Indian manufacturing gets currency boost

For about a decade, Indian electrical companies have been importing 16- inch table, pedestal and wall ( TPW) fans from China and marketing these in India, under their respective brand names. The reason: importing from China was cheaper than manufacturing these in India. China had the obvious advantages of economies of scale, cheap labour and a favourable currency. However, with the rupee depreciating 14 per cent this year and the Chinese currency, the yuan, appreciating 2.4 per cent to 6.09 a dollar, the pattern has started changing. About a year ago, electrical goods maker Havells India set up a TPW manufacturing plant in the country; this was the first such plant set up in the country in about a decade. “ We could foresee a correction in the Indian currency,” says Sunil Sikka, president, Havells India. “ About a year ago, when we started, we were at a slight disadvantage to our peers who were importing; now, we are at an advantageous position,” he says. For other electrical goods such as induction heaters, too, new manufacturing plants are being set up in India. “ We still have labour arbitrage, as it is cheaper than China. So, once scale is achieved, our import will shift from finished goods to specific parts and raw material,” Sikka says. Indian companies manufacturing induction heaters are still importing the glass needed for these products. However, this accounts for less than 10 per cent of the total production. To cater to developed markets in Europe, Havells acquired Frankfurt- headquartered Sylvania for $ 300 million in 2007. After the financial crisis of 2008, the company shut two of its five manufacturing plants in Europe and set up a joint venture manufacturing plant in China to supply LED products to Sylvania. About a year ago, the company set up a manufacturing plant for lighting fixtures in Neemrana, Rajasthan, to supply to Sylvania. Earlier, the company sourced lighting fixtures from Costa Rica and France. “India is a new sourcing hub for our European operations,” says Sikka. The company exports products worth ₹ 5- 6 crore every month and expects to double this in the next six months. The garment industry, too, is gearing up to avail of the new advantages over China. Raymond, the company best known for selling branded textile for men’s suits, plans to increase exports fourfold in the next five years, as the domestic market faces a relative slowdown. “ If I look at global manufacturing destinations for sourcing, India has improved its competitive position dramatically, especially in relation to China,” says Sanjay Behl, chief executive officer of Raymond, referring to the fact that wages in China have been growing faster than in India. The eight- decade- old company believes in its targeted markets, trade policies for import are being structured more in favour of India compared to China. According to the company’s estimates, India now exports $ 40 billion (about ₹ 2 lakh crore) worth of textiles a year. In 2012- 13, Raymond’s export revenue was about ₹ 250 crore. The company plans to invest about ₹ 1,000 crore through the next five years, primarily to augment capacities. Behl said the rise in capacity would help the company emerge as a major global exporter in the men’s wear and worsted textiles segments. “The depreciation of the rupee alone has not helped; it is also the appreciation of the yuan that has helped India become more attractive an export hub,” says Rakesh Shah, co- chairman ( foreign trade committee), Federation of Indian Chambers of Commerce and Industry. “ Today, we have an export advantage where we have our own raw material.” However, he points to the fact that China still has an advantage, in terms of manufacturing lowengineering, high- volume products due to economies of scale. But India has an obvious advantage in exporting smaller- volume products that require engineering input. Traditionally, India’s forging and automobile component industry has come under this segment and has benefited from the export market. “With the weak rupee and poor demand in the domestic markets, automobile component makers are concentrating on export markets,” says S G Joglekar, chief financial officer at Pune- based Bharat Forge. The company exports niche products for the automobile industry and doesn’t face much competition from China. “ Our exports to North America and Europe are doing better than the domestic markets; we plan to sweat the existing assets to our advantages for export,” he says. way2rading.Com is a leading B2B portal through which you can get updated information about indian manufacturers and indian suppliers. To know more about our services, visit manufacturers directory.