A Rutgers professor explains why Indians can't manufacture even their gods

As a rising economic power, India considers itself a challenger to China if not its rival. Yet, it cannot even produce something as small as a figurine of a god. Indian shops are flooded with figurines of Hindu gods and goddesses made in China. A large number of small merchandise items such as buttons are imported from China because they are cheaper than India-made goods.

How does China beat India in pricing small items despite duties and transport costs? In an article in Yale Global, Farok J. Contractor, a professor at Rutgers Business School, lists seven reasons which are reproduced below:

Scale
Contractor writes that most manufacturing in China is done on a large scale which means that overhead and fixed costs can be spread over more units of production, thereby reducing cost per unit. Giving an example, he says, an Indian producer might have three plastic injection-molding machines, whereas a Chinese counterpart has more than 70.

Productivity
Contractor cites a McKinsey report that says “…workers in India’s manufacturing sector are almost four and five times less productive, on average, than their counterparts in Thailand and China, respectively.” More output per worker gives China a competitive advantage. According to the McKinsey report, Indian factories lag in automated equipment, capacity utilization, supply chains and quality control.

Corruption
Contractor says though India and China both rank 79th out of 176 countries in Transparency International’s Corruption Perceptions Index 2016, their corruption is vastly different. Corruption in China occurs at a higher level, which does not impact daily life and business. In India, corruption is petty and frequent, making everyday life difficult. He says that's why India’s corruption is more psychologically and economically debilitating than China’s.

Transport
Transport costs favour China. Contractor gives an example to prove this: "The distance from Guangzhou in China to Mumbai is five times greater than that between Delhi and Mumbai. But cargo costs for the 7,300 kilometers by sea are roughly comparable to truck freight for the internal, 1,400 kilometers by road. Assuming 25,000 Hindu figurines per container, with ocean freight costs averaging $1,000 per container from Guangzhou to Mumbai, the transport cost per unit is around 4 US cents. Assuming two 9-ton capacity trucks needed between Delhi and Mumbai, the cost per unit is also just under 4 cents, for less than one-fifth the distance."

Electricity
Though electricity costs for industry in India and China are comparable, Indian industry sees more infrequent supply and unannounced power cuts which play havoc with production schedules.

Bureaucracy
Regulatory procedures in India make setting up new businesses cumbersome. Contractors cites the example of land acquisition: "...acquiring land is more difficult in India than in China. Both countries have populations of more than 1 billion, but India has a third of China’s total land mass. Delays and bureaucracy, as much as costs, add impediments to expanding in India. By contrast, government fiat in China is sufficient to immediately displace thousands, if needed." It's easier to do business in China which, he says, has fewer regulations, lower costs of compliance, shorter times for approvals and better legal recourse.

Subsidies
Contractor says though both India and China subsidise its industry, China goes many steps ahead. "Many of the 50-odd companies in China that produce Hindu figurines attend trade fairs not only in India, but also in Frankfurt and Las Vegas. Besides Hindu deities, they produce Christian and Buddhist figures and other household decorations. Marketing expenses are tax deductible, sometimes subsidized, and a culture of international marketing savvy extends to even smaller enterprises in China," he writes.