#TalkingTrade | E4 | V Ramakrishnan | Framework for Outcome-Driven Policy to Transform Manufacturing

Thank you, Professor Bharati. Thank you, Mr. Arjun, Dr. Arjun Kumar, for inviting me to this session. Mukul, thanks for a very graceful introduction. And Srikant, thank you for acceding to my request to contribute with your background in training and development and in software and a variety of industries including hardcore manufacturing. Yes, Mukul and I have pioneered a model called co-teaching, and you can see it has been effective for both of us. He has gone bald and I have gone gray. Right now, I'm going to take a very different, alternative stance because I have been associated with manufacturing starting with my father's factories at the age of 13 on the shop floor. So I'm a very hardcore, base-up shop floor engineer who, with friends like Mukul, has graduated into more intellectual and academic pursuits. Over 40 years, I've lived and worked around the world, run factories around the world, and I personally believe that India is on a growth path that's going to be phenomenal, but it's not going to be automatic. I think there's a huge amount of work that is being brushed aside. Every report that I see lists out activities, how many people are working, what is this and that, and so on. So I'm going to take a very hard tack, a very reasoned attack, and it may not go down very well, but I would be able to respond with a lot of depth and details should it be required. Now, may I share screen and move into the presentation please? Yes, please. Now, I've called it a strategic framework because what we are talking about is essentially a very high-level system from which we should derive policy. We cannot make policy in a vacuum, and that's one of my complaints, not only in boards that I sit in, is that we decide policy on an ad hoc basis without coherence, or there's no cogent development of the policy. Now, the outline is as I've just mentioned: strategic outcome. Definition of strategic outcomes is a fundamental necessity to shape policy. For example, we took the five or six missions that are important. What is the essential outcome that the automotive industry has to deliver? It's clear: we have to substitute fossil fuels. Come up with any technology. Nobody is telling you how many hydrogen cars have to work, what size of battery, how much fuel cells you need to use, how much lithium or sodium. Nothing is specified. But have we understood the impact of this simple outcome on the MSMEs which support automotive, which is 49% of India's MSMEs contributing to automotive manufacturing? Simply put, if you go EV, the demand for forgings, castings, and foundry work will drop by at least 70%, and that is about 80% of the jobs that people are involved in in terms of machining and stuff like that. Similarly, what is the outcome that pharma has to deliver? What is the outcome electronics has to deliver? This has to be very clear. We are going to struggle hard, but it's also a huge opportunity to establish India as a manufacturing base in an increasingly service-dominated world. India has the resources, the incipient skills. We need to do a lot of development. I'll come to that. And it needs to transform. More of the same, simply rolling out cash and saying this is what's going to be happening to my MSME, is not going to work. I'll assess the current realities and look at the possibilities for a transformation. What I have done is I have polled about 40 senior people around in the industry from my contacts. Not all responded. I've collated it and presented it in the course of the presentation, and any information or details required, I'd be happy to share. Now, to get the baseline right, we have to be clear with national outcomes because strategy is essentially a deployment of limited resources to deliver a specific outcome. If you don't know the specific outcome, whatever resources you are hiring, I always tell people when I'm teaching, it's like getting a taxi and telling them go from here to there and come back in 10 minutes. We don't know what's the direction. Outcomes are what has to be delivered, to whom, by when, at what cost. Policy is a framework to ensure resourcing and delivery of outcomes. This is the base definition with which I am starting. A transformation is a comprehensive redefinition of one or more product, process, systems, or a combination, and it is critically irreversible. Change is a reversible process; it's an alteration of a physical state. I can convert water to steam or ice and put it back into water. But if I take a caterpillar and it becomes a butterfly, it is transformed. There's no question of going back. One of the problems that we have seen in the past with the import substitution, when I came into the industry in the late 70s, early 80s, import substitution was a big thing. But believe me, no public sector, no defense sector wanted any import substitution. In today's context, Make in India is a different mindset. The outcome is different. It's a question of making India for the world, not for India. India also we will supply, but essentially we are looking at the global picture. I asked a very senior industrialist, 'What is your market?' He said, 'Why did you ask me?' I said, 'You're growing at 25% when your competition is growing at 7%.' He says, 'My market is the world.' I think that's the outcome that we need to be looking at, whether it is pharma, food processing, agriculture, or semiconductors. We cannot be just doing it as a substitute because PLI comes in and they're putting in money and are going to give it to us. So we are looking at a transformation, and definitely not a change. That should be a policy shift. All the reading that I have done on all the various government initiatives, I don't see clarity on this. Maybe I'm wrong, maybe I'm blind, maybe I'm deaf, but I'm not dumb. I'm voicing that. We are draining resources in manufacturing today. I'll give you the slides for that. Critically, when we're draining resources, we impact the quality of living of people. Quality of living is the lower end of Maslow's hierarchy: food, clothing, shelter, safety, security. We are not looking at the aspirational sides. There are only two choices: you create value or you destroy value. Manufacturing, I am very unhappy, is draining value right from cost arbitrage. We have to move to value generation. That is the strategic shift that we need to look at. Import substitution was cost arbitrage. We