WEBVTT - Kopi Time E134 - Vasuki Shastry on India’s Manufacturing Future 0:00:05.920 --> 0:00:09.600 Welcome to Kobe Time, a podcast series on Markets and 0:00:09.609 --> 0:00:12.699 Economies from D BS Group Research. I'm Tambe, chief economist, 0:00:12.850 --> 0:00:16.100 welcoming you to our 134th episode. 0:00:16.750 --> 0:00:19.969 We had Vasuki Shastri on Kobe Time back in the 0:00:19.979 --> 0:00:23.968 spring of 2021 on episode 51. At that time, we 0:00:23.979 --> 0:00:28.729 talked about the challenges for developing Asia drawing from his 0:00:28.739 --> 0:00:33.180 book has Asia lost its dynamic past turbulent future. Uh 0:00:33.189 --> 0:00:37.049 But today's podcast is focused on India Basuki and a 0:00:37.060 --> 0:00:40.490 number of other economists and analysts have lately been thinking 0:00:40.500 --> 0:00:42.720 hard about India's potential 0:00:42.970 --> 0:00:47.490 which can arguably only be realized through large scale manufacturing 0:00:47.500 --> 0:00:53.270 and uh manufacturing, lead value addition and uh employment creation. 0:00:53.759 --> 0:00:55.990 Uh I'm looking forward to this conversation because this issue 0:00:56.000 --> 0:00:58.500 is also close to my heart and some of the 0:00:58.509 --> 0:01:01.509 ideas that Basuki has put out in some of the 0:01:01.520 --> 0:01:05.819 articles that he's published recently. They have resonated with me tremendously. 0:01:06.050 --> 0:01:10.220 Uh Vasuki Shari is a senior advisor at Gatehouse advisory partners, 0:01:10.349 --> 0:01:14.919 a Geostrategic consulting firm. He was formerly with the IMF 0:01:14.940 --> 0:01:18.050 Standard Chartered Bank and the Boundary Authority of Singapore. 0:01:18.410 --> 0:01:21.519 He serves on the advisory Council of Chatham House and 0:01:21.529 --> 0:01:24.419 the Institute of Human Rights and Business. He's the author 0:01:24.430 --> 0:01:26.760 of three books, I've already mentioned one of them as 0:01:26.769 --> 0:01:29.110 Asia lost it. But also in 2018, he had published 0:01:29.120 --> 0:01:33.349 resurgent Indonesia from crisis to confidence that that can be 0:01:33.360 --> 0:01:36.529 another podcast another day. And also his book from last year, 0:01:36.540 --> 0:01:40.180 The Notorious ESGV Shastri. Welcome back to COVID time. 0:01:41.150 --> 0:01:43.739 I'm delighted to be here, Taimur, it's been, been a 0:01:43.750 --> 0:01:46.970 long time. Uh But, you know, absolutely delighted that you've 0:01:46.980 --> 0:01:50.339 kept uh the podcast going and I listened to many 0:01:50.349 --> 0:01:53.620 of them. They're really, really interesting and living far away 0:01:53.629 --> 0:01:57.730 from Asia. It's a fascinating window for me on developments 0:01:57.739 --> 0:01:58.370 on the ground. 0:01:59.050 --> 0:02:01.739 Uh Thanks for your kind words, Vasuki. It's people like 0:02:01.750 --> 0:02:03.309 you who make it happen. So I'm grateful that you're 0:02:03.319 --> 0:02:06.739 back on the podcast. Um Vasuki, let's get right to 0:02:06.750 --> 0:02:09.470 the heart of the matter. Um We are approaching the 0:02:09.479 --> 0:02:14.130 10th anniversary of make in India, help us take stock, 0:02:14.139 --> 0:02:17.389 uh what is making India and how has it evolved? 0:02:18.250 --> 0:02:21.149 Yeah, I think there's a historic backdrop as to why 0:02:21.160 --> 0:02:26.309 Prime Minister Modi within three months of assuming office in 2014, 0:02:26.649 --> 0:02:32.520 uh decided essentially to reconfigure the Indian economy, which still 0:02:32.529 --> 0:02:36.538 is and still was at that time, heavily dependent on 0:02:36.550 --> 0:02:41.119 consumption and services. There was a deeply held belief in 0:02:41.130 --> 0:02:44.050 the policy community in India and this dates back many 0:02:44.059 --> 0:02:46.100 decades that, 0:02:46.639 --> 0:02:49.660 you know, we wouldn't, probably wouldn't be having this conversation 0:02:49.669 --> 0:02:55.910 if India's state owned enterprises had delivered value, had captured 0:02:55.919 --> 0:02:59.500 a greater share of GDP over a period of time, 0:02:59.508 --> 0:03:01.339 you know, they were placed in the commanding heights of 0:03:01.350 --> 0:03:05.350 the economy for many decades. Uh they faltered, many of 0:03:05.360 --> 0:03:08.580 them failed. So there was a sense of a need 0:03:08.589 --> 0:03:12.899 for renewal even in the early 19 nineties when India 0:03:12.910 --> 0:03:15.139 embarked on its reform journey, 0:03:15.679 --> 0:03:18.350 but I think it all came into place uh in 0:03:18.360 --> 0:03:21.910 a way in 2014, uh there was a sense that, 0:03:21.919 --> 0:03:25.190 you know Indian growth had been and particularly in the 0:03:25.199 --> 0:03:29.198 19 nineties, 8% GDP. On average, there was a sense 0:03:29.210 --> 0:03:33.259 that this growth journey would end at some stage and 0:03:33.270 --> 0:03:38.559 you certainly needed to revive manufacturing, incentivized manufacturing. So in 0:03:38.570 --> 0:03:41.860 a very simple way, there were two concepts, uh two 0:03:41.869 --> 0:03:43.190 defining beliefs 0:03:43.610 --> 0:03:46.990 when making India was launched in September 2014 1st is 0:03:47.000 --> 0:03:53.149 of course, man drive manufacturing, increase its share of uh GDP. 0:03:53.160 --> 0:03:56.259 You know, it's in the low teens. Uh it's increased 0:03:56.270 --> 0:03:59.679 marginally over the past uh uh decade, we can talk 0:03:59.690 --> 0:04:00.910 about uh why 0:04:01.580 --> 0:04:06.360 and, and, and when uh of this concept and the 0:04:06.369 --> 0:04:09.050 second thing really is India's, you know, on one hand, 0:04:09.059 --> 0:04:14.600 demographic speed spot a billion people under the age of 30. 0:04:14.960 --> 0:04:17.988 But at the same time, you need to create those 0:04:18.000 --> 0:04:21.929 quality jobs for the estimated 8 to 10 million young 0:04:21.940 --> 0:04:25.058 people coming into the job market every year. And you know, 0:04:25.070 --> 0:04:27.899 at the outset that has been a failure and, and 0:04:27.910 --> 0:04:30.279 you know, the India's underemployment problem 0:04:30.910 --> 0:04:34.429 really poses social and political risks. And the fact that 0:04:34.440 --> 0:04:37.279 it has not happened is always a puzzle for me. 0:04:37.488 --> 0:04:40.820 So bringing it all together uh uh and, and to make, 0:04:40.829 --> 0:04:42.969 making India really, really attractive, 0:04:43.670 --> 0:04:45.450 the government really had to junk 0:04:46.428 --> 0:04:51.969 5 to 6 decades of philosophy that you don't incentivize 0:04:51.980 --> 0:04:55.239 foreign investors. But you know that any incentives that are 0:04:55.250 --> 0:04:59.260 given at the margin, give it to the domestic private sector. 0:04:59.390 --> 0:05:04.299 But absolutely hold all of those incentives for the state. And, 0:05:04.309 --> 0:05:09.730 and so, you know, really unshackling uh that thinking 0:05:10.230 --> 0:05:14.089 and, and, and putting up the uh center that we're 0:05:14.100 --> 0:05:18.750 going to provide production linked incentives for foreign investors to 0:05:18.760 --> 0:05:21.369 come and make in India and to come and make 0:05:21.380 --> 0:05:24.459 in India in 25 sectors. Many of these are core 0:05:24.470 --> 0:05:28.760 what the government has identified as core industrial sectors, you know, 0:05:28.769 --> 0:05:37.160 advanced manufacturing, semiconductors, uh uh tele telecommunications, automobiles. 0:05:37.488 --> 0:05:40.440 So there was a great deal of ambition in these 0:05:40.450 --> 0:05:43.880 in this uh make in India project great deal of 0:05:43.890 --> 0:05:46.469 energy and enthusiasm on the part of the government to 0:05:46.480 --> 0:05:51.789 promote this. They promoted this ceaselessly across global platforms. You know, 0:05:51.799 --> 0:05:56.019 you saw Prime Minister Modi acting as salesperson in chief 0:05:56.529 --> 0:06:00.070 uh at Davos uh for example, you know, rubbing shoulders 0:06:00.079 --> 0:06:03.868 with the fortune 100 CEO S still. 0:06:04.799 --> 0:06:07.440 And, and I think it's useful as we uh uh 0:06:07.450 --> 0:06:12.019 uh take a deep dive to differentiate between the enthusiasm 0:06:12.309 --> 0:06:15.119 and the performance of making India in the first term 0:06:15.130 --> 0:06:16.190 of Mr Modi. 0:06:16.980 --> 0:06:21.290 And I think there's a differentiated set of performance in 0:06:21.299 --> 0:06:24.500 the second term. And the second term I think has 0:06:24.510 --> 0:06:25.919 been more problematic 0:06:26.779 --> 0:06:32.190 in terms of regulatory uh uh uh outcomes in terms 0:06:32.200 --> 0:06:35.980 of the sense that many in India have, particularly in 0:06:35.988 --> 0:06:37.059 the private sector, 0:06:38.100 --> 0:06:41.059 that this is not a level playing field. But that 0:06:41.070 --> 0:06:44.040 sense was not there in the first two or three years. 0:06:45.029 --> 0:06:47.479 And you know, you've got to remember this happened 0:06:48.160 --> 0:06:53.229 pre China us uh uh Cold War or trade tensions, 0:06:53.238 --> 0:06:56.239 whatever you might. So this happened at the time. Uh 0:06:56.250 --> 0:07:00.700 So this pre pre dated China's own uh make in 0:07:00.709 --> 0:07:05.250 China 2025 which is really focused on advanced manufacturing and 0:07:05.260 --> 0:07:08.089 really sent a scare in Europe and the us that 0:07:08.100 --> 0:07:11.320 China was catching up fast. So India was in that 0:07:11.329 --> 0:07:12.420 sweet spot 0:07:12.890 --> 0:07:15.420 and you know, the headline that I'd like to give 0:07:15.429 --> 0:07:18.160 before we discuss this in detail is it's been a 0:07:18.170 --> 0:07:21.739 qualified failure. It's been a qualified failure for a variety 0:07:21.750 --> 0:07:24.670 of reasons. There have been a number of high profile 0:07:24.679 --> 0:07:29.079 foreign investors who've taken the dive, you know, micro, certainly 0:07:29.089 --> 0:07:33.790 all the contract manufacturers of apple. So the iphone 0:07:34.450 --> 0:07:37.500 uh 14 or 15 billion work are shipped out of 0:07:37.510 --> 0:07:42.079 India these days. Uh This is a tiny, tiny proportion 0:07:42.089 --> 0:07:45.690 of what is produced still in China. So bringing all 0:07:45.700 --> 0:07:47.410 of this together, I think we've got to focus a 0:07:47.420 --> 0:07:51.899 little bit on geopolitics. Uh The fact that a lot 0:07:51.910 --> 0:07:55.140 of foreign investors are moving away from China. So there's 0:07:55.149 --> 0:07:59.070 a fundamental question that make in India has faltered has 0:07:59.079 --> 0:08:00.950 been a qualified failure. 0:08:01.399 --> 0:08:03.850 Can this government in its third um pick up the 0:08:03.859 --> 0:08:10.619 pieces and really uh benefit from this wave of investment 0:08:10.899 --> 0:08:14.829 uh coming out of China in the supply chains, much 0:08:14.839 --> 0:08:17.660 of it is going to Vietnam. Uh but can India 0:08:17.670 --> 0:08:21.190 capture this? I think that's the big philosophical question for 0:08:21.200 --> 0:08:23.540 the next three years. Let me pause here. 0:08:23.959 --> 0:08:26.700 No, that's a great way to set up this whole conversation. 