From satellites in space to the “Silicon Plateau” of Bangalore, innovation is at the forefront of India’s emergence as one of the world’s leading economies. Baba Kalyani, chairman of leading metals forming manufacturer Bharat Forge, explains how the government’s Make in India initiative and Indians’ innate sense of ingenuity are helping to ensure that his country is established as a globally competitive center for advanced manufacturing.
“Innovation is the need of the hour,” according to India’s charismatic Prime Minister Narendra Modi, a former tea seller who now carries the hopes, and reflects the aspirations, of India’s 1.2 billion people.
If Modi’s rags-to-riches story is said to mirror India’s own rapid rise into the world’s ninth biggest economy following the “lost decades” of the 1950s-1980s, it can be argued that manufacturing giant Bharat Forge best encapsulates the spirt of innovation and excellence that his administration hopes will sustain India’s progress and ensure that Indian products are competitive and respected the world over.
Bharat Forge, a key component of the $2.5 billion Kalyani Group, is a technology-driven, global leader in metal forming, serving sectors such as automotive, power, oil and gas, construction, mining, rail, marine and aerospace. Established in 1961, the company now enjoys a manufacturing footprint across India and Europe and is ranked as one of the 26 most innovative businesses in its home country.
“When we started the process of manufacturing high performance products in the year 2000, people were very skeptical about the idea of an Indian company entering a country such as Germany, which has very high manufacturing technologies and capabilities,” said Baba Kalyani, chairman of Bharat Forge, which currently employs approximately 35% of its workforce outside India. “We were there to prove that we have these same capabilities. Once we gained their trust, the gates opened for us. We converted the negative connotations that they had about India and Indian companies into extremely positive ones simply by performing,” Mr Kalyani added.
The blend of technological innovation and world-class standards shown by Bharat Forge is what the Modi Administration is aiming to foster through its “Make in India” initiative, launched in September 2014. Recognizing that raising the global competitiveness of Indian manufacturing is imperative for the country’s long term-growth, the Modi Administration hopes this initiative will encourage domestic and multi-national companies to manufacture their products in India. If successful, Make in India will increase the share of manufacturing in the country’s GDP from 16% to 25% by 2022 and create 100 million additional jobs in the process. Concurrently, it will create the opportunities for rural migrants and the urban poor to learn the appropriate skill sets that will enable India to achieve its potential to become the world’s third largest economy by 2030, a ranking that is predicted by the Centre for Economic Business and Research (CEBR), a respected UK think-tank.
“India’s industrial output today is roughly $320 billion. We want to take it to $1-1.2 trillion in the next 15-20 years,” said a bullish Mr Kalyani. “For this to happen, we need to embrace the fourth industrial revolution and get into advanced manufacturing because that’s what will make us competitive in both domestic and the global markets, and that’s what creates jobs,” he added.
If the third industrial revolution used electronics and information technology to automate production, the fourth industrial revolution is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres. In this period of unprecedented technological breakthroughs, manufacturing companies have no choice but to adapt if they wish to stay competitive at the higher ends of the value chain.
As a vocal champion of innovation, Mr Kalyani believes Bharat Forge has always been a pioneering example of how Indian manufacturers can adapt their business practices to suit the requirements of the modern global economy and compete internationally. “We changed our business model to an advanced manufacturing one about 20 years ago. That’s why today we are world leaders in our business,” Mr Kalyani proclaimed. He continued: “We innovated a new business model for manufacturing. This model was very simple: we believed that the system of cheap labor does not work. It will never allow companies to make high quality products, which is what is required in the global market place. Therefore, we decided to automate our plants and change our entire workforce from blue collar to white collar. The process took 10 years to complete and received a lot of criticism initially, but now everybody in India is embracing this,” Mr Kalyani said.