copied what somebody else did. We didn't pioneer it in any way. The word 'jugaad' didn't exist till 2010 or 2006 or 2007. We are capable of that, but we are also capable of doing a very crude job of it. How to refine it, how to make it appealing to the world, is something that we have to look at. In other words, from being a 'me too', we are also an 'also ran'. We have to innovate. Innovation is not easy. It rolls off a lot of paper and tongues, but when a guy is cashed out, he doesn't think of innovation. He's looking at his next meal. Now, the quality of life are the aspirational ones. Many of the PLI-related schemes relate to aspirational wants. One of the things we need to bear in mind with most of the PLI schemes is that these large companies which mass produce electronics and related stuff, the employment generation is very poor. If you look at any of their chart of accounts, employee cost will be less than 1% or 2% out of the total cost. Value addition is low because component costs are very high. So we need to be careful. Of course, they are necessary. Of course, it's much better to make the Apple phone in India, not import it. But that's not going to resolve any of our critical issues that face India, which is employment. So what am I saying? The story so far: it's not a major driver of GDP. It has to become a major driver of GDP. In most countries which have grown, manufacturing has been part of GDP at between 25% to 30%, and we are struggling to hit 15%. Factor productivity is very low, which means land, labor, and capital, we consume far in excess of what our competition does, which makes us very expensive and sluggish. Value addition is poor. It has remained static in manufacturing at 33% for the last n number of years. Employment generation is hardly worth anything, and the quality of jobs in manufacturing, especially in the MSMEs, is very poor. It's not a significant source of innovation. Skill sets and resources are inadequate. This is the summary of manufacturing so far. There could be more aspects to it. I may be overstating a few aspects, but this is a broad summary, and this is the transformation required in each one of these areas. Just to give you an example, I've lived and worked in Germany, and I have a lot of respect for the way the German Mittelstand companies, the MSMEs of Germany, operate. 99% of German firms are Mittelstand firms, 68% of exports. But that's not what impresses me. Having visited numerous German firms, the level of innovation that they bring that drives the BMWs and the Mercedes-Benzes to global markets is phenomenal. It is outstanding, and it's not now. They have been doing it for the last 500 years. So there is a deep cultural heritage of innovation in the Mittelstand. It's the backbone of the German economy. In Japan, it's accounting for 99.7% of companies, 70% of employees, and 50% of all value added. In Korea, I've given you all the figures. It's equally impressive. Now, if you move to India, 33% of manufacturing output. It's an opportunity. Yes, we have to increase the share from 8% to 15% by 2020. This was the CII vision statement. You have to generate employment, increase the share of MSMEs. Sadly, COVID has intervened, so we cannot really hold anybody to account for this. But the thing that we need to be aware of in this slide is that much of the baseline numbers have remained unchanged for over a decade. Services has grown. Y2K happened 22 years ago, but since Y2K, the services industry has gone past 150 billion, and we're still struggling in manufacturing. Now, these are dated numbers. Sadly, I'm not able to get the latest numbers. But if you look at Indian manufacturing SMEs, and someone could ask me why are you focusing on MSMEs, because MSMEs are the backbone. If you cannot have an MSME, you cannot have a manufacturing unit. Any big guy comes in, he's going to require somebody who makes some parts for him, somebody who maintains a machine for him, somebody who repairs his door, somebody who wears his equipment. In the case of the Mercedes-Benz factory in Pune, somebody to rescue a leopard which ran into the factory. These are all activities that are essential. You notice India's MSMEs are 8% of the overall activity, whereas most others are in the 45% to 50% range. That's the gap, but that's the opportunity for us as well. It's not been an employment generator. It generates just 21% of employment, whereas again the average is around 70%. It has been static. Manufacturing share of industry is static. I read the latest report from the Ministry of MSME, and it has actually come down to 33% now. So manufacturing is actually on a declining trend and has to be reversed before it grows significantly. Percentage shares are there. Manufacturing is 29% of the total gross value added, and that also has remained static for the last 15-20 years. Compared to value-added growth, you can see the trend lines are dipping. I stress, if you don't generate value, you're destroying value. For people, productivity is falling despite better education. We need to look at all this and ask ourselves what is it that we have done and what could we be doing more of, and what should we be doing less of. That's what I'm going to attempt over the next few slides. Now, if you take the Indian MSMEs, less than 4% of the companies have 500 or more workers. Less than 4%. In Japan, it is close to 70%. So the numbers are so feeble and so weak. Simply by saying that I'm going to do more of this, I'm going to consider more camps, I'm going to do more skilling, I'm going to do more training, I'm going to give more cash, this is not going to work. We need to have a base-up level. How should we look at the base-up level? This is the result of the dipstick that I did. How should we go about making this change? I asked people who are chairmen of companies, founders of companies, audit firms, young entrepreneurs. Anush is just 42 and is an outstanding entrepreneur in textiles and a whole host of areas. He's also a venture capitalist. These were all people whom I polled, anywhere from about 35 years of age to about 70 years of age. Basically, the feedback is: let's create a network of MSME support industries or clusters as we call it. We've been talking about clusters for 30 years. The food cluster that you just spoke about, it's not going to happen on its own. The outcome for the food cluster, if that is not clear, each guy will want to do what the other guy is doing. It's like this: I do organic farming in Kunnar, and when we do the farming, the farmer next door sees that guy grew carrots last year and made a lot of money. This year I'm going to grow carrots. What happens? 