0:08:26.709 --> 0:08:29.690 But I want to uh work with you in terms 0:08:29.700 --> 0:08:32.219 of going through some data on a bunch of parameters 0:08:32.229 --> 0:08:35.819 to establish that assertion which will be headline grabbing no 0:08:35.830 --> 0:08:39.710 question about the unqualified failure of making India. But before 0:08:39.719 --> 0:08:40.700 I do that, I just want to go back to 0:08:40.710 --> 0:08:45.409 2014 for a second. But at that time, I remember 0:08:45.669 --> 0:08:47.179 Raghuram Rajan who was 0:08:47.679 --> 0:08:49.218 the governor of RB A at that time and he 0:08:49.229 --> 0:08:52.608 himself questioned the philosophical underpinning of making in India. And 0:08:52.619 --> 0:08:54.770 I think he said something like we should focus on 0:08:54.780 --> 0:08:58.210 make for India, which I interpreted that if we are 0:08:58.219 --> 0:09:02.260 going to give some performance link in investments incentive, uh 0:09:02.270 --> 0:09:03.059 we should 0:09:03.135 --> 0:09:06.834 do it for import substitution, not necessarily for export orientation 0:09:06.844 --> 0:09:10.715 because that's a hyper competitive landscape. Uh Do you think 0:09:10.734 --> 0:09:13.385 that's my right read of what Rau was coming from and, 0:09:13.395 --> 0:09:15.835 and what was your take at that time, this import 0:09:15.844 --> 0:09:17.965 substitution versus export orientation around making 0:09:17.974 --> 0:09:18.434 India, 0:09:19.289 --> 0:09:21.840 right? So if you look at the value chain proposition 0:09:21.849 --> 0:09:24.929 that India had, and unfortunately, I think if you go 0:09:24.940 --> 0:09:28.819 low down, if you're looking at low value addition, labor 0:09:28.909 --> 0:09:34.590 intensive industries like textiles and garments, the India has essentially 0:09:34.599 --> 0:09:38.329 been outmaneuvered by Bangladesh, Cambodia and Sri Lanka. 0:09:39.030 --> 0:09:43.190 Uh uh Indian wages are, are high compared to these 0:09:43.200 --> 0:09:48.358 uh three countries. And there's complexity really in e even 0:09:48.369 --> 0:09:52.049 in producing textiles and garments. And that's the, that's the 0:09:52.059 --> 0:09:56.289 reason why India has consistently lost market share. But so 0:09:56.299 --> 0:10:00.669 if you take the uh uh proposition that you can 0:10:00.679 --> 0:10:02.809 make in India for India, 0:10:03.380 --> 0:10:07.369 then because of the uh uh labor intensity and because 0:10:07.380 --> 0:10:09.580 of the fact that, you know, you've got millions of 0:10:09.590 --> 0:10:14.549 people uh uh knocking at uh uh literally looking for 0:10:14.559 --> 0:10:18.409 a job every single year. So how can you match 0:10:18.419 --> 0:10:19.280 those 0:10:20.500 --> 0:10:25.229 low technical skills with low wage industries like textiles? And 0:10:25.239 --> 0:10:27.469 India has kind of missed the bus in that. I 0:10:27.479 --> 0:10:31.349 I don't know if the current problems in Bangladesh presents 0:10:31.359 --> 0:10:35.570 a window of opportunity for India to reassert itself in, 0:10:35.580 --> 0:10:38.750 in textiles and garments. So then if you go at 0:10:38.760 --> 0:10:39.390 high 0:10:40.099 --> 0:10:44.239 value addition, the problem is you can't make in India 0:10:44.250 --> 0:10:48.609 for India, iphones are an example where it's part of 0:10:48.619 --> 0:10:53.400 a complex regional supply chain components have to flow through 0:10:53.719 --> 0:10:57.359 from Singapore, from Malaysia and other parts of East Asia 0:10:57.900 --> 0:11:02.400 into the final assembly point be China or, or India 0:11:02.409 --> 0:11:05.479 as it happens to be the case. But India has 0:11:05.489 --> 0:11:08.760 got this very, very ambivalent approach 0:11:09.140 --> 0:11:15.250 towards imports and has always had this strong sense that of, 0:11:15.260 --> 0:11:19.400 of self reliance which Prime Minister Modi kind of renewed 0:11:19.820 --> 0:11:23.809 uh in his first term. And, and that's a problem. 0:11:23.960 --> 0:11:26.159 I mean, it's a problem if you're going to say 0:11:26.169 --> 0:11:29.000 that you're going to make in India for India, then 0:11:29.010 --> 0:11:32.030 you kind of have to be like the Chinese manufacturing 0:11:32.039 --> 0:11:36.419 majors who are world beating, who are producing in China 0:11:36.429 --> 0:11:38.559 for China, you know, the by DS 0:11:39.119 --> 0:11:42.770 and the Catls of the world and then have resumed 0:11:42.780 --> 0:11:43.859 global market share. 0:11:44.919 --> 0:11:48.539 That seems to be a very, very difficult hurdle, I 0:11:48.549 --> 0:11:51.020 think for India, there are a couple of industries in 0:11:51.030 --> 0:11:52.419 India which are world beating, 0:11:53.250 --> 0:11:56.119 right? So you bring it all together and then you 0:11:56.130 --> 0:12:00.359 want to increase value addition, you want to absolutely increase 0:12:00.369 --> 0:12:04.960 manufacturing employment and you want to increase GDP share. And 0:12:04.969 --> 0:12:08.479 the only way you can do it in today's globalized world. 0:12:08.489 --> 0:12:10.349 I know, I know there's a lot of debate on 0:12:10.669 --> 0:12:13.640 whether de de globalization is a reality or not. 0:12:14.630 --> 0:12:17.890 But in that reality, you've got to do it 0:12:19.239 --> 0:12:21.659 for India to be part of a regional supply chain, 0:12:21.669 --> 0:12:25.739 which is, which traditionally and historically it has stayed away from. 0:12:26.320 --> 0:12:29.020 And I think when we review performance, we make in India, 0:12:29.030 --> 0:12:31.020 I think that's one of the biggest hurdles. I think 0:12:31.030 --> 0:12:34.728 it's a mindset challenge both on part of the policy 0:12:34.739 --> 0:12:38.440 makers and on part of the private sector. And you know, 0:12:38.599 --> 0:12:41.840 uh uh to your point on Rur Rajan Raghu has 0:12:41.849 --> 0:12:43.199 come out more recently 0:12:44.190 --> 0:12:49.090 arguing that the absolute amount uh given out, for example, 0:12:49.099 --> 0:12:53.179 for the micro facility in India, where the, you know, 0:12:53.190 --> 0:12:58.750 the uh uh uh subsidy runs in excess of 1.81 0:12:58.760 --> 0:13:03.030 0.9 billion on part of the government, federal and state 0:13:03.419 --> 0:13:06.530 that this exceeds in many ways uh the budget for 0:13:06.539 --> 0:13:09.599 higher education, right? So I is India making a calculated 0:13:09.609 --> 0:13:13.760 choice of putting all of its uh uh eggs 0:13:14.390 --> 0:13:18.409 in, in the micron basket or the apple basket. And 0:13:18.419 --> 0:13:21.059 what kind of long term value addition is there gonna be? 0:13:21.070 --> 0:13:23.450 And then I think that's a, that's the right question 0:13:23.979 --> 0:13:27.409 uh uh uh to ask of a policymaker. But if 0:13:27.419 --> 0:13:29.609 you ask, you know, le let's be fair 0:13:30.270 --> 0:13:33.229 uh with the government. And I think the government's proposition 0:13:33.239 --> 0:13:36.348 has always been, they want to make this work. They 0:13:36.359 --> 0:13:42.369 don't believe there's a single approach of plis for everybody 0:13:42.750 --> 0:13:45.968 in order to uh uh uh you know, make, making 0:13:45.979 --> 0:13:48.650 India successful. There's also a sense that we've got to 0:13:48.659 --> 0:13:53.090 improve the business environment and the regulatory environment for everyone 0:13:53.099 --> 0:13:56.479 else to do. Well. And I think that is where 0:13:56.489 --> 0:13:58.409 the bottleneck is at the moment, 0:13:59.229 --> 0:14:04.789 right? OK. Let's do uh performance evaluation of making India FD. I, 0:14:04.799 --> 0:14:07.848 how has it been over the decades since the program began? 0:14:08.539 --> 0:14:11.609 Right. So you've got two sets of statistics. Uh ta right, 0:14:11.619 --> 0:14:15.280 let's be fair. Uh, the Indian government to make an 0:14:15.289 --> 0:14:16.320 India secretariat, 0:14:16.989 --> 0:14:20.520 uh, has made the assertion that in the last 10 0:14:20.530 --> 0:14:24.919 years you kind of have attracted uh between 600 to 0:14:24.929 --> 0:14:30.179 900 billion in, in foreign direct investment. And I've actually 0:14:30.190 --> 0:14:33.750 gone and checked through the numbers. Uh uh it seems 0:14:33.760 --> 0:14:37.739 to be a consolidated gross number that they're quoting because 0:14:37.750 --> 0:14:40.080 there's lots of and, and I still have an open 0:14:40.090 --> 0:14:43.409 question mark of whether that includes portfolio flows 0:14:43.840 --> 0:14:47.049 uh right. So there's a lot of noise in that data, right? 0:14:47.059 --> 0:14:51.739 So then you look at an outside credible source like 0:14:51.750 --> 0:14:54.580 uh T AD which is over the over a long 0:14:54.590 --> 0:14:56.929 period of time has put out FT I data 0:14:57.570 --> 0:15:00.739 and the A N A data, for example, between 2019 0:15:01.280 --> 0:15:08.210 and 2024 suggests 200 plus billion has come in Greenfield 0:15:08.219 --> 0:15:12.789 investment commitments which are future commitments for which foreign investment 0:15:13.210 --> 0:15:17.190 uh flows have not yet come in. They again of 0:15:17.200 --> 0:15:20.969 the order of 200 billion or so. But so it's 0:15:20.979 --> 0:15:24.150 a mixed picture and I think uh uh when we, 0:15:24.159 --> 0:15:27.030 when we say making India has been a qualified failure, 0:15:27.609 --> 0:15:30.169 there was this sense that there would be this absolute 0:15:30.179 --> 0:15:36.270 mad rush on the part of multinational corporations looking to 0:15:36.280 --> 0:15:40.710 reso looking to relocate uh manufacturing in India, you know, 0:15:40.719 --> 0:15:44.309 mainly because of the India growth story, you had the 0:15:44.320 --> 0:15:48.969 ability to cater to the domestic market in India. Geography 0:15:48.979 --> 0:15:52.409 is very favorable. So it could also be used as 0:15:52.419 --> 0:15:53.669 an export destination. 0:15:54.349 --> 0:15:57.369 But the FD I data, right. So if you if 0:15:57.380 --> 0:15:59.090 you try and link 0:16:00.159 --> 0:16:05.320 the high numbers quoted by the American India secretariat and 0:16:05.330 --> 0:16:06.659 then you go down and see 0:16:07.380 --> 0:16:11.669 has this actually moved the needle on ma manufacturing share 0:16:11.950 --> 0:16:16.010 of GDP. So even if you assume uh uh the 0:16:16.020 --> 0:16:18.679 Indian government statistics suggest 28% 0:16:19.369 --> 0:16:23.770 is the number of manufacturing share of GDP, private sector 0:16:23.780 --> 0:16:26.919 estimates are significantly low. They're in the high teens at 0:16:26.929 --> 0:16:28.900 the moment, right? So, 0:16:30.210 --> 0:16:32.349 so you've got to have a great deal of faith 0:16:32.359 --> 0:16:36.590 in the official data to say it's been a unqualified success. 