In a rapidly evolving world dominated by the ease of setting up digital and service-oriented businesses, the manufacturing sector—particularly for MSMEs—continues to face significant challenges. In this reflective piece, Manish Kothari delves into the contrast between the glamorized IT industry and the less celebrated but foundational manufacturing sector. Through personal anecdotes and observations, he highlights the “UNEASE” of manufacturing, emphasizing the unequal distribution of economic benefits and the regulatory burdens that weigh heavily on small manufacturers.
Manufacturing is one of the businesses that fall under the overarching idea of ease of doing business. It comes under the shadow of other activities, and we may not be able to realise the context of manufacturing by an MSME.
It was somewhere in the early 2000s that I was intrigued when our French Partner informed me that he had defaulted, gone bankrupt, and couldn’t start a new business by himself. He defaulted as he took some risks, some estimates went wrong, his intent was right, his passion for manufacturing was visible in his eyes, and so was the pain that he could not restart in manufacturing. He shared that manufacturing was not a preferred business and was not encouraged. If you are in service, there are a lot of opportunities.
His love for manufacturing did not die. He figured out to restart, taking in another partner. It was not at all easy to be a manufacturer. He is and remains an inspiration for me. The technologies he developed in the foundry industry today are one of the important foundations for Rhino’s growth—green sand and moulding processes.
It’s been nearly two decades or more today. I have seen the world changing phenomenally around me. The extent of digitalisation at an accelerated pace has further increased the demand for “soft” jobs in the service industry, including artificial intelligence, machine learning, augmented reality, virtual reality, graphics, videos, and so on. The IT industry grew with high income, glamour, the white-collar revolution, and automation to an unimaginable level.
The EASE of setting up an IT or service-oriented business was and continues to be easy, as all one may need is a computing station and a small office space, and there you go, you are in business. Thousands of startups have come up in this space of digital businesses, which is the most attractive business proposition and has been a favourite for several financiers, a low-asset-based and fast-paced business proposition.
In all of this, when we are talking of automation, there are two fundamental sectors – agriculture and manufacturing, which have not evolved at the same pace. In the metal casting industry, in the foundry where I have been involved, the process of melting scrap to liquid metal and casting a shape is very fundamental and has a physical activity which has remained there for centuries and may remain there for a few more. It is perhaps why this industry is not so attractive and glamorous at the outset and does not get as much attention or priority today.
When prioritising actions to support an ecosystem, the people’s demand also matters. With agriculture and manufacturing not bringing that “kick” to the young generation, perhaps they also do not attract so much intervention. The UNEASE in manufacturing may have manifested from the dull and monotonous aspect of the creation, considering it a taken-for-granted space.
Running a manufacturing MSME industry has so many regulations and laws:
- Pollution clearance – before you can even start your business. The norms have not evolved with time and pace; the evaluation has so many gaps where one may be complying and yet not get the clearance, while several are non-compliant yet get a clearance.
- Fire NOC—Safety is important, but again, norms have not evolved. Perhaps getting a certificate is a task in itself.
- Labour license, Factory license, GST, Corporate affairs reporting as a Pvt Ltd, Financial reporting to banks, Income tax regulations, professional tax regulations, etc etc
Compare this to an IT industry, which does not have as many challenges and is not very complex, as fewer people are highly skilled and paid.
While manufacturing has longevity, it does not have glamour; the risk versus reward is quite evident. But let us also understand what the services will monitor without manufacturing. The foundation on which the entire IT industry stands is the creation of value addition by manufacturing and agriculture, yet they stand at the fag end of the economic benefit.
In the apparel industry, the producer gets not more than 50% of the retail price of an enterprise which is doing retail or e-commerce, who today are in one enterprise, tomorrow in other, high paying jobs with also a good amount of stress, but they continuously try to push down the prices of a producer so that they retain their jobs. There is a constant push to reduce the cost, asking to reduce the margins or the labour cost, so that those in the service industry can sustain. This is UNEASE in manufacturing that worries me. Where will it take us?
The foundation on which the economy stands gets the least dividend, or the distribution is unequal.
With all the talk of EODB (Ease of Doing Business), one may need to draw attention to the EADB for Manufacturing MSMEs. How can we make manufacturing aspirational and glamorous, as remunerative in value as an IT firm job, and equitable in value distribution?
Over the past few years, I have been constantly working on collapsing the value chain in manufacturing and service providers into one, bringing equitable income distribution right at the time of value creation. Experiments with the Empretec HiEERA program are being processed. In complexes that collapse the buyer and seller in the same enterprise, profits are distributed equitably amongst the value chain stakeholders, perhaps making business easier. If the CA, CS, Lawyer, Engineer, Banker, medical practitioner, artist, farmer, artisan, technician, government, and social organisations are all bound together to a shared purpose (#SDG17), perhaps we may find a possibility of EODB percolate right to the bottom.