10 people grow carrots, the market crashes, and then they are not making money. The same thing is happening in business. Indian MNCs are preferred over foreign MNCs. Having done more than 21 joint ventures in my lifetime, I can tell you foreign embassies are fair-weather friends. They are here till such time as they can add some money back to their books at home, and after that, they leave you high and dry. It has happened to Malaysia, Singapore, Philippines, Korea, all over the place, Mexico. The second question I asked is: what are the primary outcomes for the Indian manufacturing sector to deliver? You can see the maximum was globally competitive gross value added. That itself is the outcome that manufacturing has to say. What should be the gross value added for manufacturing over the next year, two years, three years, five years, ten years? We should have a vision statement, and we have to enable it and make it happen. That to me is primary. Now, promoting innovation: you can promote innovation only when you're successful and you have money. Most MSMEs don't know where they're going to get their money to pay the next salary. They are not going to innovate. So how are we going to further innovation? Government has tried central schemes like DRDO and a whole host of companies with limited success. Some have been very successful like the auto sector, some have not been so successful. What are the top five priorities? Actually, there were five priorities I asked for, but since the sample was limited, I just pasted the whole thing. Garments and textiles is a huge opportunity area, but Vietnam and Bangladesh didn't exist in garments 30 years ago. Just as a matter of interest for this audience, do you know who is the second largest garment exporter in the world? Can anybody take a guess? It's Germany. China, Germany, Vietnam, Bangladesh, Bangladesh, Vietnam, and then India. Yet when we had to do face masks and PPE equipment during COVID, the same textile and garment industry went to the government and asked for subsidies. That's the mindset which is destroying innovation in our country. Of course, gems and jewelry, there's a minor value addition. Agriculture processed foods are good, but the question you ask yourself is: do processed foods really offer a market for export? I went into processed food manufacturing in 1991 when I was head of strategy for the Kirloskis. We found less than 2% of the Indian tongue accepts processed foods. Of course, it's grown subsequently, but it's nowhere near like the West. In the West, I can go get a salad, a chicken tikka, dal bhuniya, whatever, and make a meal. You're struggling with that. Pharma and healthcare, yes, it's a huge opportunity, but not in formulations. The pharma industry gave up API and sent it to China. We are now struggling to get back into API. We just stopped making API because it is cheaper to import from China. Why is it that China can make it and we are not able to make it in the same volumes? Today in India, we cannot complain about lack of volumes or economies of scale. They are immense. So there is a problem that we have here which is going under the carpet. Electronic components and IC chips, yes, it's vital, but that should not be the end game. What is the share of IoT that we want in the world market, for which we need broadband, all the infrastructure, all of that? It is just not chips and semiconductors. Chips and semiconductors look easy, but my constant refrain is the volume of clean, clear water that they require per chip plant is 5 million gallons a minute. Do we have those resources? It's nice to talk about it, but the outcome cannot happen unless you manage your water. This is a simple equation. Batteries for both the EV and the grid, grid storage and for the cars, is a very important part of it. I have a fully alternative energy home. My house is fully solar. I have a patent on underfloor heating using solar. All that is feasible, but battery life, solar life, solar cells are not easy to make. Of course, big players like Reliance, Adani have all got into it. It's an opportunity area. Batteries: it's a confusing plethora of users and electric vehicles which people talk about. I was talking in a board meeting yesterday. As on date, there are 42 makers of electric vehicle scooters. Obviously, there's going to be a shakeout, and it's going to happen over time. So there's going to be some downside to it as well. Now, I asked them: what are the best developmental models for our MSMEs? Should it be Germany? I had a variety of answers: Germany, Switzerland, South Korea, Singapore. But the maximum was we have to generate our own model, and I agree with that. There are distinct features that we have, and I'm going to talk about the models now. What are the major drawbacks that we face? Why is productivity poor? There is no skilled labor. Today, five years ago, all the construction workers in my part of the country were from Bihar. Today, they are from Jharkhand. Extremely hardworking boys and girls. But once they are finished with this and they move on, all the skills that they have built over five projects goes with them elsewhere. Another industrialist pointed out: when my father started this factory, we were 15 kilometers from the town. Today, we are within 5 kilometers of the town, and all the labor, there is no white collar, no longer blue collar. These are realities. We do not get labor. We do not get labor, period. Forget skilled labor. Inability to innovate is a serious problem for MSMEs. I've already described it. Too many rules and regulations, all of us are aware of it. Low value added: there is hardly any value added. A big company gives you a design, a drawing, a material. You produce it, and you make an arbitrage of a few percent. That's all you do. What are the limitations? This is completely ignored. MSMEs and most Indian companies have an inability to develop markets. Our approach is and has been: I have a great product, come and buy. The world's not like that. We'll have to understand market dynamics. Simply promoting and going around on a junket saying this is what we have, attending a few exhibitions, is not what it is all about. It takes focused, concentrated work. The best example that I have seen in my lifetime is the EDB and the IE of Singapore, which