0:16:36.880 --> 0:16:39.429 But if you look at the noise in the data, 0:16:39.690 --> 0:16:42.030 it would, it would suggest that there's been a much 0:16:42.039 --> 0:16:46.349 more modest success in making India. And there are lots 0:16:46.359 --> 0:16:48.869 of big question marks at the moment on, you know, 0:16:48.880 --> 0:16:52.690 level playing field, regulatory enforcement. And this is not just 0:16:52.700 --> 0:16:56.570 a question, I think for foreign investors as concerned, it 0:16:56.580 --> 0:16:58.630 is increasingly a question for 0:16:59.299 --> 0:17:02.929 India's large business houses. Who again, if you look at 0:17:02.940 --> 0:17:06.079 the data coming out of uh sources like CMIE 0:17:07.229 --> 0:17:10.050 have have essentially over the last 10 years, 0:17:10.859 --> 0:17:15.468 pocketed all the profits uh uh after tax profits that 0:17:15.479 --> 0:17:19.010 they have generated, they're also benefiting from a lower corporate 0:17:19.020 --> 0:17:23.719 tax rate uh uh over the last seven years, but 0:17:23.729 --> 0:17:26.670 at the same time, they seem to be reluctant. And, 0:17:26.680 --> 0:17:29.930 you know, the statistic that one looks at is gross 0:17:29.939 --> 0:17:34.739 uh capital formation, uh which again does not match with 0:17:34.750 --> 0:17:38.560 this over enthusiasm in the making India story as, as 0:17:38.569 --> 0:17:40.349 suggested by the government. 0:17:41.329 --> 0:17:44.000 Right. Uh I think, you know, data is certainly an issue. 0:17:44.010 --> 0:17:46.270 Uh We've had also issues with the GDP data. So 0:17:46.280 --> 0:17:48.909 when we talk about manufacturing share of GDP, both the 0:17:48.920 --> 0:17:51.839 numerator and the denominator, you know, there are question marks 0:17:51.849 --> 0:17:57.629 around that. Uh Unfortunately, uh Vasuki, notwithstanding data issue. Uh 0:17:57.640 --> 0:18:01.150 what's your sense of job creation around making India over 0:18:01.160 --> 0:18:01.829 the last decade? 0:18:02.790 --> 0:18:05.530 Right. So you can, you, you, you've got to probably 0:18:05.540 --> 0:18:09.989 divide this up into three buckets, right? So you've got 0:18:10.000 --> 0:18:15.209 elite foreign investors, right? So you've got Apple, you, you, 0:18:15.219 --> 0:18:18.760 you now have uh micro but micros facility is still 0:18:18.770 --> 0:18:20.770 under uh construction. 0:18:23.780 --> 0:18:28.199 11 can say that the three Apple contract manufacturers uh 0:18:28.880 --> 0:18:33.599 probably have the ability to create between 50,000 to 100,000 0:18:33.609 --> 0:18:34.198 jobs 0:18:35.219 --> 0:18:39.449 if the Apple production facility has been able to scale up. 0:18:39.859 --> 0:18:44.869 If increasingly you're finding that in Shenzhen and other parts 0:18:44.880 --> 0:18:49.849 of uh southern China, there's a relocation actually taking place 0:18:49.859 --> 0:18:50.718 in the Apple 0:18:51.660 --> 0:18:57.219 iphone production away from China into Vietnam uh into India, right? 0:18:57.229 --> 0:19:02.239 So that's that story. So that number of 50,000 to 0:19:02.270 --> 0:19:06.250 100,000 clearly is unimpressive, right? So if you're looking at, 0:19:06.260 --> 0:19:08.319 you know, the uh the ambition 0:19:08.989 --> 0:19:11.180 at the start of making India was we are going 0:19:11.189 --> 0:19:16.630 to create 100 million jobs between 2014 and 2022. And 0:19:16.640 --> 0:19:20.448 one can safely say that number has not been matched, right? 0:19:20.459 --> 0:19:22.619 So if you look at again, there's a problem with 0:19:22.630 --> 0:19:23.109 data 0:19:23.750 --> 0:19:29.329 if you put together manufacturing employment in the last decade. 0:19:29.819 --> 0:19:32.479 Uh and this extends to beyond Lake in India, you 0:19:32.489 --> 0:19:34.160 come up with a number of probably 0:19:35.050 --> 0:19:36.939 55 60 million. 0:19:38.079 --> 0:19:38.619 Uh 0:19:39.569 --> 0:19:43.540 Then you've got the issue of how many young people 0:19:43.550 --> 0:19:45.229 are entering the job market 0:19:45.959 --> 0:19:49.150 every year. And that really is a surge. I mean, 0:19:49.160 --> 0:19:52.530 it's like a, it's like a tsunami uh mainly because 0:19:52.540 --> 0:19:55.099 of India's rich demographics, 0:19:55.969 --> 0:19:58.930 it's a r tsunami which you know, in theory should 0:19:58.939 --> 0:20:01.780 uh uh uh should help India grow on a sustained 0:20:01.790 --> 0:20:05.069 basis for the next 2 to 3 decades, at least. 0:20:05.329 --> 0:20:09.810 But then there's a big question mark surrounding quality of education, right. 0:20:09.819 --> 0:20:11.379 So if you're able to match 0:20:12.229 --> 0:20:17.180 these young educated and they could be the graduate engineers, 0:20:17.189 --> 0:20:21.369 they could be coming out of the vocational technical training institute. 0:20:21.910 --> 0:20:25.329 Uh Right. So there's no supply problem in theory, 0:20:26.239 --> 0:20:29.780 but on the demand side, what the employers are saying 0:20:30.130 --> 0:20:33.359 is there's a skills deficit, there's a skills deficit of 0:20:33.369 --> 0:20:34.339 a magnitude 0:20:35.050 --> 0:20:38.469 which the private sector alone cannot resolve. 0:20:39.209 --> 0:20:43.750 Therefore, there needs to be some kind of public private intervention. 0:20:43.880 --> 0:20:45.869 You've got to figure out whether you can, you know, 0:20:45.880 --> 0:20:49.208 take people in as apprentices and train them. And this 0:20:49.219 --> 0:20:51.659 is a long term journey and it's never going to 0:20:51.670 --> 0:20:55.719 happen overnight. That is why you still see these eye 0:20:55.729 --> 0:20:59.989 popping headlines in Indian media about this vast 0:21:00.770 --> 0:21:03.030 reservoir of young people, you know, 0:21:03.780 --> 0:21:06.359 probably stayed out of college, right. So in the 19 0:21:06.729 --> 0:21:09.560 to 30 age group, I mean, this is the group that, 0:21:09.569 --> 0:21:14.679 you know, any aging society like Japan and Korea really, 0:21:14.689 --> 0:21:18.589 really uh be desperate uh to have at this point 0:21:18.599 --> 0:21:23.119 of their own growth story, but India's ability and the 0:21:23.130 --> 0:21:25.859 India is of course, not alone, I think in this 0:21:25.869 --> 0:21:28.800 uh but in terms of volume, certainly a big problem 0:21:29.079 --> 0:21:30.520 if you look at Indonesia 0:21:31.229 --> 0:21:33.949 and certainly look at Sub Saharan Africa, I mean, they're 0:21:33.959 --> 0:21:39.160 likely to face similar challenges down the line. So and again, 0:21:39.170 --> 0:21:43.379 the contradiction here is, I mean, the economy is chugging along, right, 0:21:43.390 --> 0:21:47.969 chugging along at 6 to 7%. Notwithstanding challenges with uh 0:21:48.420 --> 0:21:51.810 the GDP numbers. But one can kind of feel at 0:21:52.300 --> 0:21:55.359 least in the urban centers, one can kind of feel 0:21:55.369 --> 0:21:56.530 there's a growth momentum 0:21:57.670 --> 0:22:00.438 under way. But at the same time, one can see 0:22:00.449 --> 0:22:03.660 that there are a number of people who are unemployed, right? 0:22:03.670 --> 0:22:08.859 So manufacturing, I would argue would be the solution at 0:22:08.869 --> 0:22:12.449 all levels starting with textiles, garments, low value addition. 0:22:13.390 --> 0:22:18.069 And there hasn't been unfortunately a cohesive plan, right. So 0:22:18.079 --> 0:22:24.010 making India is almost functioning like an elite island for 0:22:24.400 --> 0:22:29.270 really top notch uh uh foreign investors and Indian investors 0:22:29.680 --> 0:22:32.359 who are in that same league. And then you've got 0:22:32.369 --> 0:22:34.129 this vast category below 0:22:35.099 --> 0:22:39.150 of mid size business, uh uh who really feel that, 0:22:39.160 --> 0:22:42.859 you know, they face all the depredations of, you know, 0:22:42.869 --> 0:22:47.739 tough labor legislation. You've got the tax person knocking at 0:22:47.750 --> 0:22:50.938 the door of these uh uh mid size businesses. So 0:22:50.949 --> 0:22:55.920 there's regulatory harassment. So that explains, I think the gap 0:22:55.930 --> 0:22:57.469 of the fact that they have not been able to 0:22:57.479 --> 0:23:00.790 meet this 100 million number and they're well short of 0:23:00.800 --> 0:23:03.510 it and they're likely to be well short of this 0:23:03.849 --> 0:23:08.669 if making India is kind of not reconfigured and make 0:23:08.680 --> 0:23:11.829 it easier. I would say 11 easy fix would make 0:23:11.839 --> 0:23:15.270 it easy for domestic business to invest. Once again. 0:23:16.569 --> 0:23:18.300 I want to stay on the job creation issue a 0:23:18.310 --> 0:23:23.489 little longer. Um What about regional heterogeneity in Indonesia in India? 0:23:23.500 --> 0:23:26.849 I mean, are the northern part of India States creating 0:23:26.859 --> 0:23:29.020 more jobs in the southern part of India? Do we 0:23:29.030 --> 0:23:32.530 see more youth unemployment in up versus we see in Karnataka? 0:23:32.540 --> 0:23:34.250 Give us a little sense of, you know, because India 0:23:34.260 --> 0:23:37.150 is a big country, there are a lot of interregional 0:23:37.160 --> 0:23:38.290 heterogeneity there. 0:23:39.369 --> 0:23:44.449 Yeah. So the mobility story is, is an interesting one, right? 0:23:44.459 --> 0:23:47.010 If you go to go to the southern states, uh 0:23:47.020 --> 0:23:50.189 and southern states almost and the typology 0:23:50.979 --> 0:23:52.680 is almost like a 0:23:53.229 --> 0:23:57.060 East European country, a middle income, East European country with 0:23:57.069 --> 0:24:01.329 an aging population and with lots of imported labor, right? 0:24:01.339 --> 0:24:04.520 And these, these tend to come from the north and 0:24:04.530 --> 0:24:05.169 the east 0:24:06.060 --> 0:24:09.890 and, and for those, and for this vast army of 0:24:09.900 --> 0:24:14.530 construction labor of, of labor working in uh uh low 0:24:14.579 --> 0:24:16.160 value manufacturing. 0:24:17.020 --> 0:24:21.479 For them, it's their upward mobility ticket of, of moving 0:24:21.489 --> 0:24:23.880 to richer parts of India 0:24:24.750 --> 0:24:28.439 and, and of, of course India, unlike China does not 0:24:28.449 --> 0:24:32.280 place any restrictions on inward mobility, 0:24:32.939 --> 0:24:36.390 right? So you, you find that uh uh there's already 0:24:36.400 --> 0:24:41.219 some signs of domestic pressure, I mean, local pressure, people 0:24:41.229 --> 0:24:44.790 feel that all of these outsiders have come over and, 0:24:44.800 --> 0:24:47.938 and taken all of these uh and they don't necessarily spend, 0:24:47.949 --> 0:24:50.640 you know, in their language, linguistic complexity 0:24:51.239 --> 0:24:55.579 makes it all the more difficult to build this cohesiveness, right? 