A quiet technocrat scaling up Indian manufacturing
Dr. Pawan Goenka is driving an unusual public-private partnership, informing and helping fine tune policy changes.
Before the pandemic started, the major players in India’s room air conditioner market had no plans to invest in larger manufacturing operations, relying instead on convenient imports for over 80% of AC parts.
Over the past week, despite COVID-19 denting AC sales, global brands like Hitachi, Daikin and Panasonic, as well as domestic majors like Voltas and Blue Star, have announced investments of about ₹5,000 crore to reverse the reliance on imported AC parts from 80% to 20% over the next five years.
For instance, when domestic and global AC players conveyed that India’s ₹25,000 crore AC market didn’t necessitate larger manufacturing investments to replace established import supply chains, Dr. Goenka tapped his deal-making skills to arrive at an attractive formulation.
Recalling the challenge, he said: “An Indian player may not have technology for a compressor, so they are forced to import. An MNC has technology, but doesn’t want to make it in India, given the volumes.”
His solution — convince the MNC to make more compressors in India by getting the domestic player to buy from them instead of importing — thus adding up volumes that justify fresh investments and repeat this idea for various AC components with both domestic and foreign players stepping to invest for each
Dr. Goenka heads a group that informally began working soon after the national lockdown was announced in 2020, following a meeting between industry captains and Commerce and Industry Minister Piyush Goyal.
Noting that many of them had more time on their hands due to the lockdown, Mr Goyal had suggested CEOs put on their thinking hats and come up with ideas to tap the global sentiment against China and strengthen Indian manufacturing.
To his surprise, the minister asked Goenka to drive this introspection, that was formalised subsequently by his ministry as the Steering Committee for Local Value Addition, Manufacturing and Exports or SCALE. The group is now working on such ideas for 17 sectors — from toys, textiles, furniture and e-cycles to drones, and even fisheries.
“Large scale industrial units will not produce this outcome. They employ less people per unit of capital, and per unit of land. They also have larger negative impacts on the environment. New technologies with new business models make small units viable, as well as provide solutions to problems of inclusion and environmental sustainability,” he said, stressing this is why the NMIZ never took off.
In his first innings, Prime Minister Narendra Modi had tasked an industry chamber to come up with policy prescriptions for what he said was a central challenge for the Indian economy — scaling up income and employment levels of the people. Mr. Maira, who was associated with the exercise, said larger players in industry objected to the recommendations which were based on scenarios that encouraged smaller units along with larger ones to create a more vibrant manufacturing ecosystem.