Debates regarding the likelihood that India will be the next manufacturing hub of the world are common place today. The rising costs in China, the uncertain tagged value of Yuan to U.S. dollar and the impending need to “de risk from all the eggs in China basket” are fuelling the argument in India’s favour.
India has several plus points that strengthen its case for manufacturing – a large growing domestic demand being one – and the comparative labour cost arbitrage being the other.
Indian manufacturing is coming of age. Several companies have engaged in the process of continual improvement, embracing philosophies such as TQM, lean management, JIT etc. Work force that was primarily hired as “hands” is now being trained, engaged and motivated to apply “minds, hearts and souls” at the shop floor. Manual production operations are being replaced by ergonomically designed, quality assured and environmentally responsible processes. Shop floor workers are being trained to engage as stakeholders in this process of competitive manufacturing. Statistical process controls and six sigma are enabling 10th standard passed workers to become the champions of a resurgent manufacturing India.
And what do these champions, stakeholders receive in return? Manpower costs are (also) increasing in India – the increases in minimum wages are often quote as evidence of this trend. Let’s look at the figures :
Let us dwell on the example of NOIDA – New Okhla Industrial development Authority : developed and positioned as a premier example of an industrial township. This undisputed engine of growth in Uttar Pradesh is an all consuming hub for all the work force that is leaving their villages as soon as they turn 18 (if not forced earlier) to seek a livelihood . This regular influx is the “core comparative resource” that the Indian industry aims to leverage in its pursuit of a sustained double digit growth.
The minimum wage in NOIDA means a cash in hand of Rs. 3274/- per month. The minimum monthly rent for a shared “hole in the wall” at one of the several slums in Noida is Rs.1500/- . That leaves the worker with just about half his wages to feed himself and take care of the family he has left behind in his village. He works for 8 hours at his factory – and toils through the other 16 hours at his room in the slum –fanning himself through power disruptions during summers, wading through knee deep sewage in the monsoons and fighting mosquitoes & queuing up for water, through the year. A production shift at the well lit, 5 S shop floor with six sigma posters on the wall is undone by a daily struggle for survival during the following 16 hours.
A growing number of industry owners are learning that a clean, organized shop floor is indeed more productive. Responsible customers across the western world are forcing the more reluctant , less progressive entrepreneurs to convert. Our very own – inspectors from the labour department ( yes they are still alive, and thriving) are ensuring that factory wallahs who do not fall in line, part with a portion of their earnings regularly. They are also keeping an eye – ensuring that workers do not work overtime – no more than the permitted 50 hours per quarter. The labour laws that are meant to protect the interests of labour (and are too politically hot to be touched upon) do not permit an escape from the room in the slum for any greater than an additional 16 hours a month.
Here, we have an example of an industrial hub – with no worker hostels, no cycle tracks, a law that does not let them legally earn more than minimum wages and in case you fall ill, an ESIS Hospital, that you’d not wish upon your enemies.
If our workforce is the base on which we aim to claim our position in the manufacturing world, this foundation certainly needs reinforcement. As a starting point, all industry areas must encourage building and maintenance of low cost but efficient employee hostels. This may be done in a PPP mode, wherein the employers can take a number of rooms on long lease and/or participate in the equity.
In practice, a 10-12 hour workday can be the norm – if workers receive even one and a half times the regular wages for overtime hours beyond 8 hours, this will add a substantial 70% additional income in the hands of he worker. The employers will like the idea because they will have fewer numbers to take care of (two shifts instead of three). This will hopefully encourage owners to register more employees on the regular rolls – and not treat them eternally as “casual workers”. They may also eventually realize that a “casual “worker does treat his work “casually”. Sustainable business mandates that customers be served, profits made while ensuring that interests of all stakeholders are taken care of. Building a manufacturing hub, while neglecting our workforce is certainly perilous.
Author: Vinod Sharma