0:24:55.589 --> 0:24:55.899 But 0:24:56.650 --> 0:24:59.550 one can argue that if you're building in Tamil Nadu, 0:24:59.920 --> 0:25:04.670 an automobile component uh manufacturing facility, 0:25:05.810 --> 0:25:09.188 you tend to hire either from the West or from 0:25:09.199 --> 0:25:13.380 the South, that's where most of the qualified graduate engineers 0:25:13.390 --> 0:25:17.530 and technicians and even, you know, welders and plumbers happen 0:25:17.540 --> 0:25:20.708 to be. But if you're looking to clear land and, 0:25:20.719 --> 0:25:25.939 and build a massive uh residential or commercial complex, uh 0:25:25.949 --> 0:25:30.280 then you import labor from Uttar Pradesh or Bihar 0:25:30.939 --> 0:25:34.969 and, and, and this labor by the way has mobility opportunities, 0:25:34.979 --> 0:25:37.119 not just within India, you know, they can, they can 0:25:37.130 --> 0:25:39.899 go to Saudi Arabia, they can go, they can go 0:25:39.910 --> 0:25:42.959 to the Middle East and that's been a traditional route 0:25:43.310 --> 0:25:45.188 uh uh for many of them, and many of them 0:25:45.199 --> 0:25:50.468 actually come back with better skills uh particularly in construction. 0:25:50.479 --> 0:25:53.920 And I would argue that quality of Indian construction 0:25:54.569 --> 0:25:58.530 office buildings has probably improved dramatically in the last two 0:25:58.540 --> 0:26:02.109 decades because many of the returned have come back with 0:26:02.119 --> 0:26:03.189 better skills. 0:26:04.000 --> 0:26:07.040 But the, but the problem uh once again is if 0:26:07.050 --> 0:26:08.889 you're an apple and you're, you know, 0:26:09.660 --> 0:26:11.400 you're trying to recruit 10,000, 0:26:12.229 --> 0:26:16.609 I mean, the Foxconn facilities in China, for example, employ 0:26:16.619 --> 0:26:17.849 500,000 people, 0:26:18.550 --> 0:26:22.290 right. So try to imagine replicating 500,000 0:26:23.010 --> 0:26:24.589 in a Foxconn Apple 0:26:25.599 --> 0:26:29.130 network in Southern India or Western India. And that would 0:26:29.140 --> 0:26:31.459 be a challenge I think because there is a real 0:26:31.469 --> 0:26:35.290 skills deficit this fil where, you know, if you're a 0:26:35.300 --> 0:26:38.900 qualified engineer, you don't necessarily have to stay in India, 0:26:39.400 --> 0:26:42.160 a qualified professional as you know, I mean, India uh 0:26:42.170 --> 0:26:43.819 is is an exporter 0:26:44.449 --> 0:26:45.839 of high value talent. 0:26:46.640 --> 0:26:50.099 So I think there will be that absolute hurdle uh 0:26:50.109 --> 0:26:53.660 uh when it comes to Apple ever making a decision, 0:26:54.310 --> 0:26:55.780 OK, we are now ready to move, 0:26:56.699 --> 0:26:59.479 right. So India will always, I think be in that 0:26:59.839 --> 0:27:01.599 sub optimal space 0:27:02.260 --> 0:27:07.760 of being able to create uh employment of technical employment 0:27:07.770 --> 0:27:11.119 of the kind that a multinational firm like Apple will need. 0:27:12.180 --> 0:27:13.369 Right. Right. 0:27:13.439 --> 0:27:16.948 Um Just one final question on the employment side, Basuki, 0:27:17.280 --> 0:27:20.589 whenever we talk about youth unemployment in India, the picture 0:27:20.599 --> 0:27:22.599 that is typically drawn for us is this 0:27:23.300 --> 0:27:27.339 young, likely northern Indian male who can get a job. 0:27:27.349 --> 0:27:30.069 And there are social implications for that. I, I feel that, 0:27:30.079 --> 0:27:32.280 you know, the young women are sort of, you know, 0:27:32.599 --> 0:27:36.959 devoid in that discussion. And India has been surprisingly um 0:27:37.250 --> 0:27:40.680 under performing in terms of female participation in the labor force. 0:27:40.689 --> 0:27:43.670 Uh you had mentioned earlier, the garment industry in Bangladesh 0:27:43.819 --> 0:27:45.900 there we have seen in the last 23 decades, a 0:27:45.910 --> 0:27:49.239 huge change in terms of the fact that it's largely 0:27:49.250 --> 0:27:52.750 women who work on those factories. So 0:27:53.310 --> 0:27:54.958 I I'm sure even without looking at the data, we 0:27:54.969 --> 0:27:58.189 can say that unemployment among women to those who are 0:27:58.199 --> 0:28:00.530 actually looking for, it is a more challenging phenomenon in 0:28:00.540 --> 0:28:04.680 India than it is for male and within the Making 0:28:04.689 --> 0:28:06.810 India construct. Was there ever any sort of, you know, 0:28:07.660 --> 0:28:12.869 policy toward helping uh increasing the ratio of women's labor 0:28:12.880 --> 0:28:13.709 participation 0:28:14.790 --> 0:28:17.250 not within making India? Right. So ma making India is 0:28:17.260 --> 0:28:20.469 a very high level that they're going to introduce new processes, 0:28:20.739 --> 0:28:25.729 new infrastructure and new investment into manufacturing. So it is very, 0:28:25.739 --> 0:28:29.520 very high purpose. But certainly, you know, uh the government 0:28:29.530 --> 0:28:32.760 has tried over the last 10 years, it has recognized 0:28:32.770 --> 0:28:37.169 that they need to increase female labor force participation, which 0:28:37.180 --> 0:28:41.209 uh for a country like India, it's appallingly low, 0:28:41.650 --> 0:28:44.430 right? And, and you know, there've been all kinds of 0:28:44.439 --> 0:28:44.859 uh 0:28:45.949 --> 0:28:49.239 right. So you've got two kinds of challenges in doing that. 0:28:49.250 --> 0:28:52.459 I don't think the education challenge is one of them. Surprisingly, 0:28:52.469 --> 0:28:54.189 I think you, you even if you go down to 0:28:54.199 --> 0:28:55.390 a technical institute 0:28:56.060 --> 0:28:59.359 in any part of India, uh the num number of 0:28:59.369 --> 0:29:01.319 women now studying 0:29:01.969 --> 0:29:06.939 engineering or even undertaking technical training, that number is high. 0:29:07.750 --> 0:29:11.939 But you've got these social barriers which really prevent this 0:29:11.949 --> 0:29:18.030 translation of those skills from the classroom into the manufacturing facility. 0:29:18.250 --> 0:29:20.810 I think Indian employers have, 0:29:21.790 --> 0:29:24.569 I mean, again, one has to differentiate but in, in 0:29:24.579 --> 0:29:28.439 certainly in manufacturing, I've not done a very good job 0:29:28.449 --> 0:29:31.920 and I've seen that myself in other work that I do, 0:29:32.329 --> 0:29:35.410 they not not done a very good job in creating 0:29:35.420 --> 0:29:37.729 that welcoming environment and culture. 0:29:38.410 --> 0:29:39.479 The men and women 0:29:40.459 --> 0:29:44.050 can work in the same manufacturing place. I think it's 0:29:44.060 --> 0:29:47.930 probably improved in, in offices in white collar jobs and 0:29:47.939 --> 0:29:51.290 that's probably always been the case. But in manufacturing, you've 0:29:51.300 --> 0:29:53.719 got simple things like distance, 0:29:54.680 --> 0:29:58.380 right? So how do you overcome distance in terms of, 0:29:58.390 --> 0:30:02.739 you know, providing transport for female workers and, and doing 0:30:02.750 --> 0:30:04.420 so in a safe and secure manner? 0:30:05.410 --> 0:30:07.910 How do you make sure that uh they work that 0:30:07.920 --> 0:30:11.439 they have the ability to work multiple shifts? I think 0:30:11.449 --> 0:30:13.819 working night shifts is still a stigma 0:30:14.489 --> 0:30:18.180 and and these are really structural barriers on a micro 0:30:18.199 --> 0:30:18.709 level 0:30:19.599 --> 0:30:22.729 that no federal government in Delhi can sit. I mean, 0:30:22.739 --> 0:30:27.020 federal government in Delhi can create the enabling environment, but ultimately, 0:30:27.030 --> 0:30:30.579 it comes down to local government and the states and 0:30:30.589 --> 0:30:33.329 the states which have done, which are doing a better 0:30:33.339 --> 0:30:37.130 job compared with the national average, again, tend to be 0:30:37.140 --> 0:30:39.479 in the south and the west. Uh but again, it's 0:30:39.489 --> 0:30:41.599 a very, very mixed picture and, and, you know, 0:30:42.280 --> 0:30:43.170 uh uh 0:30:44.900 --> 0:30:47.609 10 years I think is a long time to take stock. And, 0:30:47.619 --> 0:30:49.410 you know, one can argue that, you know, making India 0:30:49.420 --> 0:30:53.270 probably premature for me to say only 10 years, why, 0:30:53.280 --> 0:30:56.709 why am I staying qualified failure? But I think in 0:30:56.719 --> 0:31:00.750 terms of female labor force participation, I mean, this predates 0:31:00.760 --> 0:31:04.829 the modi government and no, no government has been able 0:31:04.839 --> 0:31:08.790 to fix this and and right and, and they can 0:31:08.800 --> 0:31:11.290 be a powerful growth driver. And the fact that, you know, 0:31:11.300 --> 0:31:12.550 India probably can learn 0:31:13.199 --> 0:31:16.119 from the late Japanese Prime Minister Shinzo Abe 0:31:17.199 --> 0:31:21.130 uh who under international pressure and domestic pressure and the 0:31:21.140 --> 0:31:24.520 fact that Japan is aging so rapidly, Italy has made 0:31:24.530 --> 0:31:29.060 a concerted policy push uh in in this area. And 0:31:29.069 --> 0:31:32.630 India probably needs something similar to that in parallel with 0:31:32.640 --> 0:31:35.420 anything that they do would make in India in the future. 0:31:35.969 --> 0:31:38.939 Correct, correct. Uh So 10 years is a long time. 0:31:38.949 --> 0:31:41.189 So I think we should be able to make some evaluation. 0:31:41.199 --> 0:31:43.410 I think that's fair. Uh And the one that I 0:31:43.420 --> 0:31:46.510 want to talk about now is tech transfer. Uh we 0:31:46.520 --> 0:31:50.239 have seen even before making India, you know, global consumer 0:31:50.250 --> 0:31:55.040 goods companies from Unilever to Starbucks to Domino's, you know, 0:31:55.050 --> 0:31:58.479 they've come to India over the decades. Uh Did we 0:31:58.489 --> 0:31:58.949 see some, 0:31:59.060 --> 0:32:02.719 their supply chain management spill over into domestic Indian F 0:32:02.729 --> 0:32:06.989 and B supply chain and then the over the last decade, 0:32:07.000 --> 0:32:10.719 the push to bringing global manufacturers like Foxconn and others in, 0:32:10.729 --> 0:32:14.760 are we seeing some positive spillover out of that with 0:32:14.770 --> 0:32:17.979 respect to tech transfer or, you know, skilled labor or 0:32:17.989 --> 0:32:21.180 skilled entrepreneurs getting experience in those companies and building something 0:32:21.189 --> 0:32:22.040 on their own in India. 0:32:23.130 --> 0:32:25.050 Right? So you've got to look at this and you 0:32:25.060 --> 0:32:28.829 can't divorce. I think when we discuss this from the 0:32:28.839 --> 0:32:31.640 technology sector and, and the fact that, you know, uh 0:32:31.729 --> 0:32:34.250 and you know, India has got well beating 0:32:35.150 --> 0:32:38.369 public goods like the India stack. Uh the fact that 0:32:38.380 --> 0:32:42.130 you've got uh many of the America's big tech majors 0:32:42.140 --> 0:32:47.560 who've got significant uh uh you know, research facilities in India, 0:32:47.689 --> 0:32:50.500 including the likes of IBM. And I think the IBM 0:32:50.510 --> 0:32:53.650 facility in India is still one of the largest uh 0:32:53.660 --> 0:32:59.170 single uh location for employment, right. So you've got this 0:32:59.180 --> 0:33:02.369 again and got these islands of excellence. 