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.