India's biz needs to break red tape

New Delhi: Arcelor bags Mittal, Tata gets Corus and India Inc shines. Outsourcing becomes one of the country’s most envied business propositions.

While India Inc’s services are selling like hot cakes what’s keeping the manufacturing sector in the back of beyonds?

According to a report released by 'The Boston Consulting Group' and Knowledge@Wharton, India’s manufacturing sector is tied up in red tape.

The report points out that it’s in fact poor infrastructure, bureaucratic red tape and restrictive labour laws have kept the sector on a back burner.

However, the report – while finding faults with the inherent system – also brings in good news. It says that beneath the surface, things are fast changing and India could become a manufacturing powerhouse within five to 10 years.

So what are those changes?

The report says that India is increasingly becoming the preferred hub of multinationals considering the rapid emergence of a vast domestic market and relatively “low-cost workers with advanced technical skills”.

The report says that big firms like Ford, Hyundai and Suzuki all export cars from India in significant numbers and electronic giants like LG, Motorola and Nokia all either make handsets in India or have plans to start, with a sizeable share of production being exported.

Other biggies namely ABB, Schneider, Honeywell and Siemens have set up plants to manufacture electrical and electronic products for domestic and export markets.

All this being an indicative of a fast-moving manufacturing sector.

"Over the past five or six years, many firms have restructured their manufacturing operations and implemented world-class practices," a partner in BCGFs New Delhi office, Arindam Bhattacharya, was quoted by PTI as saying.

Wharton professor of management in India, Saikat Chaudhuri expresses optimism too. "Every major company has India on its radar screen. It is just a matter of timing,” he is quoted as saying in the report.

The new report, titled "What's Next for India: Beyond the Back Office" also says India is in the midst of the most ambitious infrastructure upgrade in its history.

Better roads, ports, power and airports could easily nudge the nation's annual GDP growth rate up to a sustainable 8 per cent.

The failure of power sector reforms and the success of telecom underscore the importance of foreign investment and competition in India's infrastructure upgrade, the report stressed.

India's outsourcing providers, it said, are moving up the value chain toward knowledge process outsourcing (KPO) services, where specialized expertise, judgment and discretion are the tools.