In the West China is now considered "the world's factory" and India "the world's service centre." This may soon change. Success in India's IT and telecommunications industry and the outsourcing of call centres to India from North America has played to perceptions that India's wealth can be traced to an emerging service economy. Yet India has been on the march economically for years, and not simply on the basis of IT.
Both in the 1980s and 1990s India grew at a very healthy clip of slightly under 6% a year, while lately it has climbed to 9%. This could not be done on the basis of the IT industry alone. Truth is, India also has a strong manufacturing sector, in which the automotive industry, with sales of US$34-billion, accounts for 5% of GDP and provides 13 million direct and indirect jobs. In auto parts and components India has already become a global player, supplying many of the world's leading producers. And it is now in automobiles that India is staking its claim to fame with the recent launch of the Nano, Tata Motors' "people's car."
At a price of US$2,500 dollars (100,000 rupees, i.e. "one lakh," the Indian expression for that amount), the Nano is half the price of its nearest competitor and the cheapest car on the world market. It comes with a 632 cc engine, options such as four doors, five seats, and can reach speeds of 100 km/h.
One and a half million cars were sold in India in 2007, of which one million were manufactured domestically. Yet, what is at stake is also the market of the developing world as a whole. Tata Motors thinks it will be able to sell up to a million Nanos per year a few years down the road -- in Africa, Asia and Latin America. This should not be surprising. In Chile right now, the most affordable car on the market is another Indian car, the Maruti Suzuki.
If growth in India until now has meant switching from the bicycle to the ubiquitous scooter or more high-powered motorbikes, the arrival of the Nano will allow millions of Indians to drive their own cars. In a country in which car penetration is still minimal, this has curiously led to a big hue and cry as to what this will do to the environment. Some have even gone so far as to say that Tata Motors should have put its engineering skills into building better and more efficient trains and buses, rather than into non-environment-friendly cars.
Tata Motors already builds many buses. But to ask a car company to build trains instead is like asking Ava Gardner to be a bit more like Florence Nightingale -- somewhat beside the point.
The true significance of the Nano, lauded as feat of "Gandhian (meaning stripped-down) engineering," is that it reflects one of the best, yet least heralded virtues of Indian industry -- its ability to expand the market "downward" to the popular sectors hitherto excluded from the forces of supply and demand. Much as European and North American industry markets appeal to the upper-income sectors in developing societies, Indian companies, schooled in the hard business of making do in a low-income environment, do just the opposite.
In that sense, the launch of the Nano reaches way beyond the automotive industry. It signals that India's rise is not limited to call centres, but is built on a foundation of industrial ingenuity that many poorer people in the world will soon witness firsthand on their nations' street and in their own driveways. - Jorge Heine is a distinguished fellow at the Centre for International Governance Innovation (CIGI). He served as Chile's ambassador to India from 2003 to 2007.