Interface with Mr. Rajesh Nath, MD - VDMA, German Engineering Federation, INDIA
1. How does VDMA India help Indian manufacturers to bring German technology?
The German Engineering Federation (VDMA) is the largest industry branch association in Europe. Founded in 1892, it now looks back on a 118 year long history. This non-profit association, with a workforce of 400 employees worldwide, consists of 3,000 member companies active in 39 engineering sector. VDMA is a real representative of small and medium-sized enterprises in Germany and reflects the production process itself, from components to plants, from system supplies or integrators to service providers. VDMA extended its services with nodal office located in Kolkata and having regional offices at New Delhi/ Noida and Bangalore. The Indian team assists the German member companies by their endeavour in Indian market. Further local assistance is provided to the Indian Industry in establishing contact with the German companies. VDMA India acts as a “bridge-head” between the German and the Indian Industry and helps to foster the Indo-German trade in the engineering sector.
2. Which sectors covered by maximum growth of opportunity?
The German export of machinery to India has grown from around Rs 4200 crores in 2003 to attain peak figures of Rs. 19200 crores in 2008. Due to effect of global recession this dropped to Rs 15600 crores in 2009. However the strong recovery and positive business climate in India will propel these figures to around Rs 18500 crores in 2010.
Over the years we find the demand for German machinery and equipment has been quite good in the sectors of Mechanical Power Transmission, Textile Machinery, Machine Tools, Material Handling, Construction Machinery, Plastic & Rubber Processing Machinery, Mining Machinery and Paper & Printing Machinery
3. What is your opinion of the Indian manufacturing Industry.
The manufacturing industry in India, has all the qualities which enhance economic development, increase the productivity of the manufacturing industry and face competition from the global markets. The Manufacturing industry in India is believed to have the potential of improving the economic condition of India. Exports of manufactured goods in India accounted for 75% in comparison to exports of manufactured goods all over the world. Manufacturing industry trends suggest that in the event when production increases in the service sector, simultaneously, there is a rise in the productivity of the manufacturing sector too.The Indian economy offers investors exposure to a wide range of opportunities from consumer goods and pharmaceuticals to infrastructure, energy and agriculture.
4. VDMA German Engineering Federation are an active technology partner to bring German technology in Asia. How does India fare against China?
India is one of the youngest countries in the world, with an average age of 25 and likely to get younger. India’s working-age population will increase by 240 million over the next 20 years. With a savings rate of 37 percent of GDP, India’s domestic savings fuels most of its investment requirements and only 20 percent of India’s total public debt is sourced from foreign borrowing. India’s domestic consumption, generally led by the private sector, has played a significant role in India’s growth and is expected to remain firm as more people enter the workforce and the emerging middle classes. India has a robust, diversified and well regulated financial system which has allowed it to weather the global financial crisis without any major difficulties and present an image of quality, resilience and transparency.
China is certainly the biggest market for the German Machinery manufacturers. Out of Rs 1416 Billion export of German machinery and equipment to Asia, the share of China was a dominating 48%. In comparison the share of India was only 11 %
5. How important is India as a market for VDMA German Engineering Federation?
India’s GDP is currently US$1.3 trillion, making it the eighth largest economy in the world. However, in PPP terms, which recognizes India’s low cost base, the GDP notionally rises to three times this amount (US$3.8 trillion) which places it on a similar size to Japan and, by 2013, it will become the third largest economy in the world (after the USA and China) in PPP terms. India’s economy is currently growing by 8.75 percent per annum (in 2010) and this GDP growth rate is expected to increase to 9-10 percent per annum for each of the next 10 years. Hence the growing Indian market and the investment in core sectors offer optimal opportunity to the German machinery manufacturers and technology suppliers.
6. To promote German technology how has India evolved as a market for VDMA over the years?
Indo-German trade increased by 18% during January-September in 2010, over the same period in 2009, to reach Rs 672 billion. The total Indian exports were at Rs 270 billion (+ 14.2%) and that of imports were Rs 402 billion (+ 19.5%) in the first three quarters of 2010. In 2009 among the machinery, major demand of German equipment was for Power Transmission at 10.3%, Machine Tools was 8.5%, Textile Machinery at 5.9%, Construction Equipment & Building Material Machinery was 5.8% and Printing & Paper Technology was 5.2%. In 2009 out of approximately Rs. 798 billion of machinery imported by India, Germany’s share was 18 %.
7. Which are other key areas where need to improve to become more competitive globally?
Understanding the public policy and market forces that shape the manufacturing landscape is essential to winning in the global economy.
- The ability of a company to be competitive in the market place is not about advertising or lower prices. It is about a company that has vendors as partners and employees who own the process, as well as a marketing system that completely exceeds the customer’s expectations.
- The ability to put together a plan- a strategic plan or business plan, that unique recipe for success that is unique to their business.
