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Investment News and Commentary from Emerging Markets in Asia - China, India and ASEAN

About discusses business and investment news rising from the geopolitical relations of China and India, and the interactions these two countries have with the rest of emerging Asia.

India Builds Up Low Cost Hand Tool Exports

Op/Ed Commentary: Chris Devonshire-Ellis

Mar. 18 – While the common perception is of China as the source of many low cost items found in U.S. retail stores such as Wal-Mart, B&Q, and Home Depot, a silent trend has begun to emerge that signals the beginning of the end of Chinese dominance in this field. Welcome then, to a new source of low cost goods – India’s Punjab region.

Under the auspices of India’s Ministry of Commerce, the Engineering Export Promotion Council has been doing a sterling job in actively seeking new markets for Indian products overseas. The EEPC is so focused that it even has a specific desk and representative devoted to selling hand crafted tools.

With India’s Punjab region accounting for some 75 percent of all India’s hand tool exports, the presence of over thirty Indian manufacturers at the worlds largest hardware fair in Cologne has raised some eyebrows. The vendors are easy to spot – Punjab is the home of much of India’s Sikh population, resplendent in turbans and beards, and appear exotic in Western business surroundings.

Inquiries by all accounts have been flooding in, with the crucial aspect – quality – coming up time and again. As Chinese hand tooling standards dip, with incorrectly tempered hammer heads and shovel blades causing fractures and breakages, the Punjab region is set to step in.

Considered India’s breadbasket, the region’s crafting of agricultural tools isn’t just a manufacturing business set up for export. In Punjab, the tooling industry comes from years of practical experience toiling in India’s own agricultural industry, with baking sun, hard earth, and heavy usage. The manufacturing of substandard tools just isn’t going to fly here, and the equipment is made with rather more professional know-how and pride than a Chinese accountant’s bottom line can muster. These tools are now on sale across the U.S. in the aforementioned stores and are rapidly gaining in popularity as  both reliable and inexpensive.

Hand tools from the Punjab have been steadily increasing in exports, achieving US$163 million last year and US$198 million in 2008. Exports for 2010 are expected to increase by 15 percent. With the retail cost of a shovel at B&Q around US$20, that’s a lot of Punjabi hardware that is finding its way into the big retail stores. Furthermore, from shovels and hammers grows more expertise, and the Punjabis have begun manufacturing electrical tools and specialist tooling in the region. The applications are diverse.

As mentioned, there is a history here born from years of agricultural expertise in the making of hand tools in Punjab, and a deeper connection with the products. That may be something China is losing, as manufacturing there gets ever more cost conscious. China also can’t compete as labor costs for such workers are now three times higher than in India. The result, to keep prices competitive, is a reduction in quality.

The Punjabi hand tool manufacturers may be just a small part of a tiny trend. However, I suspect that the discovery of Indian manufacturing skills, if chosen correctly and based on local experience, may start to shift the onus of cheap product manufacturing and supply from Chinese factories to Indian ones. After all, you can’t build a castle without shovels, and the Punjabi’s have those in abundance.

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4 Responses to India Builds Up Low Cost Hand Tool Exports

  1. joel waldman says:

    i would be interested to know what is the equivalent to the $ 163 million exported from India last year.

    I suggest, based upon my knowledge of Indian manufacturing, after having lived there for 35 years, and having owned the only furniture factory in India (as per the U.S. Commerce Department), it is not likely that we will see a dramatic shift to india, of hand tool manufacturing, from china.

    When The US Commerce Department was deciding on anti-dumping duties for bedroom furniture from China, it chose India as the comparison country for doing their analysis. Based upon my involvement in this analysis, it turned out that:

    1. although the cost/manhour was similar at that time between the two countries, in the furniture industry, the productivity/dollar of wages was substantially higher in China.
    2. raw material costs, from wood to steel to glue to hdf to coating materials, were the same, when stated in dollars.
    3. transport from my factory in the center of India to either USA east coast or west coast ports, was significantly more expensive, than from the average Chinese furniture factory. The Punjab is far from a port.
    4. direct expenses as well as other factors, such as electricity (and the need for in-house power plants), cost of construction, cost of direct supervision, taxes, cost of money (at the bank), were and are significantly higher in india, than in china.

    Therefore, if there is a movement from china to india of such manufacturing, it is not based upon a cost vs quality comparison. As companies such as Wallmart have stated previously, importers are becoming concerned about putting ALL their eggs in one basket, and as one can see repeatedly, Chinese manufacturers are moving up-market, and are probably no longer interested in producing these “cheap” products, particularly in light of the current labor shortage, and wage increases experienced recently in Southern China. Also, I wonder what government incentive is being give to this category of exports.

    When Suzuki first set up in India, I was impressed with news articles about their exports. It wasn’t till years later, meeting with a Indian Ministry of External Affairs official in Vietnam, who claimed credit for getting the contract from the Hungarians (he was the Ambassador at the time), that I learned that the sell price was less than $ 2000/car: a clear money loser for the manufacturer, but necessary due to its export commitments.

    #’s don’t always give the true picture.

  2. Chris Devonshire-Ellis says:

    Thanks Joel, really useful insights. A main factor you mention is the productivity aspect gap between China and India. Much of this, as you have alluded too, is related to China’s superior infrastructure and skilled work force over Indian labor. That’s fair comment as things stand right now. However, I have been in China for the past 25 years and I recall Chinese companies and factories having exactly the same comparisons made negatively about them when compared to their US or European equivilents at the time. And then look what happened. My observations are that India will follow the same path China did in improving infrastructure and workforce skills, and will do so quite rapidly. I believe that the example I just made is indication that that is beginning to occur. Time will tell, but some basic indicators are in place. Thanks – Chris

  3. Joel’s remarks may be correct in general but in the particular case of handtools, Chris statement is appropriate. Thanks for both

  4. Chris Devonshire-Ellis says:

    For our readers who may not be aware, Mr. Ramachandran above is the Executive Director of the India-China Chamber of Commerce & Industry – – Chris

Comments are closed.

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