Comments on: India Builds Up Low Cost Hand Tool Exports

By: Chris Devonshire-Ellis

Chris Devonshire-Ellis — Tue, 30 Mar 2010 16:06:32 +0000

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

By: P N Ramachandran

P N Ramachandran — Fri, 26 Mar 2010 10:17:08 +0000

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

By: Chris Devonshire-Ellis

Chris Devonshire-Ellis — Thu, 18 Mar 2010 11:56:59 +0000

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

By: joel waldman

joel waldman — Thu, 18 Mar 2010 06:11:07 +0000

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.