Watch Out, World — India’s Flexing a New Muscle
WHY YOU SHOULD CARE
Because this rising economic superstar is ready to change the way it relates to the rest of the world.
Part of a series on the future of business in Narendra Modi’s India.
Water calls to you in some of India’s famous cities. In Mumbai, a long string of neighborhoods lights up coastal Marine Drive, where lovers stroll at night. In Kolkata, the former capital of the British Empire, the lively foot traffic crossing the Howrah Bridge above the Hooghly River makes it feel a bit like being on the Golden Gate Bridge. Down south in Chennai, between a stretch of resorts and a fishing village, the city’s port might hold a similar romance, if you’re apt to grow sentimental about the ambitious future of the nation. B. Vimal, traffic manager for the Chennai port, says the maritime sector has been neglected for years — but that may at last be changing.
Industry watchers think that’s the case: A February report from the India Brand Equity Foundation shows that cargo traffic moving through India’s 13 major ports and several hundred minor ports will rise by almost 60 percent between 2015 and 2017 to a whopping 1,758 million metric tons. Manufacturing and ports might sound like artifacts of an older age of business, but for India, they ring of the future — the nation that was kept out of international trade by its colonial overlords for decades can finally participate. What’s more, manufacturing and ports can help India move past the era of early globalization in which its cities’ connection to the rest of the world was likelier to be in call centers than in the creation and export of large consumer goods. Today’s India, like its frenemy China, hankers after what Japan achieved in the 1980s, and beyond: an ability to make and sell stuff that people want the world over, and to tend to a homegrown market at the same time.
Vimal and others like him tip their hat to the ruling party and its leader, Prime Minister Narendra Modi, who was voted into office on a reputation of being good for business. To ensure no one forgets this promise, one of the Modi government’s battering rams is the wide-ranging Make in India campaign, an initiative to encourage Indian and foreign companies alike to make goods within the country. “The ports are going to be critical” for realizing Make in India, says G. Raghuram, faculty dean of the Indian Institute of Management, Ahmedabad, and former vice chancellor of the Indian Maritime University.
Without uniting the country’s tangled network of roads and railroad tracks with its ports, India’s long-term future doesn’t look good.
And Modi has specifically cast his eye on the maritime world, saying in April that he’d like to double the nation’s port capacity from where it stood in 2015 to some 3,000 million metric tons of cargo annually by 2020; major ports in the U.S. like Seattle and New York have the capacity for tens of millions of metric tons. Modi told the audience at the country’s first-ever maritime summit that he’s already invested almost $38 billion in the sector, with billions more to come. He’s addressing the long-held problem of turnaround time at the ports — Indian ports, according to a KPMG report, required an average of 84 hours to turn around a shipment. Top ports like Hong Kong and Singapore got the job done in seven.
It may seem obvious that the ports along India’s 7,500-kilometer coastline would reap benefits from the manufacturing pushes. But in the short run, new goods may simply circulate within the country, never making it to the export stage. The Modi government will have to follow the supply chain backward, into the inland parts of the country where car parts and more are made. “I think our domestic logistics need a lot of attention too,” says Raghuram, pointing to roads and railways. “Very often, they are the bottleneck.”
Without uniting the country’s tangled network of roads and railroad tracks with its ports, India’s long-term future doesn’t look good, says Arun Bruce, managing director of the Boston Consulting Group’s Mumbai office. Bruce worries that Modi’s brainchild has focused on spurring the creation of products without working out how to get the goods out of the country. In the short term, Bruce explains, India’s rising domestic market — the new middle class, with its voracious spending appetite — can buy some of the country’s homegrown goods. In the long view, though? “We can’t keep riding on the Indian consumption story,” he says. “Will that make us the next manufacturing superpower? No.” (Though OZY spoke to government representatives from the Chennai port, representatives from the Ministry of Shipping in New Delhi did not reply to requests for comment.)
Which makes the ports an interesting lens into all that’s required to build such manufacturing muscle. Historically, India shipped out a lot of low-tech stuff, says Bruce, like garments, which are low capital and low innovation. “You didn’t need good IP to make a T-shirt,” he points out. Today, though, Indians would like to be the home of more complicated things than an American teenager’s cute block-print summer dress. The things these next-gen ships will carry: pharmaceuticals, automobiles, steel.
Exports have a touchy past in India — especially at ports like Chennai’s and Kolkata’s, each in cities that were once of crucial importance to the British Empire (back when they were Madras and Calcutta, respectively). While the industrial revolution raged outside India, Her Majesty’s subcontinental citizens participated, not as equals but as indentured labor exports; fed a diet of British imported goods, they were prevented from creating a self-sustaining economy at home. Letting Indians consume Indian goods was a central tenet of Gandhi’s swadeshi movement — his famous salt march protested the British habit of taxing production on the making of local goods.
“In Europe, ports create the manufacturing,” says Vimal, who has worked at the Chennai port for 15 years. He believes “Chennai is almost ready” for that kind of influence, pointing to the initiatives he and his colleagues can take to change manufacturing, such as lowering port charges for vessels carrying desirable cargo. Initially, Vimal recalls, almost everything coming through his port was imports, with vessels docking from Germany and Japan. And now? Nearly 300,000 cars have left his port, fully assembled, ready to be sold to those same countries that once dominated the import docket — Japan, Korea and China.