0:33:03.989 --> 0:33:07.869 And India more recently in the last two decades, has seen, 0:33:07.880 --> 0:33:10.010 you know, the Starbucks and the Tim Hortons 0:33:10.719 --> 0:33:14.000 setting up franchise operations all over the country. You've got 0:33:14.010 --> 0:33:21.619 the entry of many hotel chains, consumer goods manufacturers. There's definitely, 0:33:21.780 --> 0:33:25.060 you know, a, a skills transfer taking place. 0:33:25.770 --> 0:33:29.430 But I guess the question is, and again, not to, 0:33:29.750 --> 0:33:35.290 not to speak poorly of uh fast food franchise chain ski, 0:33:36.130 --> 0:33:39.709 the skills transfer that takes place. It's probably essential, I 0:33:39.719 --> 0:33:41.770 think in a country like India where you've got so 0:33:41.780 --> 0:33:42.550 many people 0:33:43.219 --> 0:33:46.599 looking for jobs in the 20 to 30 age group 0:33:47.239 --> 0:33:50.250 that, you know, I used to two decades ago, uh, 0:33:50.270 --> 0:33:52.920 really be amused at the fact that you've got these 0:33:52.930 --> 0:33:57.020 master's degrees proliferating in India and events management 0:33:57.699 --> 0:34:00.859 and, you know, so, you know, every, every second university 0:34:00.869 --> 0:34:04.400 had an events management undergrad and a and, and, and 0:34:04.410 --> 0:34:07.479 a graduate degree. And I al I was always thinking, 0:34:07.489 --> 0:34:09.080 you know, what possible value 0:34:09.709 --> 0:34:12.459 does this create? And I was probably wrong because India 0:34:12.469 --> 0:34:16.439 now does have a vibrant events management space. They're learning 0:34:16.449 --> 0:34:20.580 a lot in putting up events from concert promoters from 0:34:20.590 --> 0:34:24.540 other parts of the world. So you've got these pockets 0:34:24.550 --> 0:34:27.489 uh where there are skills transfer taking place, people are 0:34:27.500 --> 0:34:32.009 upgrading their skills and for those who want to access 0:34:33.270 --> 0:34:35.540 online education tool 0:34:36.659 --> 0:34:39.389 that is available in India today. But, but you've got 0:34:39.399 --> 0:34:41.709 to be proficient, you've got to, you've got to be 0:34:41.719 --> 0:34:45.339 at a certain educational level in order to tap into 0:34:45.350 --> 0:34:49.639 those uh uh online courses and upgrade your own skills. 0:34:49.649 --> 0:34:55.290 Because ultimately, you know, learning is, is also an individual journey, 0:34:55.300 --> 0:34:58.158 not just the responsibility of the state, 0:34:59.449 --> 0:35:03.250 but when you come to actual manufacturing and advanced technologies, right? 0:35:03.260 --> 0:35:06.229 So there was this this talk of semiconductors and I 0:35:06.239 --> 0:35:09.830 think Prime Minister Modi was in Singapore last week. This 0:35:09.840 --> 0:35:15.729 collaboration on semiconductor testing, India is probably way way behind that. 0:35:15.739 --> 0:35:18.830 And that explains this controversy over what Myron 0:35:19.790 --> 0:35:25.409 is attempting to do in Gujarat where the technology on 0:35:25.419 --> 0:35:29.050 offer is seen as being slightly behind the curve. 0:35:30.209 --> 0:35:32.489 So there's a lot of hope and expectation on a 0:35:32.500 --> 0:35:36.899 single company like Apple because I think people have seen 0:35:37.639 --> 0:35:41.899 the Apple journey in China and the absolutely transformative power 0:35:42.350 --> 0:35:45.799 that it had in really upgrading skills. Really, you know, 0:35:45.939 --> 0:35:47.819 I don't think Apple could have succeeded 0:35:48.520 --> 0:35:52.540 without the presence of Foxconn and the tremendous investment it 0:35:52.550 --> 0:35:55.339 put in, in in human skills development. 0:35:56.090 --> 0:36:00.270 And and so you need, you need that scale and Vietnam, 0:36:01.659 --> 0:36:03.549 although much smaller country 0:36:04.179 --> 0:36:06.770 is doing that because it's had the benefit of Korean 0:36:06.780 --> 0:36:10.569 investment in the last two decades. So India in many 0:36:10.580 --> 0:36:13.520 ways is starting off behind the curve and and that 0:36:13.530 --> 0:36:14.760 skills transfer 0:36:15.979 --> 0:36:17.080 has to happen 0:36:17.840 --> 0:36:21.689 with these manufacturing companies being able to say that they're 0:36:21.699 --> 0:36:24.100 going to take people on board and actually train them 0:36:24.110 --> 0:36:24.820 on the shop floor, 0:36:25.959 --> 0:36:26.459 right? 0:36:26.889 --> 0:36:30.100 Um Mau OK, let's put aside the low end of 0:36:30.110 --> 0:36:32.979 the scale spectrum and the top end, let's focus on 0:36:32.989 --> 0:36:33.820 the middle end 0:36:34.239 --> 0:36:37.399 like are we going to see Indian entrepreneurs or even 0:36:37.409 --> 0:36:42.799 the large conglomerates creating Indian made in India TV brands 0:36:42.939 --> 0:36:46.479 or drones? So not like you know, the three nanometer chip, 0:36:46.489 --> 0:36:49.100 super fancy smartphone, but you know what we call, I 0:36:49.110 --> 0:36:52.360 guess lagging edge technology in which there are you know, 0:36:52.370 --> 0:36:54.969 hundreds of billions of dollars worth of potential investment and 0:36:54.979 --> 0:36:56.159 job creation and so on. 0:36:56.429 --> 0:36:59.739 Um But are we still seeing basically, you know, Chinese manufacturers, 0:36:59.750 --> 0:37:03.040 assembling cell phones in India or even like for a TV, 0:37:03.050 --> 0:37:05.139 it's really made in China TV, that is coming into India. 0:37:05.149 --> 0:37:08.609 We don't have that much of a homegrown technology stack 0:37:08.620 --> 0:37:10.169 to replicate that yet. 0:37:11.280 --> 0:37:13.979 Right. So, you know, there's a lot of talk here 0:37:13.989 --> 0:37:17.979 in Washington DC on how the US in, particularly since 0:37:17.989 --> 0:37:23.100 the early 19 nineties, when both China entered the WTO 0:37:23.320 --> 0:37:27.299 in uh 2000 and predating that of course, was NAFTA 0:37:27.969 --> 0:37:33.290 that you have this in exodus of manufacturing away from 0:37:33.300 --> 0:37:37.080 the US and, and, and which led to this overdependence 0:37:37.090 --> 0:37:41.459 on China or for almost everything from toys uh to 0:37:41.469 --> 0:37:45.340 light bulbs and everything else similar thing has happened, I 0:37:45.350 --> 0:37:48.729 think in India and, and, and you know, India is 0:37:48.739 --> 0:37:51.069 at this very interesting policy juncture now 0:37:51.889 --> 0:37:57.459 where I think the national security community is deeply concerned 0:37:57.959 --> 0:38:03.709 of Indian business over reliance on China, particularly in key 0:38:03.719 --> 0:38:08.339 sectors like pharmaceuticals in in and you mentioned mobile phones. 0:38:08.350 --> 0:38:10.830 Uh and and there are any number of other industries 0:38:11.080 --> 0:38:14.110 and I think the China India trade numbers really reflect 0:38:14.120 --> 0:38:19.360 the fact that India is exporting very little beyond commodities and, 0:38:19.370 --> 0:38:21.179 and perhaps metals, 0:38:21.520 --> 0:38:26.000 but it's importing vast quantities of stuff that it should 0:38:26.010 --> 0:38:28.219 be in a position to produce itself, 0:38:29.050 --> 0:38:33.030 right? So India has kind of ceded that ground. And 0:38:33.040 --> 0:38:35.520 I think where there's a very late realization 0:38:36.439 --> 0:38:40.750 that you can't have a national security and a border 0:38:40.760 --> 0:38:43.219 dispute with your giant neighbor. 0:38:43.899 --> 0:38:47.759 And at the same time, be so reliant on imports. 0:38:47.770 --> 0:38:50.199 And there's already pressure now building up from Indian business 0:38:50.209 --> 0:38:54.479 groups that there, there's got to be a pathway where 0:38:54.489 --> 0:38:59.120 the national security issues are discussed at a separate level 0:38:59.639 --> 0:39:01.639 and it should be business as usual. 0:39:02.370 --> 0:39:05.159 And so perhaps this should provide some kind of an 0:39:05.169 --> 0:39:08.229 incentive I think for India to be I I hate 0:39:08.239 --> 0:39:11.620 to use the word self reliant but in areas like 0:39:11.629 --> 0:39:16.899 advanced pharmaceutical ingredients, api si mean, India is a world 0:39:16.909 --> 0:39:21.370 beater in the pharma industry, you know, producing vaccines, producing 0:39:21.379 --> 0:39:25.389 basic drugs and it's pretty astonishing that you're still relying 0:39:25.399 --> 0:39:28.229 on imports from China. And and this is not a 0:39:28.239 --> 0:39:30.560 new story by any means. 0:39:31.310 --> 0:39:35.290 Then if you look at uh products like cement, 0:39:36.169 --> 0:39:39.070 if you look at products like uh right, if you're 0:39:39.080 --> 0:39:43.229 looking at basic chemicals, if you're looking at automobiles, I 0:39:43.239 --> 0:39:48.199 think India has got probably more resilient industrial capacity to 0:39:48.209 --> 0:39:51.120 produce stuff for the domestic market. But the wide open 0:39:51.129 --> 0:39:54.729 question mark is why can't you use uh all of 0:39:54.739 --> 0:39:59.179 that excellence in local manufacturing to be world beating? And 0:39:59.189 --> 0:40:02.429 you know, there's a tension here, there's tension here with 0:40:02.979 --> 0:40:05.229 the Indian government feeling very nervous 0:40:05.899 --> 0:40:10.259 when Indian companies invest overseas. Uh There's a sense that 0:40:10.270 --> 0:40:13.020 you're kind of betraying your country and you know, Finance 0:40:13.030 --> 0:40:14.080 Minister Sitar Rahman 0:40:14.719 --> 0:40:18.600 actually chastised uh Indian Business uh two or three years 0:40:18.610 --> 0:40:21.889 ago that they were not that they were inadequately investing 0:40:21.899 --> 0:40:24.080 in India, right. So if you want to be world 0:40:24.090 --> 0:40:28.100 beating large Indian Business House, you kind of have to 0:40:28.110 --> 0:40:30.260 step out of your comfort zone. 0:40:31.260 --> 0:40:34.109 But they feel, you know, there is a barrier in 0:40:34.120 --> 0:40:38.840 doing that. But at the same time, the absolute proliferation 0:40:39.520 --> 0:40:42.169 of well beating companies coming out of China. 