Monday, November 25, 2013: For almost a decade, the India-based electrical companies have been following a trend of importing 16-inch table, pedestal and wall (TPW) fans from China and then marketing these in India under their own brand name because importing from China was cheaper than manufacturing them in India. However, the trend is set to change with the recent economic developments.
While the rupee has been depreciating 14 per cent this year, the Chinese currency, the yuan, has been appreciating 2.4 per cent to 6.09 a dollar. This is leading the change in pattern.
Havells India set up a TPW manufacturing plant in India about a decade ago, the first such plant set up in the country. Sunil Sikka, president, Havells India said, “We could foresee a correction in the Indian currency. About a year ago, when we started, we were at a slight disadvantage to our peers who were importing; now, we are at an advantageous position,” he says.
And now manufacturing plants are being set up in India for other electrical goods such as induction heaters. Sikka added, “We still have labour arbitrage, as it is cheaper than China. So, once scale is achieved, our import will shift from finished goods to specific parts and raw material.”
Havells had acquired Frankfurt-headquartered Sylvania for $300 million in 2007 to cater to the developed markets. However, after the 2008 financial instability, the company closed down two of its five manufacturing plants in Europe and created a joint venture manufacturing plant in China, which was to supply LED products to Sylvania.
It was about a year ago that it set up a plant for lighting fixtures in Neemrana, Rajasthan, to supply to Sylvania. “India is a new sourcing hub for our European operations,” says Sikka. The company exports products worth Rs 50-60 million every month and plans to double this in the next 6 months.
Rakesh Shah, co-chairman (foreign trade committee), Federation of Indian Chambers of Commerce and Industry told Business Standard, “The depreciation of the rupee alone has not helped; it is also the appreciation of the yuan that has helped India become more attractive an export hub. Today, we have an export advantage where we have our own raw material.”
Shah, however, added that China still has an advantage, in terms of manufacturing low-engineering, high-volume products due to economies of scale. But India has an obvious advantage in exporting smaller-volume products that require engineering input.