Fast forward to the present day and Bharat Forge is using 3D printing technology to create digital metal components. The chairman pointed out that Bharat Forge is also at the forefront of defense technology innovation. In February 2016, it was announced that the company had joined forces with Tata Motors and General Dynamics to bid for the $11 billion contract to manufacture combat infantry vehicles for the Indian Army under the Future Infantry Combat Vehicle (FICV) Program. “A large part of Make in India is related to how India can produce its own defense hardware. As a nation, we hardly have any capability in this arena. We have to start from designing the products, then manufacturing and testing,” Mr Kalyani explained. He continued that Bharat Forge is one of many Indian companies that is embracing the fourth industrial revolution whilst adapting it to fit the needs and culture of their country. “The fourth industrial revolution gives us the most unique opportunity, advantage, and knowledge base to go from a factor driven economy to an efficiency driven economy,” Mr Kalyani said. The chairman points to examples of other Indian manufacturing companies - besides Bharat Forge - that have been able to build highly recognized brands in the West, as evidence that India is already well on its way to becoming a major global player in advanced manufacturing. “Just look at Jaguar or Land Rover, owned by Tata, and our companies in Germany and Sweden; we have all been able to build the necessary trust among European players, attracting huge amounts of investment in the process. Indian entrepreneurs have learned to stand on their own two feet and make it happen in any part of the world. They are tech savvy and they understand what they are doing.” Mr Kalyani said.
Whilst Bharat Forge may have been at the forefront of innovation in its sector for more than two decades, Mr Kalyani believes that Prime Minister Modi is a true pioneer and innovator when it comes to economic policy and leadership. “In the last 67 years that India has been independent, and in my 44 working years, I have never seen a government or a Prime Minister with such an innovative approach towards changing the direction of the economy as Prime Minister Modi. He firmly believes in what he says and in the direction he is heading. There is a clear sense that we have a structure and an enabling system that will allow policies to be implemented and reforms to happen, and ultimately enable India to change very dramatically,” Mr Kalyani said. “Make in India, of course, is the key platform for taking India forward in the manufacturing and industrial sector,” he added.
Since Mr Modi was elected as Prime Minister on a wave of optimism in 2014, Mr Kalyani has accompanied him on various overseas visits to Asia and Europe. He says that Prime Minister Modi’s trade and investment policies have been warmly welcomed and appreciated by the business and political leaders in all the countries they have visited.
“The Indian government and Prime Minister Modi are walking the talk. When he says he is creating the conditions to ease doing business and ‘putting out a red carpet in place of red tape’, people are beginning to believe it because he is making it happen,” Mr Kalyani said.
Prime Minister Modi also has ambitious plans to reform India’s notoriously fragmented tax system, which has a long been considered a deterrent to foreign investment. Mr Modi would like to establish a uniform national goods and services tax, amongst other proposals, but his government is facing a fierce battle to get the enabling legislation through Parliament. “Yes, there is still some way to go, but it is a process. We have a federal political system that can make it difficult to implement central policies. In many states the governments are different. It takes time for the system to change. Whether or not it is changing fast enough, this is a matter of opinion. But the fact that it is changing in the right direction is still very impressive,” the Bharat Forge chairman said.
Mr Kalyani cites the Make in India week in mid-February 2016 as a prime example of how the world is responding positively to the Prime Minister’s business-friendly policies.
Held in Mumbai from February 13-18 2016, the Make in India week was intended to showcase the potential of design, innovation and sustainability across India's manufacturing sectors in the coming decade. The event attracted some 2500 international companies and 8000 domestic firms, as well as government delegations from 68 countries.
“International perceptions have changed so dramatically that the Make in India week sparked huge demand all over the world from people wanting to attend. Everybody wanted to be there. People believe that India is a place where growth is going to happen in the next 5-10 years,” Mr Kalyani said. Indeed, in the same month that Made in India week was held, it was announced that India’s economy outpaced China in 2015 with a growth rate of 7.5%. The country also attracted around $26.5 billion in foreign investments in the first nine months of 2015, which is 18 percent more than in the same period the previous year. The Bharat Forge chairman is confident that investors in the USA, the world’s largest source of FDI outflows, are fully awake to the potential that exists in India under the leadership of Prime Minister Modi.
“My message to them is that this is a country where the opportunities are huge, and the political leadership has ambitious plans to grow the economy from $2 to $20 trillion in the next 25-30 years. We are very well connected in business, technology and education with the US. So please come and invest. India is open for you,” Mr Kalyani said.