Unmade In India

AFTER five years of almost 20 per cent annual growth, in the first half of this financial year growth in Indian exports has dropped to 11 percent, perhaps the biggest deceleration in recent times. Several reasons have been offered for the slowdown, but none fully qualifies. Interest rates in India are indeed high, but have been so for too long to make a special impact now. The Government blames the slowdown on general global conditions, but world trade in items such as textiles, tea, gems, marine products and leather continues to grow. And it is precisely in these areas, considered our star performers till yesterday, that India has actually registered a drop in absolute terms.

The real reason is far simpler, and also more difficult to digest: poor quality. The real bulk of international trade is in manufactured goods, and not in basic commodities repackaged into fancy brands, where quality, innovation and design are crucial. If you take away products made in India under licence arrangements from foreign companies, what do we really make that a western consumer would like to buy? Cotton shirts from Sri Lanka have better quality. Shoes from Malaysia and jewellery from Thailand are cheaper and better. Our seafood exports have often been banned in many countries because of bacterial infection.

The saga of Indian decline in world trade is not new. Our share of global exports has gone down from 2.5 per cent at Independence to a mere 0.5 per cent today. It is shameful that a huge country which is so rich in raw materials, tradition and crafts has not been able to create a positive country-of-origin association in even a single product line. French perfumes, Japanese electronics, Italian shoes, American movies...these are all examples of how a country can be so closely tied to perceptual quality. What does India have? Even in mangoes, a tiny country like Israel, which has transplanted agriculture on a fiercely inhospitable land, is much better known than India. The strong export performance of the last five years was an aberration, propped up by fiscal subsidies which have run out of steam and which no sensible country can sustain anyway.

Indian companies are not only insensitive towards quality or lacking in creativity, but the way they transact business endears them to nobody. A recent Ugandan business delegation complained about unethical Indian practices, Japanese trading houses have nightmares of missed shipping deadlines and EU countries often issue business advisories warning against fly-by-night Indian exporters. Long used to treating each other like dirt, we look upon foreigners as easy targets—both abroad and at home, where taxi drivers regularly cheat on fares and hotels charge tourists a higher room tariff. Both are abhorable, but at least the taxi driver does not defend himself with fancy mumbo-jumbo and specious arguments.

Given this background, the 'Made in India' campaign started by the Ministry of Commerce would indeed be laughable, were it was not such a serious issue. The international image of the country does need a serious boost but such an exercise needs a concerted effort toward quality in every aspect of our business life: the way we behave, follow laws, honour promises and spread goodwill at the individual level. It requires starting with improvements in actual products. Products as in things, and products as in people What measures then, aside from the obvious need to invest in infrastructure, can the Government take to promote exports? First, penalise exporters for unethical practices abroad, including possible criminal liability. Second, target any export promotion budget in middle-sized companies. Large companies do not export but merely hire smart accountants who fudge money and inventory around (ITC is a classical example). This fact is borne out by a Business Standard survey which shows that the top 1,000 companies are net importers to the tune of $7 billion, roughly twice our trade deficit.

Third, allow foreign managers into India who can educate and sensitise Indian exporters on internationally acceptable business behaviour. Subsidise their salary if required. Product technology can often be bought off the shelf but 'people technology' can only be gained through learning. Fourth, remove export policy from the stifling embrace of economic theorists, and instead involve real managers with real world experience in real time. Economists understand neither international behaviour nor how everyday business decisions are made and unmade. They also use words such as a "nonplan current outlay" which nobody else understands.

Government officials are in the habit of using our booming software exports as an example of our export competitiveness. Precisely, Mr Commerce Minister. The software industry has done well because it produces international quality work, and was discovered by the world without any hard-selling. Ditto for handicrafts, exports of which have climbed even faster than software in recent years. The 'Made in India' idea is indeed seductive, and perhaps inspired by Alisha Chinai's popular song of the same name. If so, it may be wise to recall that the person demanding that label was an Indian and not a foreigner.