say that in addition to infrastructure, there are other issues too. I have been privileged enough to have lived in many countries and if I were to cite 3 major areas where Indians as a class of people need to improve in a very significant way, they would be:
    a. be more disciplined;
    b. education system needs to improve (currently it is more of a racket)
    c. people need to get more educated than being literate – how do we do that?

  7. ChinaStarted 10 yeas earlier then India and India will fight back India is backed by its own resources when compared to China We are in Bull Phase where China may look brighter But india is into a Phase where the constant growth is the Key India will be there for a longer time and we all have heard the story of TOrtoise and Rabbit and ultimately the consistency is going to matter.

  8. Indians like to debate.
    Chinese don’t.
    That’s why Indians finish the 100m in 10.5 sec and Chinese in 10.0 sec.

  9. “L&T has sold ten coal gasification plants totaling $350 million to China in the past three years”

    To me this shows that China is following a win-win trade strategy. Why reinvent the wheel if India or another country could do a better job. This is what globalisation is all about.

    China would rather concentrate her R&D on products which the US and Europe refuse to sell to her. This is all the incentive China needs to innovate.

  10. You should write a book!!!

  11. Every comparions between the two behemoths comes down to Democracy vs Infrastructure.

    No while there are numerous examples that come to mind of well off states with no/minimal democracy (Singapore,Hong Kong,Saudi Arabia) I am hard pressed to find states with democracy and minimal infrastructure that have managed to raise the living standards of its people in a significant way. And after 28 years here I am not sure India is a genuine democracy. But of couse it is miles ahead of China on that metric.

    I root for India but my money is on China. Infrastructure takes time. A lot of time to build. Transitioning to Democracy is a lot less initimidating. And look at Singapore/HK….who cares about Democracy when you have a SUV parked below your penthouse apartment.

    Being hungry is more painful than being ‘free’….ask any villager in Bihar or Jharkand.

    Shiva.

  12. Quote . . . especially its chaotic democracy, general confusion, and lack of discipline – can be turned into advantages . . . Unquote
    This has always been a comment made in one form or another – that democracy is essential for entreprenuership, inventiveness etc to flourish. Were the Chinese living under democracy when they invented/discovered silk, paper, porcelain, gunpowder, the compass, the seismograph, etc etc? Are the western commentators trying to console themselves quixotically in the face of the relentless growth in China? Mmmm, is there a strategy somewhere in Sun Tze’s art of war that says let your adversary mislead himself with his own fables and catch him in ways that he least expect?

  13. Unfortunately the politicians of India have held back the progress of the country.And “democracy” is not the reason. India needs a Deng or a Thatcher to change the course of events & make things happen. When i left India for the USA some 20 years ago at the age of 49, we had the technology & expertise to do most of the manufacturing jobs of the USA now being done in China. Communist China had the genius to invent a formula to have its politics & external affairs controlled from the center with the internal regions having a capatilistic approach. They have been so successful in their endeavour that in 20 years they are now milking the American capitilistic cow of $ 22 Billion per month.Thats India’s US balance of payments in one year & mostly in IT that goes to the upper middle class to which I belonged.
    As a young Commissioning Engineer I worked in Nehru’s “temples of India” Bhilai/Rourkela Steel Plants & most of the factories mentioned in your article. The median Indian engineer& worker is brilliant & world class.It’s a shame that that intellect is not being harnessed for the benefit of the country.

  14. So finally you narrowed down to India’s crumbling infrastructure. Yes, thats the biggest problem in India. China has first world infrastructure, India still looks like the leader of third world. For very good infrastructure there should be a great private public partnership. Without the people support state con’t do anything alone!! Its people who are ultimately responsible. If there are no good roads in India, it simply mean people don’t need it!!
    We can see the will and the dedication of the people behind the great infrastructure of china. Like double positive becomes negative, the advantage of India is itself is her disadvantage. Too much democracy is working agains India. This makes people to involve more in politics than in economics. This is common sense not a great knowledge. I won’t mean India won’t progress, I mean she will take lot of time.


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