has really helped the MSMEs come up to substantial sizes. Not only do they find markets, they find customers. They encourage the customers. They give you the money to meet the customer requirements and take you places. Price-based purchasing: that's very true. The standard rule in most companies is: if I can do it at 100 rupees, you should be able to do it under 85 rupees. My question is: look, 60 rupees is your material cost. How is he going to do it in 85? Why should he do it at 85? After all, you may get 4-5% material cheaper, but for you, labor is more expensive. For him, the only component that he can save on is labor because material cost offsets that. A significant element is that our banks don't understand the manufacturing model. They're using outdated metrics to evaluate loans. Mukul and I have been working on a paper for some years now. Maybe it's time to pull it out and bring it out. SEBI has now started looking at the metrics that a company has to report, public companies, very differently. I think banking has to change. As one young man put it: I can get a Honda at 7% loan, but if I want to buy a CNC machine, I have to pay 12%. The Honda can run away, but my CNC machine cannot. It's grounded. That's the sort of conundrum that we need to address. You will also notice in the top five limitations, government policy is considered the least relevant. That is how irrelevant government policy making today is. That's what we need to look at and understand why. What do MSMEs require help in? Product development, help in process efficiency, and capital for plant and machinery. This is the feedback that I have. This is with all of you. I've sent it to all of you. Working capital management, liquidity, and cash, yes, it is a serious issue. All of this, a lot of work can be done using the net and the artificial intelligence around and IoT. Singapore has done something similar in making common accounting platforms for MSMEs. So we can think about a lot of things, and there are solutions for many of these. It's not as though we are desperate and don't know what to do. So majority are tiny, undercapitalized, no ambition to scale, don't generate sufficient cash, clueless about markets and customers. Factor productivity we have discussed. Factories: number of factories with 500 workers is discussed. GVA per worker in large factories is much higher. So there is a case for size in MSME manufacturing. As is the GVA, both the GVA per worker and GVA is much higher overall. The size of the factories higher. Mukul mentioned this: economy, efficiency, and effectiveness. This is the slide that we have used very often. If you want value for money, the resources are capital and cash, plant and machinery, and knowledge. Output: goods and services. And outcomes: if you don't know the outcome, if you've not defined it, you cannot run an effective operation, whether it's manufacturing, services, academics, or anything. You must know what you have to deliver, to whom, by when, at what cost. Each industry vertical has to come up with that number, and the government has to facilitate that. That is a key policy that has to be set out as a document. This is what we have to deliver. Who's the target audience? Who's the target market? At what cost? So we refer to it as the triple E economy: efficiency, effectiveness, and economy. Economy is not about cutting cost. Economy is about optimizing use of limited resources. Efficiency is about optimized use of plant and machinery. Effectiveness is the overall result that the business delivers in terms of value generation. I've defined this, so I won't stay with this. Now, what are the reference models? I personally prefer the Japanese construct. Mukul and I were having a discussion this morning. What's the German model? The German model is phenomenal. It goes back to the guilds from the Hanseatic towns and goes back more than a thousand years, where every trade has to be certified by the body that controls the trade, not with the government. Even a supervisor is not a person who becomes a senior operator who becomes a supervisor. A supervisor in a shipping company has to be trained as a supervisor in a shipping company. A supervisor in a textile factory has to be trained as a supervisor, not as an operator. So the German model has a long cultural history. The Japanese less so. The Japanese go back only about 100 years, and it's much easier to replicate because the German model is just taken for granted. So I'll dwell a little bit on the German model and then the Japanese model. You can see their basic act: the Medium-Sized Enterprise Basic Act of 1963, amended December 1999. So they're fairly current. Basic measures promote business innovation. You can see clause-wise what they've got: strengthening of business fundamentals, smoothing adaptation to changes, equity capital, administrative structure, small and medium enterprise policy-making councils. This is the broad framework. I've given you the reference. You're welcome to take it, and we should be able to leverage on our goodwill with Japan and enable this. The next slide will tell you why. You see this structure: prefectures, most of us are aware, are like our states. In Japan, you have METI's SME Agency nationwide. SME Agency functions as policy maker, and their complete architecture is open to us. JETRO is external trade. Finance Corporation, there's a banking operation, credit guarantee. There's a separate one. Of course, they've used a Japanese spelling, so you'll have to forgive me for that. So what are the roles of chambers of commerce and industry? What is the commerce and industry association? Anush made a point which I wish to mention: before the budget, every industry association only asks for the favors that it wants. Have you ever seen any industry association asking for what Indian manufacturing should look like before any budget? CII attempts it to an extent, but is it comprehensive? Let's decide that. There are quite a few SMEs. So now they look at viability before providing funding. It's not that we say 20,000 crores available, you can come and tap into it. We will waive interest for two years. That to me was not a very great idea. When I asked a lot of MSME people, the only question that they asked me is: 'Yeah, I can take the loan, but I have to pay it back. I'm not sure how I'm going to pay it back.' This was the answer, which is why the take-up on that was very limited. Startups can get the following support: management