Manufacturers wait and watch India
By Tim Hanley - December 19, 2013
As you can imagine, India is an interesting place these days. As highlighted by Deloitte’s most recent global and Asia Pacific economic outlooks, the Indian economy has clearly slowed down and the promise for accelerated growth that seemed to be on the horizon a few years ago appears elusive.
There are a variety of potential reasons for the economic slowdown and falling value of the rupee in India. However, based on conversations with senior executives and industry observers during my recent visit to the country, most of the challenge revolves around the country’s inability to establish the reforms needed to attract more foreign direct investments. Many multi-national corporations (MNC’s) have been increasingly cautious about investment in India and most Indian business leaders that I talked with believe that significant reform may not come until after the elections in 2014.
A lack of a strong infrastructure network in India continues to be a major challenge for the country’s growth. During one of my meetings at a major manufacturing plant in Delhi, I had the opportunity to witness first-hand how the best manufacturers maneuver their local supply chains around such challenges. For example, there are no trucks allowed in or out of this particular neighborhood surrounding the plant for two four-hour windows during the day. As a result, all of the flow of raw material parts as well as finished must be carefully scheduled around the times when trucks are allowed in and out of the neighborhood.
Each time I visit India, I leave with a greater appreciation of the business environment and also the potential that lies ahead of what will be perhaps the fastest growing middle class in the world. While some of the economic challenges have caused many of the MNCs to pause briefly, there is no doubt they recognize the importance of accessing this very significant consumer market in the future. Further demonstration of this is Deloitte’s survey of global manufacturing CEOs who view India as rising to be the second most globally competitive manufacturing economies five years from now, behind only China.
Tim Hanley is the Global Leader of the Manufacturing Industry group of Deloitte Touche Tohmatsu Limited (DTTL). In his global industry leadership role, he directs strategic initiatives and investments to grow Deloitte member firm market share within the manufacturing industry. During his distinguished 34-year career, Hanley has led teams serving all business aspects, including consulting with top management regarding organizational financial strategy development and execution, acquisitions, and market development.