0:40:43.199 --> 0:40:46.310 Uh I think there's a sense within the Indian business 0:40:46.320 --> 0:40:47.129 community 0:40:47.770 --> 0:40:51.149 that that train has left the station, right? So India 0:40:51.159 --> 0:40:55.100 has kind of lost that wave that it could have 0:40:55.110 --> 0:40:58.110 capitalized on. And the speed dates make in India 0:40:58.850 --> 0:41:03.040 right now, you're stuck with large manufacturers, kind of saying, OK, 0:41:03.050 --> 0:41:05.069 we're going to tap into the domestic market, 0:41:06.060 --> 0:41:09.319 then you're going to see these foreign investors come into 0:41:09.330 --> 0:41:12.389 advanced manufacturing. So there's, there's going to be that sense 0:41:12.399 --> 0:41:14.159 of grievance 0:41:14.949 --> 0:41:18.580 and, and I don't think, I mean, un unless there's 0:41:18.590 --> 0:41:19.969 an emboldened leadership 0:41:20.620 --> 0:41:26.709 trying to shift dramatically the current policy path, it's very 0:41:26.719 --> 0:41:28.379 hard to see how India is going to get out 0:41:28.389 --> 0:41:30.719 of this. Uh I, I don't know to call this 0:41:30.729 --> 0:41:35.080 rut but certainly this challenge situation of not being able 0:41:35.090 --> 0:41:37.199 to increase manufacturing share of GDP. 0:41:38.770 --> 0:41:39.679 So you, you 0:41:39.689 --> 0:41:44.570 touched upon uh local business houses and their grievances and 0:41:44.580 --> 0:41:46.669 et cetera. So let's talk about them for a second, 0:41:46.949 --> 0:41:50.820 have the um incentives and the investments brought in through 0:41:50.830 --> 0:41:54.310 making India made India more competitive. 0:41:58.330 --> 0:42:00.879 Right. Again, you've got to, you've got to do this 0:42:00.889 --> 0:42:03.510 at the product level, right? Is the Apple iphone, 0:42:04.350 --> 0:42:09.229 uh price competitive and manufacturing competitive when it comes out 0:42:09.239 --> 0:42:11.050 of its facilities in Southern India. 0:42:11.729 --> 0:42:13.620 Apple seems to suggest. Yes. 0:42:14.300 --> 0:42:17.139 And, and I think, uh uh if you're, if you're 0:42:17.149 --> 0:42:22.229 comparing wages with Shenzhen and Southern India, there's obviously a 0:42:22.239 --> 0:42:24.959 huge gap because Chinese wages have really gone up 0:42:25.590 --> 0:42:30.510 uh more significantly than, than India's have. But this is 0:42:30.520 --> 0:42:33.020 not just a be competitive, this game, this is a, 0:42:33.030 --> 0:42:36.859 this is a game of being able to upgrade technological 0:42:36.870 --> 0:42:41.300 skills and be ready. You know, Apple, the iphone 16 0:42:41.310 --> 0:42:44.590 is going to be launched in two weeks time. Can 0:42:44.600 --> 0:42:50.250 that be produced in India? Uh immediately answer is probably not. 0:42:51.070 --> 0:42:51.570 And 0:42:52.360 --> 0:42:55.149 a lot of other foreign investors I think are looking 0:42:55.159 --> 0:42:57.779 at uh the Apple experience 0:42:58.489 --> 0:43:01.330 to figure out they'll be able to replicate it. And 0:43:01.340 --> 0:43:04.330 this is happening really because a lot of multinational companies, 0:43:04.419 --> 0:43:08.110 you're a European company or an American company, you're hearing 0:43:08.120 --> 0:43:11.989 from your policymakers probably every single day that you've got 0:43:12.000 --> 0:43:15.399 to build away from China. You've got to look at 0:43:15.739 --> 0:43:18.989 other place. You've got to reso if you can, first 0:43:19.000 --> 0:43:20.709 of all, why not create jobs at home? 0:43:21.610 --> 0:43:24.449 If your argument is you're not able to reso immediately, 0:43:24.459 --> 0:43:26.909 then you know, try to look for alternative destinations. 0:43:27.540 --> 0:43:34.060 So India always looms large in these conversations and and 0:43:34.070 --> 0:43:37.679 so you need a critical mass of investors who are 0:43:37.689 --> 0:43:40.320 able to make the kind of technological leap and the 0:43:40.330 --> 0:43:44.179 skills leap that you're talking about, right? So you're using 0:43:44.189 --> 0:43:47.959 see 14 billion of iphone products, that number has to 0:43:47.969 --> 0:43:49.479 be 100 and 40 billion. 0:43:50.280 --> 0:43:52.989 In order to say you've created this critical mass of 0:43:53.000 --> 0:43:57.389 skilled workforce who are fungible, right? Who can literally work 0:43:57.850 --> 0:44:00.750 not only in India but anywhere else in the world. 0:44:01.399 --> 0:44:04.840 And at the same time, kind of marrying the kind 0:44:04.850 --> 0:44:08.129 of advanced research that the IB MS of the world 0:44:08.139 --> 0:44:12.699 are carrying out and translating that into manufacturing within India 0:44:12.959 --> 0:44:17.709 because most of that research and development knowledge currently is 0:44:17.719 --> 0:44:18.620 exported away. 0:44:19.330 --> 0:44:19.629 Yes. 0:44:20.300 --> 0:44:22.719 Yeah. Uh And what about, 0:44:23.669 --> 0:44:27.169 you know, when you have not the apples of the 0:44:27.179 --> 0:44:29.300 world is impossible to sort of, you know, create an 0:44:29.310 --> 0:44:31.889 Indian entity that can be competitive vis a vis apple, 0:44:32.000 --> 0:44:34.629 but again, in the middle end of the technology spectrum. 0:44:34.639 --> 0:44:36.610 And I'm thinking really on, you know, sort of the 0:44:36.620 --> 0:44:39.110 not the highest end smartphones, but the mid end, like 0:44:39.120 --> 0:44:41.790 the stuff that, you know, Shami and Oppo are producing 0:44:41.800 --> 0:44:44.290 and Indians seem to be very happy buying that made 0:44:44.300 --> 0:44:47.969 in China phone. Um in that area, are we beginning 0:44:47.979 --> 0:44:49.610 to see any sign of 0:44:50.090 --> 0:44:53.229 local grown technology or local grown companies becoming a bit 0:44:53.239 --> 0:44:57.830 more competitive? Uh and, and trying to give the imported 0:44:57.840 --> 0:44:59.069 brands that run for their money, 0:45:00.419 --> 0:45:02.520 right? So let's let's talk a little bit. Um, I'll, 0:45:02.530 --> 0:45:05.310 I'll come back to uh mobile phones. 0:45:07.290 --> 0:45:09.669 If you look at two wheelers and three wheelers. 0:45:10.770 --> 0:45:13.699 India is huge competitive advantage. In fact, India is still 0:45:13.709 --> 0:45:15.229 the world's largest manufacturer 0:45:15.949 --> 0:45:19.459 of, of two wheelers. And many of those two wheelers 0:45:19.469 --> 0:45:22.129 manufacturers are beginning to electrify 0:45:23.270 --> 0:45:27.169 and they're creating this uniquely, you know, the, the Hindi 0:45:27.179 --> 0:45:32.110 word called Juga, which really is homegrown innovation at a 0:45:32.120 --> 0:45:34.850 very low price. That probably is the best translation that 0:45:34.860 --> 0:45:38.030 I can think of. Good one, not bad at all. And, 0:45:38.040 --> 0:45:40.850 and so you've got an auto shop line, the streets 0:45:40.860 --> 0:45:41.949 of Mumbai, 0:45:42.719 --> 0:45:45.379 many of them at the moment are on CNG. 0:45:46.250 --> 0:45:50.889 Uh but I think they see the value in electrifying 0:45:50.899 --> 0:45:53.979 and the, and we're not talking Tesla supercharges 0:45:54.750 --> 0:45:58.229 in terms of how these two wheelers and three wheelers 0:45:58.239 --> 0:46:01.750 uh uh go into a charging station, charging station is 0:46:01.760 --> 0:46:05.909 probably uh the local tobacconist, right? It's a local pawn 0:46:06.040 --> 0:46:09.319 shop which happens to have an electric charger where the 0:46:09.330 --> 0:46:11.949 rickshaw guy can charge his vehicle. 0:46:12.679 --> 0:46:16.040 And so there is innovation taking place, right? So let's 0:46:16.050 --> 0:46:16.979 not forget that. 0:46:17.879 --> 0:46:19.929 And in the start up space 0:46:20.810 --> 0:46:25.090 again, it's pretty vibrant, but they tend to go into 0:46:25.100 --> 0:46:30.370 uh uh social media, e-commerce services type of solution services 0:46:30.699 --> 0:46:34.739 rather than the kind of uh mobile manufacturing that you're 0:46:34.750 --> 0:46:35.629 talking about. 0:46:36.290 --> 0:46:40.629 And I think there's this big question on whether you're 0:46:40.639 --> 0:46:42.669 able to produce everything at home 0:46:43.590 --> 0:46:46.689 or you still need to rely on China or Vietnam 0:46:47.540 --> 0:46:53.479 even to produce a low cost, you know, ₹500 phone. 0:46:54.389 --> 0:46:57.409 And I think there's vulnerability there for India, not everything 0:46:57.419 --> 0:47:02.969 is available or manufactured in India from scratch there. I 0:47:02.979 --> 0:47:07.229 think India can lead is not in trying to compete 0:47:07.239 --> 0:47:08.570 with the Xiaomi 0:47:09.840 --> 0:47:16.000 or Lenovo or or any other Chinese manufacturer. But for 0:47:16.010 --> 0:47:19.319 domestic entrepreneurs. And again, moving away from the large business 0:47:19.330 --> 0:47:20.049 houses 0:47:20.800 --> 0:47:23.139 to innovate on a smaller scale 0:47:23.800 --> 0:47:27.649 to find and and you know, again, move away from 0:47:27.659 --> 0:47:29.850 trying to cater to the urban elite, 0:47:30.489 --> 0:47:34.229 but try to find solutions for your three wheeler driver 0:47:34.800 --> 0:47:38.120 to say that you know, by operating an electric uh 0:47:38.129 --> 0:47:38.929 three Wheler, 0:47:39.770 --> 0:47:43.399 uh you're not only benefiting from lower costs, but there's 0:47:43.409 --> 0:47:46.909 a social value attached to that anything you need to, 0:47:46.969 --> 0:47:50.280 you got to happen on that scale and you need 0:47:50.469 --> 0:47:53.479 obviously uh uh a widespread 0:47:54.129 --> 0:47:59.669 success all over the country across a number of sectors 0:48:00.050 --> 0:48:02.909 which will really break this logjam where where India can 0:48:02.919 --> 0:48:05.709 really send these skills. You know, two wheeler three wheeler 0:48:06.399 --> 0:48:10.620 are translatable where India can really help sub Saharan Africa, 0:48:10.629 --> 0:48:15.000 for example, which face similar infrastructure challenges. There is probably 0:48:15.090 --> 0:48:19.030 slightly more advanced. The China offering for many parts of 0:48:19.040 --> 0:48:23.580 Africa in this field is probably too high tech and 0:48:23.590 --> 0:48:24.620 and too expensive. 0:48:25.260 --> 0:48:29.439 And I think Indian innovation can really excel at this level. 0:48:30.899 --> 0:48:33.080 Fascinating. I I want to talk to you in greater 0:48:33.090 --> 0:48:36.959 detail about the green transition story in a moment. But 0:48:36.969 --> 0:48:39.860 uh Maui, in the conversation that we've had so far, 0:48:39.870 --> 0:48:44.020 you have mentioned Vietnam a bunch of times. So let's 0:48:44.030 --> 0:48:47.320 do a little compare contrast. I don't think Vietnam had 0:48:47.699 --> 0:48:51.379 uh flashy making Vietnam campaign. They probably did it a 0:48:51.389 --> 0:48:53.959 little more organically and they probably, you know, sort of 0:48:53.969 --> 0:48:57.069 got the Chinese to get embedded in a far friendlier 0:48:57.080 --> 0:48:59.360 manner in their economy, both with FD I as well 0:48:59.370 --> 0:48:59.959 as tech. 0:49:00.229 --> 0:49:04.089 Um but nonetheless, are there lessons for India from Vietnam's experience? 0:49:05.000 --> 0:49:08.739 Absolutely. Right. So you mentioned China, actually the Vietnam uh 0:49:08.750 --> 0:49:10.779 uh manufacturing experience 0:49:11.530 --> 0:49:15.620 is entirely, you know, it's a, you know, appeal to 0:49:15.629 --> 0:49:19.840 Samsung to come make in Vietnam. And I think Samsung 0:49:19.850 --> 0:49:25.550 was the absolute original big investor in, in Vietnam. Uh 0:49:25.560 --> 0:49:28.859 there was a period of time when uh Samsung had 0:49:28.870 --> 0:49:30.110 so many engineers 0:49:30.959 --> 0:49:33.770 working for its facility in Vietnam. A lot of other 0:49:33.780 --> 0:49:36.989 foreign investors started to complain that there was some kind 0:49:37.000 --> 0:49:39.529 of hoarding taking place. 