India's Struggle Toward Industrialization

May 19, 2011
Manufacturing seems poised to thrive in this emerging market, but sanitation, infrastructure and land-acquisition issues pose major challenges.

I nervously looked out the window of an Air India flight as it ascended through a thick haze that blanketed the Delhi skyline. For the first time in my life, I truly felt like a foreigner. Just moments earlier I was negotiating my way through the Delhi airport after proceeding through the wrong security checkpoint.

The mistake took me toward baggage claim and outside the airport instead of leading me to my connecting flight. Figuring out how to get me through the check-in gate required several mini conferences among Air India staff in a language I couldn't understand. The way things were progressing, I wondered if Delhi was going to be my new home for a while.

If you've read recent economic reports about India, you might think that's not such a terrible thing. After all, India is a country on the rise. Manufacturers are making significant investments in the region, including Ford's May 17 announcement that it will spend $72 million to boost capacity at its Chennai engine plant. Indian manufacturing activity in April grew at its fastest pace in five months, according to the HSBC Purchasing Managers' Index.

India is indeed developing. The smog hovering over Delhi seemed to follow my flight as it descended to my destination city of Kolkata for Siemens' annual metals and mining summit. During my brief stay I never asked anyone about the haze, but I suspect it's a byproduct of an industrial boom. India is steadily gaining as a manufacturing powerhouse. New technology campuses are sprouting throughout India's urban centers along with upscale office and apartment complexes.

But the country faces a host of challenges that can't be ignored, especially by Western visitors who are making their first trip to the Asian nation. Productive countries need healthy citizens who can work in their steel mills and auto plants. They need clean water, proper trash collection and maintained roadways - not only for their people but foreign investors who want to participate in the nation's industrial revolution. Otherwise, the image of India as a dirty, inhospitable place will endure.

Some might say India is getting there. But for the people living under such conditions, change couldn't come fast enough. In some parts of Kolkata I saw sanitation unfit for vermin and staggering poverty. I saw children picking through trash heaps and people using the roadside as a bathroom, presumably because of a lack of indoor facilities.

But the environment presents great opportunity for manufacturers to help elevate the quality of life for India's people. The nation's largest steel mills are expanding to accommodate rising demand for infrastructure needs, such as highway construction. Steel "has the greatest multiplier effect" on the economy, P.K. Bishnoi, chairman and managing director of Indian state-owned steel producer Rashtriya Ispat Nigam Ltd., or RINL, told reporters during the Siemens conference in Kolkata.

By 2012, RINL expects to double capacity at its Visakhapatnam steel plant. Other Indian steel executives who spoke at Siemens' metals and mining summit also discussed plans for ambitious near- and long-term expansion efforts. They also talked about the challenges they continue to face in meeting their production goals.

Land acquisition is a major issue in India because of opposition from landowners and environmental regulations. South Korean steel maker Posco had been battling for more than five years to secure land for its proposed $12 billion steel plant in the eastern state of Orissa. The state finally began acquiring the land for the project, the Wall Street Journal reported May 19.

The ability to secure raw materials is another growth barrier cited by steel producers in India. JSW Steel Chief Operating Officer P Sashindran told me that India is rich in iron-ore, but most of the nation's supply is exported to other countries around the world. He wants government policies that encourage domestic consumption of iron-ore supplies.

Like other developing countries, India's potential as an industrial power could hinge on a host of social and political changes.

In IW's August edition I'll explore some of these issues more in depth as part of the magazine's annual IW 1000 list of the world's largest publicly held manufacturers. So stay tuned.

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