Dilip Piramal, chairman, VIP Industries says India needs to attract investments and one way of doing that is by improving labour polices among other measures.
This is coming from an affected party as Piramal had pulled out his plant from India and set it up in China because of intractable labour laws in India.
Also Read: Diplomatic talks aside, China still bypasses Indian exports
"Indian unions are so strong that once the company is flourishing, they demand very high wages like say Rs 20,000 - 25,000 a month. At that wage level our manufacturing cost, the labour cost of that product goes up to about 15 to 20 percent. That's 10 percent higher than what we can get from China. The Chinese manufacturing wage bill is not even 5 percent. So, this 10 percent or 15 percent price differential is much more than what we can sustain," he explains.
Below is the edited transcript of the interview to CNBC-TV18.
Q: Since you pulled out investments from India and put them in China it is tough to expect why Chinese will invest USD 20 billion in India if their investment climate is so much better than ours, will they?
A: There is no connection between the two things or rather the two things are on opposite sides. If today we have Indian companies like ours importing, getting a lot of sales from the products made in China and importing them all the way to India, then what is the logic of Chinese companies investing in India.
However, it also depends on the type of products; I mean each industry is different so obviously the Chinese won't be investing in these low wage goods like luggage which I am importing but I guess they will invest more in the heavy industries like chemical industries and all which are better located in the country where they are sold. So, I really don't know where China will be investing in India. But let say so many areas like infrastructure particularly which have to be implemented in the country itself and cannot be easily like outsourced, you cannot outsource laying of railway tracks and all. So maybe they might be investing in such areas where they do have lot of expertise.
Q: What was the compelling reason that pulled you into China? Why did you invest there and what does India need to change?
A: I will give you the example of luggage itself and this can be sort of same example is there for readymade garments which is one of the largest industries in the world. What happens is that these are very low cost goods and where normally labour cost is about 10 percent of the cost of manufacturing these products.
What happens in India is that the unions are so strong that once the company is flourishing, they demand very high wages something like say Rs 20,000 - 25,000 a month. And at that wage level our manufacturing cost, the labour cost of that product goes up to about 15 to 20 percent. That's 10 percent higher than what we can get from China or rather the Chinese manufacturing wage bill is not even 5 percent. So, this 10 percent or 15 percent price differential is much more than what we can sustain.
Q: So what can we change to become a compelling investment destination for the Chinese?
A: We have to make India a better place to invest in and have an environment which is more conducive for manufacturing. What is required for that is a general infrastructure has to be good like land number one has to be available at good prices which itself has now become a big problem because government has increased the price of acquisition of land. Then you need a general infrastructure like power supply, good wage or good labour supply which we have, but if they change the wage labour policies then it will become even better.
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