0:49:40.370 --> 0:49:44.760 And I think the Vietnam lesson uh uh for, for 0:49:44.770 --> 0:49:46.909 India is and again, 0:49:47.639 --> 0:49:51.689 uh many Vietnamese uh uh uh businesses would say they're 0:49:51.699 --> 0:49:55.520 too small a country, right? They can't be compared possibly 0:49:55.830 --> 0:49:58.109 with India. But I think Vietnam 0:49:58.709 --> 0:50:04.010 focused on and did not give up the low value 0:50:04.020 --> 0:50:09.649 edition that easily and eventually all of that migrated to Cambodia. 0:50:09.659 --> 0:50:11.260 But at the start of the journey, right, if you 0:50:11.270 --> 0:50:14.679 really look at uh the early 19 nineties after the 0:50:14.689 --> 0:50:20.050 Paris agreement which essentially normalized Vietnam's uh integration with the 0:50:20.060 --> 0:50:24.050 rest of the world. Also normalized Cambodia's integration. 0:50:24.729 --> 0:50:28.639 Vietnam took a calculated bet at manufacturing. They looked at 0:50:28.649 --> 0:50:31.049 China and said this is exactly what we want to do, 0:50:31.229 --> 0:50:34.350 but we are not in China's place at this point 0:50:34.360 --> 0:50:37.389 in time. So we're going to focus on, first of all, 0:50:38.300 --> 0:50:42.639 taking away all the shoe manufacturing that existed in Indonesia 0:50:43.120 --> 0:50:46.759 in the 1919 eighties and 19 nineties, all of them 0:50:46.770 --> 0:50:49.129 moved and many of them were Korean investors, all of 0:50:49.139 --> 0:50:53.639 them even sneakers, sneakers. That's right. All the sneakers that 0:50:53.649 --> 0:50:56.239 when I was, lived in Jakarta in the 19 nineties, 0:50:56.550 --> 0:51:00.199 they were all produced in, in Indonesia and they moved 0:51:00.209 --> 0:51:03.179 the following decade all to Vietnam, right? So that was 0:51:03.189 --> 0:51:05.069 kind of. So they really learned 0:51:05.530 --> 0:51:08.870 with textiles, they learned with shoe wear, they learned with toys. 0:51:09.370 --> 0:51:13.520 And then when Samsung made the offer that they were looking. 0:51:13.530 --> 0:51:15.070 And at that time, Samsung's 0:51:16.209 --> 0:51:20.080 really wanted to manufacture television sets and, and other low 0:51:20.090 --> 0:51:22.388 end consumer electronics 0:51:23.110 --> 0:51:27.009 in Vietnam because Korea was getting too expensive and like 0:51:27.020 --> 0:51:30.510 Korean Che balls, you know, the LGS and the others followed. 0:51:31.419 --> 0:51:35.109 And it was that success, which laid the foundation for 0:51:35.120 --> 0:51:37.560 Vietnam to be able to stay. Now, we can, we 0:51:37.570 --> 0:51:38.399 can embrace 0:51:39.050 --> 0:51:42.919 uh uh mass scale manufacturing, we can bring in a 0:51:42.929 --> 0:51:48.428 greater number of, of uh uh multinational companies to come 0:51:48.439 --> 0:51:52.279 and make in Vietnam. And that I I know Vietnam 0:51:52.290 --> 0:51:56.340 is going through its own unique structural and political challenges 0:51:57.149 --> 0:51:59.770 at this point in time. But if you ask any 0:51:59.780 --> 0:52:03.750 foreign investor today that if you cannot make in China, 0:52:04.379 --> 0:52:07.560 what would be a logical next destination 0:52:08.439 --> 0:52:13.300 without batting an eyelid, they'll say Vietnam, they probably pause 0:52:13.489 --> 0:52:16.649 for about 10 seconds and mention India. 0:52:19.159 --> 0:52:22.620 Yeah, so India is still up there but not quite there. 0:52:22.629 --> 0:52:26.909 Uh And, and you're right that the supply chain with 0:52:26.919 --> 0:52:30.979 which um Vietnam has sort of prospered, has a wide 0:52:30.989 --> 0:52:33.669 range of lessons for any country that wants to embrace 0:52:33.679 --> 0:52:38.520 manufacturing the warehouses, the logistics, the port, the tax system, 0:52:38.530 --> 0:52:41.399 I mean, for a country that is sensibly a communist country, 0:52:41.489 --> 0:52:45.379 they're remarkably capitalistic when it comes to accommodating foreign investors. 0:52:46.929 --> 0:52:49.469 Yeah, absolutely. You know, there's a story told to me 0:52:49.479 --> 0:52:50.669 over a decade ago. 0:52:51.780 --> 0:52:55.020 Uh and, and this probably is a caricature, right? So 0:52:55.030 --> 0:52:57.939 your foreign investor who lands in Delhi and says I 0:52:57.949 --> 0:53:00.949 want to build 100 million manufacturing facility 0:53:01.959 --> 0:53:07.239 and, and he runs up immediately against the obstacles. Uh saying, 0:53:07.250 --> 0:53:10.649 you know, you need not only permits and clearances from Delhi, 0:53:10.699 --> 0:53:12.739 you've got to figure out which state you're going to 0:53:12.750 --> 0:53:17.909 operate in, you need permits and clearances and the state 0:53:17.919 --> 0:53:21.530 and the federal government are not necessarily working in concert. 0:53:21.540 --> 0:53:22.590 There's no coordinations, 0:53:23.310 --> 0:53:26.610 we try to do the same in Vietnam. And uh 0:53:26.620 --> 0:53:30.969 uh the, the guy in Hanoi, uh the state official 0:53:31.250 --> 0:53:35.750 has the ability to call up the provincial official and 0:53:35.760 --> 0:53:40.479 coordinate and make that investment happen in an at a really, 0:53:40.489 --> 0:53:44.879 really amazing space including providing electricity connections. If the road 0:53:44.889 --> 0:53:46.009 needs to be built, 0:53:46.760 --> 0:53:50.699 that's the challenge, that's the gap that India needs to overcome. And, 0:53:50.709 --> 0:53:53.540 and there isn't, I mean, India is uniquely 0:53:54.250 --> 0:53:58.040 uh political system and the way the economy is arranged 0:53:58.050 --> 0:54:01.350 does not allow for that kind of co ordination, 0:54:02.889 --> 0:54:03.389 right? 0:54:04.100 --> 0:54:07.169 OK. A little bit of crystal ball gazing. We've had 0:54:07.179 --> 0:54:10.279 a decade of making India, it promised a lot. It 0:54:10.290 --> 0:54:13.379 has delivered somewhat but nothing compared to what the original 0:54:13.389 --> 0:54:18.280 promises were. But again, looking forward, uh both, what do 0:54:18.290 --> 0:54:20.859 you see happening and what should be 0:54:20.870 --> 0:54:21.319 happening, 0:54:22.580 --> 0:54:25.840 right. So this is India's moment, I think and and 0:54:25.850 --> 0:54:29.560 has been India's moment uh for the last three decades. 0:54:30.250 --> 0:54:33.060 Uh I think any policy maker looking back could say, 0:54:33.070 --> 0:54:35.989 you know, India has done reasonably well, it has accelerated 0:54:36.000 --> 0:54:40.669 economic growth, it has removed some of the shackles uh that, 0:54:40.679 --> 0:54:44.149 you know, led to the infamous Hindu rate of growth 0:54:44.250 --> 0:54:48.350 since the 19 fifties. Uh You have a more affluent 0:54:48.399 --> 0:54:53.790 middle class, uh you've created an economy which provides opportunity 0:54:54.100 --> 0:54:57.250 for those who wish to stay back home and, and 0:54:57.260 --> 0:54:58.909 they certainly, you know, visibly 0:54:59.629 --> 0:55:03.409 you've got this class of billionaires and millionaires. 0:55:04.100 --> 0:55:06.569 But I think the big question mark for India is 0:55:06.750 --> 0:55:09.820 how do you sustain this India group story? Right? Can 0:55:09.830 --> 0:55:12.638 you continue to be the fastest growing economy 0:55:13.389 --> 0:55:14.449 in the G 20 0:55:15.179 --> 0:55:19.899 uh for the next 20 years without uh providing that 0:55:19.909 --> 0:55:25.080 manufacturing story. And I would argue at some stage, India 0:55:25.090 --> 0:55:28.989 will come up against the obstacle that, you know, and, 0:55:29.000 --> 0:55:32.790 and maybe hopefully that stage is today rather than 10 0:55:32.800 --> 0:55:35.509 years from now when it be, when it may be 0:55:35.520 --> 0:55:38.120 too late. Uh for India to catch up, 0:55:38.929 --> 0:55:43.010 there's an absolute sweet geopolitical spot where India can play 0:55:43.020 --> 0:55:48.030 in at the moment. Uh India obviously is aligned perfectly 0:55:48.040 --> 0:55:52.459 with the US on, on security issues. And India is 0:55:52.469 --> 0:55:55.629 a member of a quad, it's a member of IP 0:55:55.689 --> 0:55:58.839 F even though it's not part of the trade chapter 0:55:59.729 --> 0:56:03.030 of the Indo Pacific economic framework. And there's a greater 0:56:03.750 --> 0:56:09.149 exchange of ideas, greater exchange of uh uh policy dialogue 0:56:09.729 --> 0:56:10.840 that happens 0:56:11.889 --> 0:56:15.129 in, in the democratic world including India today 0:56:15.850 --> 0:56:18.709 uh than at any time in the past, right? So that, 0:56:18.719 --> 0:56:23.620 that should provide an enabling environment for foreign investors and 0:56:23.629 --> 0:56:28.429 local investors to make more in India policy obstacles by 0:56:28.439 --> 0:56:29.149 the three 0:56:29.750 --> 0:56:34.689 barriers which which, which really uh the government should address 0:56:34.979 --> 0:56:37.819 uh in the next year or so. First, in the sense, 0:56:37.830 --> 0:56:39.969 it's not a level playing field, 0:56:40.899 --> 0:56:44.719 the fact that you've got favored groups who seem to 0:56:44.729 --> 0:56:48.879 be getting all of the benefits in terms of contracts, 0:56:48.889 --> 0:56:52.520 in terms of being able to produce that scale uh 0:56:52.530 --> 0:56:56.229 with very little barriers. And at the same time, you've 0:56:56.239 --> 0:56:58.179 got a lot of others who feel that they don't, 0:56:58.189 --> 0:57:02.770 you know that these favored groups are disproportionately benefit. So 0:57:02.780 --> 0:57:06.719 India needs to level the playing field really to enable 0:57:07.429 --> 0:57:11.009 other large scale business houses who have the ability, who 0:57:11.020 --> 0:57:14.370 have the skills and the knowledge to also invest in 0:57:14.379 --> 0:57:15.810 this Indian growth story. 0:57:16.729 --> 0:57:20.399 Second is, and this has been a prob problem. Predating 0:57:20.409 --> 0:57:24.659 make in India is lack of predictability on regulatory enforcement 0:57:24.669 --> 0:57:29.110 or on tax claims. I mean, the GST is and 0:57:29.120 --> 0:57:32.280 has become a very blunt instrument. I mean, the Indian 0:57:32.290 --> 0:57:33.510 company enforces 0:57:34.300 --> 0:57:37.340 which as you know, is an it services company was 0:57:37.350 --> 0:57:39.350 today was recently placed with a 0:57:40.010 --> 0:57:44.320 absolute staggering GST came uh which seems to have come 0:57:44.330 --> 0:57:47.719 out of nowhere. So there's a lack of predictability and 0:57:47.729 --> 0:57:52.570 regulation on enforcement and on taxation that is due from 0:57:52.580 --> 0:57:57.570 companies either to state or, or, or the center. And 0:57:57.580 --> 0:58:01.840 that absolutely plays a chilling role, I think in uh in, in, 0:58:01.850 --> 0:58:04.469 in businesses not being able to plan 0:58:05.209 --> 0:58:08.149 and, and they're absolutely scared that there's going to be 0:58:08.159 --> 0:58:09.110 a knock on the door 0:58:09.739 --> 0:58:12.750 which is going to take away management time and attention. 