consultation, providing startup advice, business incubation, expert advice in management. Now, we have all these building blocks lying around somewhere in our system. But I have interacted with some of these experts in management and experts in the business. These are people who have spent 40-50 years in the business, who have retired and are now taken over by the industry associations to help people in that vertical to grow. In other words, they're given help, assistance, and inputs to deliver the outcomes that the economy wants out of them. Funding, investment, or venture support of the company management is the last. It's not the first step. How are they developing it? Japan has to go international. They look at human resource cultivation, which we're going to talk about. Environment and safety measures, support for manufacturing through comprehensive assistance in R&D. Innovation is not going to happen at the micro level. Support for reasonable regional resource utilization, fostering cooperation, fund investment, and debt guarantee. You see the finance always comes in the last. Whereas any, if you look at the balance sheet of the Ministry of MSME, the finance is the first thing that we talk about. That's the last thing we need to talk about. We must make it viable. There's a mutual aid system, which is what the cluster concept is. Business safety mutual relief system offers financial support to make SMEs in an emergency situation like COVID, which we have done. Fund investment, turnaround if it's viable, and SME turnaround support fund. So this is the structure, and I've given you all the references here. I'll be happy to share more of these references because I think here is a solid model, a proven model, which we can work and adapt. What are the ways we have to adapt? Too early to say unless we know what the outcomes are and what our policy belief is. You can't adapt to this. So we need to keep this as a dynamic model and not a static model. The German, I'd rather talk about the ethos. Firstly, they price their employees. I was chatting with Srikant also. You get a guy very highly skilled and trained for two years, and you put him into the industry. Do you think that guy in Tirupur is going to pay the tailor any percentage more because he comes skilled? We don't pay for the services that we want because he doesn't get the end product. That is the pricing issue I spoke about in the feedback session. Most are family owned and managed over generations. I worked in a company in Germany which was in the family for three generations. I'm still in touch with the fourth generation. When they come to Asia or I go to Europe, we always meet up and chat. That's the depth of relationship we have. No business dealings. The business dealings are with my family business, not with me. The cosmopolitan yet very traditional employers enticing career opportunities. I'm yet to see any turnover in a German SME. Hardly a guy becomes a designer, he becomes a chief designer 30 years later. He's able to innovate because he has been steeped in that industry. They invest to create more jobs. Technology development is something that they are mad about. They do business for the long term, and they have a strong sense of social responsibility. You ask our guys to pay ESI and PF, and you can see how much they complain about it. So this is the ethos from the German side. From the Japanese side, we have a practical, down-to-earth approach about how to approach the setting up of successful MSMEs. If you can combine both, we can have our Indian model. Yes, it requires a huge cultural shift. How that's going to happen, when it can happen, will it happen, those are more points. But this is the ideal that we are looking at. This is very shocking: the skilled workforce in India. South Korea has 96%, Japan it's 80%, in India it's 2%. So we have a very substantial job for training our people, very very substantial. We have 5,000 public ITIs. China has 500,000. What I feel sad was the ITE model in Singapore was set up by our ITI bigwigs in the mid-60s. Today, you go to an ITE, it is far more modern than most machine shops in India or most training centers in India. Latest equipment, well-trained staff, extremely well adjusted to the industry. Their complete training is based around industry demands. We taught them how to set it up, and yet we are laggards. So everywhere, the vocationally trained is 90 plus, and we know that large industry accounts for less than 5% of India's employment. So we're not going to get away from this. This is the transformation we need to look at. But there are puzzling numbers here which I'll come to now. Lack of training facilities? I don't agree with it. There are lots of opportunities which you can talk about. New entrance into the workforce is only 4.75 million, not 12 million. So why are we looking at 150 million vocational seats in the National Skill Development Fund? You need 4 million a year, 12 million, 15 million a year, assuming you want to retrain, assuming you want to get hold of the 8th standard, 10th standard, 12th standard dropouts who, in the new education policy, were given the option. So we have to size our problem. We are having numbers all over the place. Another document within National Skill Development Fund talks about 406 million institutional seats for vocational training. That's one third of our population. Graduates' employability sadly has dropped from 56% to 37% in 2021. I've given you all the references. ITI: we talk about it. Out of 750,000 seats, only 76% is used. 24% is lying fallow, and the infrastructure is pathetic, I can tell you. So there's a huge opportunity there to revamp it and start using it. How do you transform? Form clusters. This next line I'm taking out of Srikant's feedback to me: 10 corporates to nurture 100 mid-sized firms to nurture 10,000 MSMEs. Credit is to Srikant for that line. Focused, industry-relevant, role-specific skills. It's very sad. Every textile factory, garment factory I visit, one of the biggest shortages is people who can iron. Ask yourself: without ironing, can you pack a shirt or a t-shirt? There are no ironers, and it's a job which nobody wants. So there's a huge lack of specific training skills. Tailoring: a tailor can only make the needle go so fast. But if you want throughput out of an operation, you need to have a skilled workforce at every level. Different levels of skills for sure, but you need it, whether it's making or assembling cars.

