The Financial Times (May 20,2011) just published an interesting article on India becoming the world leader in what is known as “frugal engineering”. Always behind China as the world’s low-cost manufacturer, India has chosen the path of producing low-cost products that are resistant to tough environments such as Indian or African roads and weather–and have robust quality standards. India, already known as the IT back office of the world, is now creating hubs for global manufacturing of small cars, wireless telecomm equipment, and low-cost innovative products for emerging markets ( as well as such items as small decentralized power plants for areas of the world with no electricity).
“The story of India’s rise as a key contributor to the global supply chain is very different from the one that elevated China to ‘factory of the world’ status. India is putting less emphasis on hard-core manufacturing , but it’s taking a leadership position in research and product development”, writes the Times. Products developed by “frugal engineering” for Indian markets fit well in other developing world markets in African and Latin America.
Ford, which has invested over $1 billion in a 200,000 auto/year state-of-the-art plant in Southern India, is making cars for emerging markets, where manufacturing costs are often higher than in India. “We now recognize it as a hub for small and fuel-efficient cars”, says the head of Ford-India.
India is also becoming a more popular destination for global manufacturers who want to decouple and de-risk from China, whose wages are rising, whose markets are highly regulated, and where intellectual property rights are often infringed.
Discussion questions:
1. What is India’s strategic advantage over China and what is China’s advantage over India as a global manufacturer?
2. Why is India a world center for frugal manufacturing?