0:58:13.199 --> 0:58:14.439 I would say the third 0:58:15.489 --> 0:58:16.169 problem 0:58:17.000 --> 0:58:19.689 and, and, and this has got a lot to do 0:58:19.699 --> 0:58:23.219 with politics which has kind of been, I think uh 0:58:23.229 --> 0:58:23.250 uh 0:58:24.540 --> 0:58:28.060 has been a feature much more dramatic in the last 0:58:28.070 --> 0:58:28.760 10 years 0:58:29.899 --> 0:58:34.360 than in previous governments. There's a real sense of polarization 0:58:34.370 --> 0:58:39.989 and I don't mean societal polarization alone, there's political polarization 0:58:40.429 --> 0:58:44.080 that if you're a non ruling party 0:58:45.500 --> 0:58:47.449 government running a state. 0:58:48.239 --> 0:58:51.469 There is the co ordination that was possible in the 0:58:51.479 --> 0:58:55.659 past with the ruling party in power in New Delhi. 0:58:56.919 --> 0:58:59.840 That is a challenge and that absolutely is a problem 0:58:59.850 --> 0:59:03.899 for investors. Uh Because you, if you're a foreign investor, 0:59:04.219 --> 0:59:07.429 putting a significant amount of money, you are either come 0:59:07.439 --> 0:59:11.300 through the fast track, right, where everything is made easy 0:59:11.310 --> 0:59:14.919 for you. It's arguable whether that the number of those 0:59:14.929 --> 0:59:18.540 investors will be 1020 30 it certainly can't be 300 0:59:18.790 --> 0:59:23.260 because that will absolutely overwhelm uh uh the government's capacity 0:59:23.750 --> 0:59:27.189 to deliver, right. So you need to create the fast 0:59:27.199 --> 0:59:31.500 track should be available for everyone to participate in. And 0:59:31.510 --> 0:59:34.129 there's got to be that greater level of co ordination 0:59:34.139 --> 0:59:39.090 and sense of national purpose and cohesion. Uh The political 0:59:39.100 --> 0:59:43.448 environment is charged, it's very difficult. I know, but 0:59:44.110 --> 0:59:48.949 from a foreign investor perspective, uh that's an absolute challenge. And, 0:59:48.959 --> 0:59:52.250 and if India is not able to overcome this, you're 0:59:52.260 --> 0:59:54.689 always going to find successes. I don't mean to say 0:59:54.699 --> 0:59:56.629 that all foreign investors are going to turn away. I 0:59:56.639 --> 1:00:00.389 think the share size and attractiveness of Indian market uh 1:00:00.399 --> 1:00:01.570 will remain, 1:00:02.449 --> 1:00:05.639 will keep India in the trail for a long period 1:00:05.649 --> 1:00:08.030 of time. Uh But you know, 1:00:09.270 --> 1:00:12.139 time is money and businesses will, I mean, there are 1:00:12.149 --> 1:00:15.699 other destinations which are knocking on the door and businesses 1:00:16.040 --> 1:00:17.209 will simply turn away 1:00:17.969 --> 1:00:22.040 right from Mexico to Hungary. There's quite a few out 1:00:22.050 --> 1:00:25.320 there asking for the same investment dollar. But finally, you, 1:00:25.330 --> 1:00:28.439 you talked about the sort of the view from the 1:00:28.449 --> 1:00:30.939 inside that's sitting in India, what India needs to do 1:00:30.949 --> 1:00:34.719 to attract foreign investment. But let's say you encounter a 1:00:34.729 --> 1:00:37.219 foreign investor tomorrow in Washington DC and New York who 1:00:37.229 --> 1:00:39.800 are looking at India as a possible destination for their 1:00:39.810 --> 1:00:42.030 investment dollars. How would you guide them? 1:00:43.489 --> 1:00:47.550 Right. So the two challenges uh so 22 challenges and 1:00:47.560 --> 1:00:48.429 two questions, 1:00:49.750 --> 1:00:52.929 I don't think foreign investors need to be persuaded a lot. 1:00:53.340 --> 1:00:56.570 If you're making breakfast cereals, if you're making 1:00:57.300 --> 1:01:01.830 consumer products, they don't need a great deal of persuasion 1:01:02.000 --> 1:01:03.350 that they've got to make in India. 1:01:04.520 --> 1:01:08.300 And they increasingly feel that in order to make in 1:01:08.310 --> 1:01:12.550 India successfully and and in order to do it quickly, 1:01:12.889 --> 1:01:15.260 you need to partner with someone locally 1:01:15.889 --> 1:01:20.070 that seems to be the model for non make in India, 1:01:20.080 --> 1:01:24.090 advanced manufacturing kind of, right. So you, you get a 1:01:24.100 --> 1:01:28.060 joint venture partner and, and you know, you, you outsource 1:01:28.070 --> 1:01:32.899 the regulatory tax issues to your joint venture partner, you 1:01:32.909 --> 1:01:36.919 take a smaller stake and India is now allowing majority 1:01:36.929 --> 1:01:40.669 stake in many sectors so they can still retain some 1:01:40.679 --> 1:01:42.590 level of uh majority control. 1:01:43.219 --> 1:01:45.840 That's an easy proposition. And that has happened, I think 1:01:45.850 --> 1:01:49.510 since the India opened up 30 years ago. But you know, 1:01:49.840 --> 1:01:52.040 the central part of our conversation today 1:01:53.020 --> 1:01:56.020 that is still not delivering the kind of employment levels 1:01:56.300 --> 1:02:01.120 and value added. Uh uh compared with the others. The 1:02:01.129 --> 1:02:02.560 second set of questions 1:02:03.250 --> 1:02:07.520 that the manufacturer of semiconductors uh right. Can I create 1:02:07.530 --> 1:02:09.629 a fab? Can I build a fab fab lab 1:02:10.800 --> 1:02:16.510 in India using NVIDIA GP us? Can I can I 1:02:16.520 --> 1:02:20.139 build a network of data centers? 1:02:20.840 --> 1:02:23.409 Uh because I want to train, I want to train 1:02:23.419 --> 1:02:25.060 my large language models 1:02:25.770 --> 1:02:30.810 in India because of uh uh availability of land availability 1:02:30.820 --> 1:02:34.689 of technical skills, at least at that high level. That 1:02:34.699 --> 1:02:38.040 is where the complexity is, that is the problem that 1:02:38.050 --> 1:02:40.629 make in India has been attempting to solve 1:02:41.350 --> 1:02:44.850 in creating this fast track. But the fact that for me, 1:02:44.860 --> 1:02:46.979 the worrying thing is the take up rate. 1:02:47.689 --> 1:02:50.189 But it's one thing to say that you've put $28 1:02:50.199 --> 1:02:55.629 billion on the table in plis production incentives. But the 1:02:55.639 --> 1:02:59.139 take up rate on the part of foreign investors has 1:02:59.149 --> 1:03:01.949 been very, very low and 10 years is a long 1:03:01.959 --> 1:03:05.350 time to say that you've barely touched 2 billion or 1:03:05.360 --> 1:03:08.070 3 billion, which happens to be the number, 1:03:08.750 --> 1:03:12.570 right. So the advice to the foreign investor in the 1:03:12.580 --> 1:03:16.739 second category is how compelling is your business model at 1:03:16.750 --> 1:03:20.889 the moment that you do need to move from China 1:03:21.620 --> 1:03:25.600 perhaps at a slower trajectory than what one reads in 1:03:25.610 --> 1:03:28.919 the newspapers where you know the feeling in Washington DC 1:03:28.929 --> 1:03:31.360 is you simply click off the switch 1:03:32.199 --> 1:03:35.659 exit China and there beckons India and Vietnam that's not 1:03:35.669 --> 1:03:37.360 going to happen that way. I think China is going 1:03:37.370 --> 1:03:41.719 to be a significant manufacturing destination for a long period 1:03:41.729 --> 1:03:44.459 of time, much longer than what political leaders seem to 1:03:44.800 --> 1:03:45.580 seem to believe. 1:03:46.820 --> 1:03:49.600 But if you place India on that slower track, so 1:03:49.610 --> 1:03:52.860 India is able to sort out its regulatory problems, the 1:03:52.870 --> 1:03:56.340 co ordination problem that I pointed out, 1:03:57.139 --> 1:04:00.860 but it's more drip that gradually India is going to 1:04:00.870 --> 1:04:05.050 scale up, then it's probably an attractive destination. But as 1:04:05.060 --> 1:04:05.949 you well know, 1:04:06.810 --> 1:04:08.429 foreign investors are impatient 1:04:09.439 --> 1:04:12.770 if we were talking. For example, I think uh 20 1:04:12.780 --> 1:04:13.379 years ago, 1:04:14.189 --> 1:04:16.739 I, I think 20 years ago, we have fixated too 1:04:16.750 --> 1:04:19.550 much on growth in India growth at all costs. 1:04:20.449 --> 1:04:24.149 And I think the conversation is appropriately now turned to 1:04:24.260 --> 1:04:26.580 what is the quality of that growth? What are the 1:04:26.590 --> 1:04:30.469 growth drivers? Are we are, should we be satisfied with 1:04:30.479 --> 1:04:34.389 consumption and services and the fact that the the greater 1:04:34.399 --> 1:04:38.469 sense of urgency, those questions are being asked within India? 1:04:38.949 --> 1:04:41.060 I think lends me to believe that there'll be some 1:04:41.070 --> 1:04:43.580 change uh whether the change is going to be to 1:04:43.590 --> 1:04:47.159 everyone's satisfaction, of course, remains to be seen. But I 1:04:47.169 --> 1:04:51.120 think making India is an honorable aspiration uh for the 1:04:51.129 --> 1:04:53.409 country's policymakers to regain. 1:04:54.610 --> 1:04:57.020 Right. Vasuki, I had earlier promised that we're going to 1:04:57.030 --> 1:04:59.530 talk about the potential of green transition. We're gonna leave 1:04:59.540 --> 1:05:01.159 it for another day. And also I want to talk 1:05:01.169 --> 1:05:03.719 about Indonesia with you another day as well. But for today, Vasuki, 1:05:04.080 --> 1:05:06.389 thanks so much. For your time and insights. 1:05:07.409 --> 1:05:09.510 Thank you ta It's always a pleasure to chat with 1:05:09.520 --> 1:05:12.570 you and I will continue to be a fan of 1:05:12.580 --> 1:05:16.820 copy tm. May copy TM thrive and prosper for the 1:05:16.830 --> 1:05:18.149 next few decades. 1:05:18.449 --> 1:05:21.149 Ok. It is copy time. I'm not a coffee shop, 1:05:21.810 --> 1:05:24.399 but yes, I, I will try to keep the lights 1:05:24.409 --> 1:05:26.550 on in the studio as long as I can. Uh 1:05:26.560 --> 1:05:30.389 Thank you Vasuki and thanks to our listeners and viewers. 1:05:30.409 --> 1:05:33.229 Copy time was produced by Ken Delbridge at Sky Studios, 1:05:33.239 --> 1:05:35.649 Violet Lee and Daisy Sharma provided additional 1:05:35.745 --> 1:05:38.524 system. It is for information only and does not represent 1:05:38.534 --> 1:05:42.344 any trade recommendations. All 134 episodes of the podcast are 1:05:42.354 --> 1:05:46.205 available on youtube and on all major podcast platforms. As 1:05:46.215 --> 1:05:49.044 for our research publications, webinars and live streams, you can 1:05:49.054 --> 1:05:52.145 find them all by Googling D BS Research Library. Have 1:05:52.155 --> 1:05:52.925 a great day.