Rethink manufacturing in a changing world

The just-concluded Asian Development Bank meet in Delhi held a panel discussion on the theme, Beyond Factory Asia. India, which had not particularly joined Factory Asia, will do well to focus on the Beyond bit, rather than on catching a train that is probably grinding to a halt. Factory Asia loosely describes an Asia-wide division of manufacturing that produces at locations distributed over (east and southeast) Asia for final assembly and export to the major consuming centres, the US and Europe. This model is now coming unstuck. For one, low levels of economic activity in the traditional consuming markets have made for static demand for goods. For another, incomes are rising in the Asian economies, increasing domestic demand and rendering some kinds of manufacturing a whole lot less competitive than before.

There is an even more worrying trend: a technologydriven relocation of manufacturing back to the consuming markets. Three factors are at work here, mainly. Advances in robotics is one. 3D printing, in which things are built by computer-controlled injection of molten or dissolved materials layer upon layer in stipulated three dimensional patterns to build components, is the second. And, finally, there are huge advances in both energy efficiency and tapping new energy sources that make energy costs a competitive advantage, particularly for the US. It would be futile for India’s new industrial strategy to try and be part of Factory Asia. India has to slash its import tariffs to force local production to configure itself to the latest available technologies and production processes. India’s own vast and varied internal market must be fully integrated with modern rail, road and non-cascading tax linkages. Production and consumption must be truly globalised to build and sustain lasting competitiveness. Education must become truly emancipating, and skills training, dynamic. And physical infrastructure, including towns, must facilitate, rather than constrain.