Manufacturing metal parts or doing plastics, you need specific skill sets. There are institutions in the south like the JD Training Institute which have identified and have been doing a phenomenal job for the last 40 years. So it's not unknown in India. Build flexibility because whatever we talk about today, within three to five years the market dynamics is going to change. Mentor and coach the entrepreneur. CII has a coaching program, but again it has been reduced to a template. Coaching cannot be a template; it is very individual-specific and business-specific, which is what the Japanese have done. If you go back and refer to what is there, India does not have a brand in manufacturing. China is known for its low cost, high speed. Taiwan is known for its high quality, super quick turnaround. What is our brand? We don't have a brand. If you don't have a brand, you will not get a premium. Brand essentially requires, as it tells you, 'I will perform what I promise, and hence pay me more.' Indian manufacturing does not have a brand as yet. We should build one. That's a transformation that we need to work on. Encourage and reward excellence. Loans can be cheaper, as I mentioned. Logistics, I think all of us know what a horrible situation we are in. Should the Government of India be so prescriptive in training, in manual, what CSR fund has to go where, who has to do what? 'I'll only do this, you will have to go into a toll room, you'll have to do this.' The plethora of institutes that are involved in training is overwhelming. Frankly, I've read about it on the net eight or ten times, I'm not able to get my mind around the number of people involved in skilling and training, and yet we have only two percent of our workforce trained. Remember the National Small Industries Corporation? Go back to the early fifties; my father was a beneficiary of that. And yet only two percent of our workforce is trained. Why? R&D is a wasteful process and we need to encourage it, but let's be clear: it's not going to happen voluntarily. It's going to happen if there is a price arbitrage or a business benefit. MSME is going to struggle to do it. Current players are here, the emerging players are known. There's defense production, semiconductor, textile parks, pharma, all that Dr. Bharti defined fairly clearly. Traditional Indian systems, but what I'm pointing out is electric vehicles. They will obsolete a substantial part of our current manufacturing infrastructure. An electric vehicle has 20 major parts compared to about 16,000 in an IC engine, including nuts, fasteners, bolts, everything. All that manufacturing jobs are gone. It'll require completely new technologies: materials, sensors, magnets, precision die casting, high-strength plastics, integrated telematics. We are nowhere in all of this. Additive manufacturing in construction, low-cost housing. IIT Madras has already done several pilot projects and you can build a full home in less than 22 days with additive manufacturing, where you don't peel away material to make a shape but you add material around the shape that you want. It has immense potential in low-volume manufacturing, low-cost manufacturing, for example, limbs for doctors. And I was surprised, I was speaking to somebody at a dinner a few days ago. He exports more than 40 crores worth of bespoke garments manufactured in Gurgaon to America alone. The tailor measures it and sends it, he produces it and ships it back. This is manufacturing as a service. Mukul mentioned it. So there's potential, and there's much more. I've just put in a few areas: MRO, maintenance and repair organization, additive manufacturing for spare parts. Of course, you need it licensed, validated, verified, all that is there. But that's a huge opportunity. People are getting into it but struggling with it. Precision manufacturing. India does not make containers. Why? It is basically sheet metal, but it's precision sheet metal. It's not something that you can put in good luck; it has to be manufactured with high precision. A large container is a very high precision product. So are aerobridges. What's so great about aerobridges? Indonesia, which has no manufacturing infrastructure comparable with India, was making aerobridges in the mid-80s, and we are still importing them. And remember, 100 airports are coming up. Let us say each with five aerobridges: 500 aerobridges for India, replacements, exports. There's a market, but it's precision sheet metal. We do very crude sheet metal work. EV and other things would require high precision sheet metal and die castings. In fact, for Tesla, the entire base of the Tesla car is a die casting, a single piece. When that happens, your labor component will drop, but the precision requirement will go up. Electric motors, controls. Manufacturing is a service, I've already spoken about it. So what do we focus on? Skill sets specific to the industry. Government is a facilitator and auditor. Map skill sets for current and emerging requirements at the highest level based on outcomes to be delivered by the sector. Here is where the strategy and outcome should come back; that should devolve into policy. Today, the data available is extremely confusing. Yes, training is a concurrent subject. Policy is from the center, the states are involved. But I was asking somebody, 'What is