A lot of soul searching is going on on how to make India and export powerhouse. We do not have oil and yet we consume a lot of it. We need to export equivalent value of our imports to be a healthy economy and we are unable to do so.
In this blog, I shall explore some deeper reasons for our inability to mature to being an export powerhouse.
I am offering this blog as an example of how the following steps will make India an export power house
1. Improving domestic competition, lowering barriers to entry and removing barriers to trade inside the country
This will automatically increase exports. The alcohol industry is used as an example where the limits placed on the industry make it unfit for exports on large scale.
I am neither pro nor anti alcohol. I take it as a reality that some people need alcohol so it is better to accept it and make laws which suitably govern the production, distribution and consumption.
The alcohol industry has state-wise legislation of production, pricing, distribution and sales. Regulation varies from state to state with Tamilnadu being the most regulated where the state is now an integral part of the alcohol business and Goa where it is relatively free.
There is massive imports of alcohol due to overseas travel. The conventions on duty free allow each adult passengers to bring in two litres of alcohol. Funnily the internal laws do not allow the same.
As a result, our domestic alcohol industry suffers from poor quality lack of brands as there is no national market. It is not enough to make a good product and be able to market it well, You need to have politicians and government in your pocket and in many cases adopt them as your partner.
We have some of the best quality grains, fruits, flowers in the world and an unique culture of making alcohol without using grain products. Yet we have not international brand in alcohol. The reason is that our domestic market is constrained. Very little innovation is possible - racketeering is the order of the day.
Our nation has a very large population with very diverse tastes. This is a natural advantage if we allow creation of competitive national markets. Any good new product will find a large enough volume of takers which can give it volume and critical mass leading to profitability. This in turn will automatically lead to exports.
Let us see what happened till two - wheelers and cars industry was licensed and controlled. There was no innovation, no competition. There were imports and hardly any exports. Now we are exporting a lot of 2 wheelers and cars and are turning into worldwide production hubs for two-wheelers and cars.
2. Dismantle Licence Raj ...
A easy to attach national market creates a lot of innovation. A young Engineer or Designer straight out of college can launch a new product and challenge the status-quo and create a successful organization.
No one will come to work for you if you dont have good toilets. You dont need inspectors to check these things. We need to keep self regulation and punish violators like Union Carbide not waste time and police vibrant people who want to create new products and organizations.
There is a very large hungry base of young people. Even if they do not find jobs, they will become entrepreneurs due to lack of choice but unless the eco-system is provided for these fledging businesses to thrive, they will all end in failure.
3. Government should tip the scales very subtly in favour of Indian companies
This is a lesson to be learnt from Unites States of America. Many new technologies are partially funded by the government so that the country gets an advantage. The government also buys their own country's products so that these organizations gain vitality. Their is a lot of strategic intent in their buying behaviour.
Our country's government not only does not support firms which could create exports. It harasses and penalizes such companies so much so that they think that it is is mistake to be in a business where the government is a big buyer or has a big role ! Many examples abound: A company recently created capacity for Technical Ammonium Nitrate, an industrial explosive of high quality learning and absorbing new technologies in the process. Our government companies would rather import fertilizer grade explosive and use them rather than buying from this innovative company.
There is a company called Encore Software Ltd which made a product which could have aided the armed forces during the terrorist attack in Mumbai in 2008. Unfortunately this product is yet to see the light of day as the decision makers in government do not support them and to add insult to injury expect to be support them. Any surprise we have no exports of arms from India and are dependent on imports ?
In this blog, I shall explore some deeper reasons for our inability to mature to being an export powerhouse.
I am offering this blog as an example of how the following steps will make India an export power house
1. Improving domestic competition, lowering barriers to entry and removing barriers to trade inside the country
This will automatically increase exports. The alcohol industry is used as an example where the limits placed on the industry make it unfit for exports on large scale.
I am neither pro nor anti alcohol. I take it as a reality that some people need alcohol so it is better to accept it and make laws which suitably govern the production, distribution and consumption.
The alcohol industry has state-wise legislation of production, pricing, distribution and sales. Regulation varies from state to state with Tamilnadu being the most regulated where the state is now an integral part of the alcohol business and Goa where it is relatively free.
There is massive imports of alcohol due to overseas travel. The conventions on duty free allow each adult passengers to bring in two litres of alcohol. Funnily the internal laws do not allow the same.
As a result, our domestic alcohol industry suffers from poor quality lack of brands as there is no national market. It is not enough to make a good product and be able to market it well, You need to have politicians and government in your pocket and in many cases adopt them as your partner.
We have some of the best quality grains, fruits, flowers in the world and an unique culture of making alcohol without using grain products. Yet we have not international brand in alcohol. The reason is that our domestic market is constrained. Very little innovation is possible - racketeering is the order of the day.
Our nation has a very large population with very diverse tastes. This is a natural advantage if we allow creation of competitive national markets. Any good new product will find a large enough volume of takers which can give it volume and critical mass leading to profitability. This in turn will automatically lead to exports.
Let us see what happened till two - wheelers and cars industry was licensed and controlled. There was no innovation, no competition. There were imports and hardly any exports. Now we are exporting a lot of 2 wheelers and cars and are turning into worldwide production hubs for two-wheelers and cars.
2. Dismantle Licence Raj ...
A easy to attach national market creates a lot of innovation. A young Engineer or Designer straight out of college can launch a new product and challenge the status-quo and create a successful organization.
No one will come to work for you if you dont have good toilets. You dont need inspectors to check these things. We need to keep self regulation and punish violators like Union Carbide not waste time and police vibrant people who want to create new products and organizations.
There is a very large hungry base of young people. Even if they do not find jobs, they will become entrepreneurs due to lack of choice but unless the eco-system is provided for these fledging businesses to thrive, they will all end in failure.
3. Government should tip the scales very subtly in favour of Indian companies
This is a lesson to be learnt from Unites States of America. Many new technologies are partially funded by the government so that the country gets an advantage. The government also buys their own country's products so that these organizations gain vitality. Their is a lot of strategic intent in their buying behaviour.
Our country's government not only does not support firms which could create exports. It harasses and penalizes such companies so much so that they think that it is is mistake to be in a business where the government is a big buyer or has a big role ! Many examples abound: A company recently created capacity for Technical Ammonium Nitrate, an industrial explosive of high quality learning and absorbing new technologies in the process. Our government companies would rather import fertilizer grade explosive and use them rather than buying from this innovative company.
There is a company called Encore Software Ltd which made a product which could have aided the armed forces during the terrorist attack in Mumbai in 2008. Unfortunately this product is yet to see the light of day as the decision makers in government do not support them and to add insult to injury expect to be support them. Any surprise we have no exports of arms from India and are dependent on imports ?
NaMo's slogan "Less government more governance." may work if he gets into the hot seat and follows up on his promise.
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