‘Make in India’ was the flagship initiative of the Modi government. In last four years, various efforts have been made by the government to promote India as manufacturing hub of the world. The global climate is also favorable for Make in India as a trade war is going on between US and China. America is largest outsourcer of manufacturing jobs and China is ‘factory of the world’. But in the changing global political climate and domestic conditions in the Communist country, China could no longer hold its position. In last few years, labor price has risen exponentially in China and therefore manufacturing is no longer cheap in the country. The companies are looking for cheap alternatives to outsource manufacturing activities and this could be golden opportunity for India.
India has availability of cheap and country’s economy is integrated with global economy and this could help the country to become an alternative to China for companies which are looking to outsource manufacturing. The government has also been successful in promoting domestic manufacturing in some sectors such as smartphones. This year the country has overtaken United States to become second largest manufacturer in the world, trailing only to the global manufacturing giant China. Now, the government has decided to promote domestic manufacturing of major appliances like refrigerators, water coolers, microwave ovens, washing machines, dishwashers, and air conditioners. These goods are also called white goods and this industry is worth more than 30,000 crore. In last few decades multinational companies manufactured entry-to-mid-segment products domestically but used to import high-end products and critical components from other countries.
To promote domestic manufacture of high end appliances and their components, government hiked import duties in September. The hike in import duties coupled with declining value of rupee in last few weeks will make these products costly. The decline in imports due to price rise will also help to check rising Current Account Deficit (CAD) and make the domestically manufactured products competitive in the market. “Investments in excess of Rs 6,500 crore in the white goods sector have already been lined up for the next two years, with more in the pipeline,” said a person from industry. The major companies which are planning to invest in domestic manufacturing and assembling are Germany’s Bosch and Siemens, Japan’s Panasonic, Turkey’s Arcelik, China’s Midea, Haier as well as domestic brands like Godrej and BPL.
The custom duties on refrigerators, washing machines and air conditioners were doubled to 20 percent from previous 10 percent while duties on compressors for air conditioners and refrigerators were increased from 7.5 percent to 10 percent in September. The import duty on televisions and Smartphones was increased to 20 percent in December last year which resulted in exponential rise in domestic smartphone manufacturing, the government wants to repeat the success story in white goods sector. “After the recent import duty hike by the government, it is no more a question whether to locally produce or import and sell. We need to invest in local manufacturing and create a Make in India base, otherwise it will be difficult,” said Gunjan Srivastava, MD of BSH Household Appliances.
Appliances like Refrigerators, freezers and other refrigerating or freezing equipment including water coolers, washing machines, televisions, and electric soothing irons were moved from 28 percent tax slab to 18 percent tax slab in July. This would also boost the consumption of these products and help the domestic industry grow.
After the import duty hike, global brands came to conclusion that domestic manufacturing will be cheaper given low labor cost in India and reduction of freight cost from overseas. The new plants of many MNCs are being set in areas of Gujarat, Noida, and Chennai. If the country is able to repeat its smartphone manufacturing success story in the appliances sector, it will give huge boost to domestic manufacturing and create millions of jobs. This could be another success story of Make in India along with smartphone manufacturing. The rise of manufacturing sector could also help the country achieve double digit growth which is a long-held dream.