the policy that the center should enunciate?' Nobody is able to mention it. And I think training is fine, but we need to pay. Anush has just sent me a note saying people prefer to work for 7,000 rupees as a salesperson in an insurance company rather than 12,000 rupees in a manufacturing company. So when we're talking about skill sets, how are we going to ensure that they are employed? Yes, the internship program that the Government of India started, I would leave to Srikant to talk about it. It's a fantastic program. All the people who are using those interns are very happy with them, but will they stay in the industry after two years? Or all the training and they'll go off to some other industry for software coding? We don't know. All this, and the Skill Development Ministry is a separate setup. So you have the Ministry of MSME, Ministry of Manpower, Ministry of Education, Ministry of Skill Development, National Skills Development Corporation. I think one of the things we need to do is integrate it into a single body and work with industry associations to take care of training. They know more about what they need. And that is where I go back to the outcome: what is to be delivered by whom, at what cost? They will be able to manage it better. That's the secret of the guilds in all of Europe, not just Germany. It's there in Holland, Switzerland, France. We have vast resource space available. We have to channelize this. It can transform manufacturing if only challenges are recognized and addressed. More of the same is not going to help us. Innovation as in pharma helps, market development in textiles. I was asking again, I know sadly he's not able to join us, 'Why is it that India imports fabric, polyester fabric, synthetic fabric?' His answer was, 'India has the largest company in the world making the raw material for synthetic fabrics, makes it the cheapest, but it is still the costliest product in India.' I don't want to name names, but the factory on the west coast of India is well known. We are still importing 30%. Cotton is not imported, but very few people use cotton. Cotton availability is limited. The bulk of garments are made from synthetics, and we're still importing it from China. And it has a huge consequence. I won't go into it. I have restructured a company, so I know a little bit about it. The auto industry is in ferment. IC engines have a life of 10, 15, 20 years, whichever way you look at it. Maybe the largest segments like shipping, ship and rail may have something for a little longer. But please bear in mind that in an IC engine in a car, more than 50% of the car price is still imported. It contributes a significant amount of our current account deficit: aluminum, rubber, chemicals, electronic components, carbon black for tires. All this continues to be imported. So we need to look at this based on a number of factors. I've covered a broad swath. I've been extremely critical, but I think if you're going to have a policy shift, we need to have a critical analysis. It does not mean to say that we are critical of somebody or some institution; that's not the intent. But we need a critical evaluation of where we are. We need a clear understanding of where we want to be, and we need coherent approaches and policy to take us there. I'll be happy to answer questions. Otherwise, I hand over the floor back to Professor Rashar to take it from here.

May I just come in to support what Srikant said? Mukul, Professor Bharti, if you look at our ITIs, our engineering colleges, medical colleges, or science colleges, 70 to 80% of the time the labs remain unused, machine shops remain unused. Can we train the trainers and use that time? Today, work from home can be done for all the theory courses. These people can go over the weekend or in the afternoons or evenings when the labs are not occupied, and they can be trained. And in this way, to take off from Srikant, yes, the directions are right, but we need millions upon millions of these people available because the solution to the problem of plenty is to have a solution of plenty. If you have a lot of surplus skilled labor, this labor migration, people switching jobs, changing jobs, that will drop automatically. Till then, it's going to be a constant phenomenon. Can we not use the available or reshape the available infrastructure? As Peter Drucker put it 50 years ago in his own way, he says the biggest lack of productivity is the classroom because it's used for two hours or three hours in a day. Prof, no insult, that's all we're using it for. Same thing with our labs. We can take these ITIs, we can run them on a three-shift basis. We can tell people what is happening, and we can use these resources. Every engineering college has a set of labs that are underutilized. Every medical college has labs underutilized. Every science college's labs are underutilized. So to take on from where Srikant said, can we plan on training millions of people with available infrastructure and upgrading it? Yes, it requires a massive upgrade, no doubt about it. Because other than the four walls, much of it is already 50 years old. As he said, training a blind guy to do some fitting and filing work is not the be-all and end-all of it, because fitting and filing, once electronics takes hold of our life, is going to drop by about 60%. Thank you.

