Address by Mr Ravichandran Purushothaman, President, Danfoss India and Chair, CII Southern Region, at the CFI–MMA Manufacturing Leadership Forum on the theme “Realising India’s Manufacturing Ambitions: Capabilities and Mindsets that Matter.”
The topic today is extremely important, given where India is sitting and the window the world is offering us. What we do during this window, as companies, individuals, government and every other stakeholder, matters enormously for the growth of the Indian economy.
A couple of days back, I spent over four hours with Dr. Ashok Kumar Lahiri, the Vice Chair of NITI Aayog, on one question: what should India do differently to capture this opportunity in manufacturing? We looked at the last seventy years, at what we got right and what we got wrong. In the socialist era, we assumed that if we put money into the public sector, it would take care of manufacturing. Over five or six decades, that proved not to be a bad model, but it did not bring agility or value creation. A designer of the bullet train at Southern Railways, someone I play golf with, once told me that for fifty years they worked with Indian industry to develop a brake for a railway coach, and they still use a German one.
Let me share a few numbers. India is a four-trillion-dollar economy, and the US is thirty trillion. What is unique about India and the US is that nearly sixty percent of GDP comes from local consumption. No other country has such a formidable share of consumption in its GDP basket. Since 1994, almost thirty years, India has grown at an average of six and a half percent, irrespective of who has ruled in Delhi. In the years when we touched seven or eight percent, the higher growth came from manufacturing. So the real truth is that if you fix manufacturing, you can grow at eight-plus percent. The arithmetic is simple. At four trillion dollars, if manufacturing grows at twelve percent, we reach fourteen trillion by 2035 and thirty-two to thirty-three trillion by 2047. That is why we at CII have been working so extensively with the government to fix manufacturing.
There are great examples from other countries, and China is the one to learn from. Twenty-five years ago, they made a vision document that outlined which sectors they would play in and which companies would lead those sectors in the world. In 1999, I was working for a telecommunications company, Siemens, and Josh was at Nokia. In our boardrooms, we spoke about a company called Huawei. In twenty-five years, China picked its little champions and the state supported them. When you go one level deeper and ask what really changed, it is not technology and it is not the ecosystem. It is leadership, the leadership of the entrepreneurs. That is what transformed China.
So what is our vision? Mine for India is simple: make for India, scale for the world. We have a sixty percent consumption story, and in every sector there are significant opportunities.
Let me leave you with five things we must get right.
First, the sectors we choose to play in, and the ecosystem within each of them. In almost every industry where we manufacture, we are scaling, but there is still an awful lot of import content. That is not fixing manufacturing. It is creating a hole in the balance of trade and on the balance sheet of the Indian economy. We are working closely with NITI Aayog to pick sectors. The new manufacturing policy for five sectors was launched last week, and we will probably add ten more. The problem is silos. Everyone in a sector should think about growing the size of the cake, not the size of their slice.
Second, talent. Manufacturing does not naturally attract talent. When we set up our Oragadam facility, Ganesh gave us a wonderful blueprint and playbook for the infrastructure, because nobody wants to leave Sholinganallur and travel all the way to Oragadam. How do you persuade a Gen Z engineer to travel an hour and a half, get up at six and catch a bus at quarter past? There is no silver bullet, and what works for my company may not work for yours. When I started in 2013, we were in refrigeration and air conditioning, a subject not even taught in colleges. No professor knew what minus thirty degrees meant, or at what temperature you store apples versus bananas. So we invested in the ecosystem right from the start. We worked with five or six universities, because I did not want an Oragadam that spoke only Tamil. I wanted a national outlook. We went to the professors, told them what kind of company we are and why we exist, helped scale them up, and through them built the students. We have done this for fifteen years, and today our attrition is six to seven percent, because our purpose was articulated early. I have about four and a half thousand people, 83 percent of them Gen Z. They join with an undergraduate degree, and three years later they want a master’s. We worried they would leave, so we co-created a master’s degree with a university. They earn while they study, and some of them give up their Saturdays and Sundays, just as we are sitting here today. Every company needs its own playbook to attract and retain talent. It is a fundamental need.
Third, investing in the ecosystem. From 2000 to 2007, we were only importing and selling. In 2012, we got board approval to build a full-blown value chain in India. We found that importing would not stay competitive over the long term, so we had to indigenise. We built the R&D, the knowledge bank for developing and adapting products, and then for conceptualising India-for-India products. Along the way, we learned that Indian customers want European specifications at Chinese prices. That was a revelation. To deliver it, we had to master cost, and the best way to manage cost is a strong supplier ecosystem. We hunted for suppliers, and we could not find one for brass, which refrigeration needs at low temperatures, along with copper. I ended up in Rajkot, landing in eighty cities like an Indigo plane, figuring out where suppliers were. Today I can proudly say we have 200 suppliers, built over ten years. We invest in them, including capital, and we help them supply not just to us but globally to our parent companies. You can keep talking as long as you like, but if you do not build your own ecosystem, you will never fix manufacturing.
Fourth, leadership capability in the supply chain, and how we treat our blue-collar workforce. At Danfoss we practise what we call horizontalisation. We do not keep the same blue-collar colleague on the same value stream for more than three years. Someone on refrigeration moves to power electronics, then to another line. It brings pride, because he or she is learning something phenomenally different. Otherwise you see brass for a lifetime and never know the pride of electronics. It also helped us during COVID, when we had to run continuous production lines. We could rotate people, and nobody had a skill issue operating a different portfolio. We must also lift five to ten percent of the best blue-collar talent into white-collar roles over five to ten years. As a country, we are very good at manufacturing but very poor at process IP. Coke and Pepsi hinge on the process IP of how each is made. I don’t think any company in this room has seriously looked at the process IP of how it runs its own processes. There is phenomenal work to be done there.
Fifth, labs and validation. Building supplier capability in India is hard because for many products there are no good labs. Automotive companies have built some, there is a test track somewhere in Oragadam, and there are power research labs in Bangalore, but India has put far too little focus here. If we want to make for the world, we must understand the world’s playground and the test certifications it requires.
The most important emerging challenge, and opportunity, is CBAM, the carbon border mechanism. Carbon-based pricing will apply when you export from India. For manufacturers, that means taking carbon out of your operations. This is where we have a far bigger edge than China. Southern India accounts for 30 to 33 percent of India’s manufacturing GDP, and Tamil Nadu operates at about sixty percent renewable energy. You must harness green energy and decarbonise. If we fix green manufacturing, carbon and water neutrality, I see no reason why India cannot achieve the one-trillion-dollar target Mr. Piyush Goyal has set for 2032.
All of this needs one thing, and that is leadership. I am very hopeful that we can make a difference in the window in front of us, but only if we work together. The future is partnership, and partnership, to me, is the new leadership.
