Brand values made in India

In the late eighties when Rajiv Gandhi’s proto-liberalisation saw a bunch of tie-ups between Indian commercial vehicle makers and Japanese giants, the trend was embraced wholeheartedly by the ramshackle cottage industries around Calcutta, as it was called then. All of a sudden on the pavement shops around Burrabazar, cheap household appliances acquired “Japanese” brand names. The local purveyors of these (mostly dud) products were strictly honourable. They did not purloin venerable labels such as, say, Nissan or Sony. Instead, they chose vaguely Japanese-sounding names, such as “Ishibishi” or “Makanishi” and so on.

It is not known whether these businesses lasted or were any more successful than the Indo-japanese commercial vehicle makers. But they deserve credit for their entrepreneurial nous in recognising the visceral Indian penchant for “foreign” goods at a time when “self reliance” was the dominant economic policy of the day and every respectable city had its thriving market for smuggled luxury products. Swadeshi was good for evicting the British; not so much as a personal creed living in independent India as the barriers to upward mobility were lowered.

As the concept makes a comeback in the guise of self-reliance, Make in India, atmanirbhar and so on, it would be interesting to see what shape or form brand-building acquires in the years to come. As a political credo, these slogans have a resonance with a certain political base. As an economic policy, the Indira Gandhi’s economic policies hold lessons.

Autarky is the word being bandied about darkly by critics as the military’s famous Canteen Stores

Department chain announced that it would stock only “swadeshi” goods made in India in its outlets from June 1. This policy, the home minister hastened to clarify, included goods made by multinationals in India but not, it appears, the Made-in-china household appliances and mobiles and so on. (It was unclear why the home minister should be making an announcement that concerns the defence ministry, but this government moves in mysterious ways.) This, then, is an upgraded version of self-reliance that includes the longed-for utopia of making India multinationals investment hub. But will Indian consumers acquire a special penchant for products made in India? Or, to put it another way, would they care?

This is not to say that promoting manufacturing in India is undesirable, but provided these enterprises compete on the same terms as the rest of the world. Rising tariff walls cannot be an efficient substitute for poor “ease of doing business” realities. The automobile industry is a good example of steady indigenisation that spawned a robust industry in auto-components. The Phased Manufacturing Programme (PMP) for mobile phones, which the Narendra Modi government introduced in its first term, has seen a sharp decline in imports and a sharp rise in local units, making India the largest smartphone handset maker after China.

This more recent success story highlights both the possibilities and the limits of the “swadeshi” strategy. Unlike automobiles, which expanded and grew under a falling tariff regime, the PMP synchronises localisation to rising tariffs on inputs.

But the truth is, unlike Akio Morita’s celebrated example of Made in Japan, Made in India is not the same as Branded in India. The country’s smartphone market today is divided principally between global Chinese and Korean brands (and Apple, the iconic US brand is made by a Chinese company). Ironically, it was the Chinese handset brands that made the quickest transition under the PMP. Micromax, the Indian brand (made mostly in China, though) has gone the way of all meteors.

Whether it is air-conditioners, home appliances, entertainment electronics, and even fast-moving consumer goods, the dominant competitors remain foreign. Manufacturing in India has its virtues, but every B-school graduate knows that brand-building is where the real value lies. So even if the government continues with its Canute-like policy of raising tariff barriers to induce local manufacture, the strategy may work in so far as offering the Indian consumer goods with higher local content. But it is unlikely to serve the long-term purpose of making India a competitive, viable factory to the world of the kind that the Chinese government has fashioned. Being outward-oriented in the entire manufacturing value chain (albeit with questionable currency and intellectual property regimes) has enabled the creation of global Chinese brands — Xiaomi, Oppo, One-plus, Alibaba and so on.

The automobile industry offers a pointer: India is not only an export hub, but strong domestic competitors have emerged in Tata and Mahindra. It’s been a long haul, of course, from the failures of the gas-guzzling Standard 2000 in the late eighties to the Daewoo Cielo in the early nineties. These gains took place against an environment of receding protectionism, suggesting that as a template for non-ideological selfreliance it probably works better than muscular nationalism that closes off India from the global supply chain.