- The ability to develop your relationships with your vendors, employees and your customers beyond the normal business relationship.
- That passion for excellence that requires constant improvement, innovation, and deep rich relationships.
Excellence and world-class are not slogan, they are attributes of the finest most successful businesses.
8. What is VDMA E-market?
The VDMA E-Market is the customized platform for designing engineers, development engineers and technology purchasing personnel. Here one can find extensive product information from the main branches of the capital goods industry.
Our data base concentrates the expertise of the industry: clearly arranged product groups helps to quickly find the product one is looking for. The schematic presentation of the research output allows a systematic comparison between the different results.
The VDMA E-Market gives engineers and technicians an efficient tool:
- High detail and targeting precision, recognised classification
- Well-arranged presentation of the search results and many options for comparison
- Neutral platform, development of the E-Market as a joint endeavour of the VDMA (German Engineering Federation)
9. How German Industry handling the rising cost of material and pressure on labour cost?
Germany has managed to safeguard its strong industrial base, even in this globally competing era with international locations competing with each other. The companies are responding to unfavourable conditions by relocating first production and even business sites themselves. Some strategies for cutting down on costs and improving supply chain and labour efficiency like taking advantage of financial strengths, exploring new options, diversifying, finding partners etc. While a business can’t control the price of raw materials, finding creative solutions to streamline distribution channels, building better relationships with suppliers and improving staff efficiency can help compensate for the elevated cost of production.
10. How German companies managing the pricing issue in India?
The German companies are looking to produce locally to reduce the cost for the Indian market. Hence we find increased interest of German to be present “locally’ by setting up own manufacturing facility or forming Joint Ventures with Indian companies for manufacturing.
- Also we find India developing as an important “sourcing” hub especially for components and spares as well as casting.
- Further the German manufacturers believe in giving “value for money”. The equipments are not only robust with high technological standards but are also backed with efficient service.
11. What challenges India is facing and what will be the ideal measures to overcome the challenges.
Some of the challenges faced by the industry are - Inadequate availability of power and water, poor infrastructure, unskilled labor, government policies, bureaucratic hurdles, rising input cost and human resource, low technology implementation to name a few. The various infrastructure projects being implemented by the government is the right step in addressing this hurdles. However, there is still a long way to go even if we compare our infrastructure with other countries in Asia. India’s, engineering skills, especially in the IT sector are exceptionally high. This must be effectively utilized in automation to make the processes cost effective. Further, with international players coming into India, the quality bar has to be raised and availability of advanced technology would be a boon for the domestic industry. India generates good English speaking young population, educated manpower passing out from the high standard engineering and management colleges which would provide an effective manpower pool in the years to come. Added to this is the well established IPR regulation which is becoming increasingly important in global business scenario.
12. Challenges and opportunities in adopting automation process?
Presently, technology adoption has become necessary to drive down costs and improve quality. Use of automation is the key element in technology adoption. It is essential to examine automation as a strategy for increasing productivity and reliability in one’s operation if one has to balance between the investment costs attributed to the implementation costs of knowledge-based engineering or engineering automation software and the benefits of automation in terms of payback. Though automation promises improvements in efficiency and management agility, it also brings in its own challenges as far as its realization by SMEs is concerned. Firstly affordability, secondly the benefit awareness and finally the application knowledge come in question. Moreover, implementing automation technology can sometimes involve a lot of time, effort and additional investment into maintaining and updating that technology as well. In this scenario cost plays a major role for people who want to reduce costs on marketing, production, development and design. And people who want to bring down cost will surely adopt the concept of appropriate automation at low cost.
13. How can we cut cost with help of Automation?
In the coming year, several new products and technologies will begin to emerge. If we look at the new technologies that are coming up in the field of automation, we find a complete shift from traditional practices to more sophisticated and developed technology. The introduction of robots with integrated vision and touch dramatically changes the speed and efficiency of new production and delivery systems. Robots have become so accurate that they can be applied where manual operations are no longer a viable option. The biggest change in industrial robots is that they will evolve into a broader variety of structures and mechanisms. Further these applications will lead to better and accurate quality of work and better utilisation of resources which will help to cut down the production cost and increase efficiency.
14. 2010 Year in India large Industrial Delegation of USA, France and China etc visited and signed large business deals. How VDMA will help to meet this challenge?
The Indo-EU Trade negotiations are going on well. Both the sides have expressed desire to try to come to an understanding. The European side has expressed reservation over the stand of Indian Government in delisting capital goods in certain sector.
It would be imperative for India to bring down the tariff and duties. This would help the global capital goods industry. Further lowering of tariffs would act as a catalyst to increase the demand. This would help in new job generation and give a boost the economy. We at VDMA look forward to the exciting and challenging phase of increased bilateral trade in the years to come.