I live in an area where there are about 300 tribal villages in the Nilgiris. I understand the situation reasonably well, though I can't say it's hands-on or tactile. In the agri sector in the tribal sectors, every resource is missing, and the level of ill health in these sectors is extraordinary. I was part of an NGO where we try to help promote organic farming because they have cows, they have all the access to generating organic farming products. I myself am an organic farmer, so I understand it reasonably well. The question is the level of health and education is so backward. The women are very hardworking. They took up organic farming of herbs. We bought the herbs from them, gave them a clear 24-25% margin, we retained 8% for our management cost and supplying some of the inputs. But these poor ladies are extremely anemic, they're very sick, and much of the money that they earn gets taken away by the men. So we should not look at it as a tribal area problem. I think we should look at it as a human developmental problem. Education is the key. The district collector here wanted through COVID to establish online classes, but some of the tribal areas were so deep in the forest there was no broadband. We just concluded an eye camp two weeks ago for the tribal children, and we literally had to send our autorickshaw garbage bin collectors to the loudspeaker asking them to come for the tribal thing because everything was free. It was done by a leading institution called Aravind Eye Hospital free of cost. The children were examined. We focused on the children because the children's eyes are bad, their education suffers. They gave them free lenses, free spectacles. The children were taken to Coimbatore for major surgery in case they required it. But the moment you see it, you realize that the human development index is so poor. We need to focus on that primarily. Give them good nutrition, give them good food. How is the question? Because through COVID, what has happened is everybody has gotten used to eating tons of rice and dal, nothing else. Diabetes is high, anemia is high. So if I start trying to improve this as a superstructure without reaching the basic needs, we will be missing the bus. We have to have a lot of humility to accept that we have not done a great job of it. And these village hamlets are small, 20 families, 10 families. They are 10-15 kilometers away from the major routes. Very often you can't go, and you need a four-wheel drive to get there. So we have to look at this as a base of the problem. I don't have a ready-made solution. If I had, I would have spoken about it. Simply taking them, bringing them to the urban area, giving them a degree, and giving them a job is not going to work because you're not lifting up the basic health and nutrition of these people. If I may, let's also be very clear. People who have access to jobs are in the urban and rural areas. So they are going to fight for the last bit of scrap that is necessary. And on this point, I will touch on what Mukul said. 95% of the youth in the area that I live in cannot speak a word of English or Hindi. They cannot get a job outside of Tamil Nadu. So I don't know if language, regional language focus, is going to help. And in the context of the tribals, many of them have their own sub-languages, which makes it very difficult to communicate as well. Yes.

Take it. I'll follow up with what you have to say.

See, to come in, let us understand what trade agreements are about. Trade agreements are not about benefiting India as a country. It is essentially a route to find how they can deliver their products and services into India or get a ring fence around resources from India that their industry and society can use. I have been involved with AFTA, the Asian Free Trade Agreement, which was a successor or which was copied from NAFTA in the mid-90s. And every country came up with the idea, 'Oh, wonderful idea, AFTA.' But all of us have to be dollar-neutral in our transactions. Now, how is that possible if you're not making cars and you're importing cars, and the other guy is buying rice from you? You're never going to be dollar-neutral. So these trade agreements are barriers. And particularly in the East Asian countries, there is an insidious barrier of language which is used. I have done more than eight joint ventures in Japan, and I can tell you their faces will go blank and they'll start speaking Japanese when something inconvenient comes up. I have sat down with a Japanese gentleman who's a great lover of India, he sits in Delhi. I have about 25 PowerPoints where he has explained how the Japanese are not serious about certain barriers. We need to accept that. The question is, as much as pointed out, if India is economically sound, socially integrated, and politically confident, we will get better terms for our free trade. For example, with oil, we are currently going through that. We are getting oil at a preferential price because India is now a desired destination. Why? Economically, India is getting onto a sound footing, and let us face it, that is what people respect. Socially, India is still in a bit of tension, but it is on a road towards integration. How it will happen, when it will happen, whether we are going to be secular or not secular, I don't know. I'm not looking through a telescope to find out what it is. And politically, we are savvy. We know what we want, we know what outcomes we want. Therefore, we are able to frame the agreements. A simple example is what's happening on the Galwan border. We have refused to yield because we know what we want. I wonder how many of you picked up what our National Security Advisor told his Chinese Foreign Minister: 'Of course I'll come to China, but first sort this problem out.' That confidence is essential. And I think going forward, the free trade agreements we have done so many, but if you really look at it, why did we walk out of that BRICS and East Asia zone? Because it is not beneficial. We said, 'Okay fine, you guys go ahead. We don't need it. You need Indian market access, you're not willing to give me the same access.' Now, whether you're competitive or not competitive, that's a second issue. Of course, we have to be competitive. Are we competitive in certain segments? Yes, like pharma, software services, we are good. In certain areas, we are not. Defense will increasingly become extremely competitive. So FTAs will only work if there's a mutual need and one side is able to fulfill the needs of the other in specific terms. This is my take on FTAs and joint ventures. Essentially, an FTA comes from a position of weakness, not from a position of strength. 'You have what I don't have, I have what you don't have, therefore let's get together.' I see Professor Bharti smiling.

I think the first step should be to identify sectors which satisfy the basic needs of the people. This could be five or ten sectors which are essentially about well-paid jobs for which we need skilling. We need aspirational sectors which will help India sustain as it moves forward. We can't have 45 sectors to develop. We need to have sequential development because if I develop textiles and garments today, I can't be developing it again 20 years from now. It has to go on a self-sustaining mode. We should bring it up to speed and let it go. The Government of India should be a facilitator and a promoter, not a micro-manager. We need extremely thoughtful processes to skill our businessmen. Our managers today are very inept. They are not capable of managing a highly competitive business. They don't think that way. So we need to put a lot of time into upgrading those skills. And we need help for these businesses to actually find customers and ensure the quality and the competitiveness is maintained. There are methods of doing it. We can't get into it. It's not going to be easy. It has not been attempted in too many places, but it is not as though it is an impossible task because there's a requirement somewhere, there's a potential to produce it somewhere, and we need to identify what needs to be made to happen. That's my way forward for this whole discussion. Thank you.