Small businesses: ‘Mad in India’

Small businesses: ‘Mad in India’

Excessive red tape is hindering India's drive to be a global manufacturing hub

SAM Staff,
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Mr Saurabh Ahuja, who runs a company in New Delhi that provides budding entrepreneurs with a place to experiment with product ideas, says it took three months and over $4,000 in warehouse fees, taxes and bribes to import a 3D printer from China for his business.PHOTO: AGENCE FRANCE-PRESS

When Mr Saurabh Ahuja tried to import a US$600 (S$842) 3D printer for manufacturing drones in his New Delhi workshop, he ended up spending another US$900 in taxes and bribes, and waited three months for the printer to clear Customs.

“We lack in technology and industry to make the smallest things, so we have to import,” Mr Ahuja said as he listed the frustrations entrepreneurs still encounter since the government launched its “Make In India” project.

“If my business grows, the country grows with me. But the government won’t let me grow,” he said.

Since coming to power in 2014, Prime Minister Narendra Modi has been looking to overhaul India’s image as an awkward country in which to do business and instead emulate China by becoming a global manufacturing hub.

In September that year, he unveiled “Make in India” as a flagship initiative which would have an “unprecedented overhaul of outdated processes and policies” at its core.

The government has tried to woo investors by promising to simplify the tax regime and liberalise rules on foreign direct investment.

But in the World Bank’s most recent ranking of countries for their ease of doing business, India placed 130th out of 190.

While much of the focus has been on the travails of foreign companies, local entrepreneurs who should be the poster boys of Indian manufacturing are also struggling.

The printer that Mr Ahuja eventually managed to import from China to build everything from drones to robots had nearly 300 parts. He first had to submit a sheaf of documents, including details of the exporter and the product catalogue, to officials at the New Delhi airport.

He was then told that each part would have to be tested before being let through. Three months and 150,000 rupees (S$3,280) in warehouse charges later, he got his consignment, but only after he coughed up a bribe, he said.

Airport officials did not respond to an e-mailed query for comment.

Mr Ahuja, 29, launched his company six years ago from a basement in New Delhi to provide other budding entrepreneurs a place to experiment with product ideas. For an hourly rental fee, clients have access to equipment such as 3D printers and circuit boards. But while the prototypes can be crafted in India, nearly all the manufacturing ends up being outsourced overseas.

“Maker spaces are great because you can quickly launch a prototype and get credibility,” said Mr Navi Radjou, co-author of the book Frugal Innovation. “But then you open a Pandora’s box because if a customer asks for 2,000 units of your product, you’re screwed since you can’t make it at that scale and that leads to a lot of frustration.”

While India’s big business houses are among Mr Modi’s loudest cheerleaders, economist Sunil Sinha said making things at home remains a fraught process for smaller firms.

“The crucial component is what’s happening at the state level, at the local level,” said Mr Sinha, principal economist at Fitch India. “Anyone setting up a factory or business needs water and electricity connections, and various permissions and annual regulatory filings to different government watchdogs. Those are the major stumbling blocks and there are no significant changes at that level.”

He added that many of the large companies have “special access to the corridors of powers, but for the small guy, no one will even answer his call, so he has to strike a deal with whoever is the hurdle”.

Mr Ahuja was reminded of how onerous it was to manufacture at scale when last year, the government banned imports of the lithium polymer batteries needed to power the drones. He now buys them from someone in Mumbai who smuggles them in and then charges US$300, double the actual cost.

Mr Ahuja’s complaints find echoes among large-scale manufacturers such as Mr Rajiv Bajaj, head of the Bajaj Auto conglomerate. Mr Bajaj wants to introduce a quadricycle but has encountered multiple obstacles. “If your innovation in the country depends on government approval or the judicial process, it will not be a case of ‘Made in India’, but ‘Mad in India’,” he said.

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SOURCEAGENCE FRANCE-PRESSE
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