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This results in uncertainty in the supply chain, thereby forcing manufacturers to increase their safety stocks, effectively throwing the lean manufacturing system out of gear.

Coupled with the complex tax regime, the inconsistency in the government supply policies has
resulted in disruption and high uncertainty in the supply chain due to extraneous events like trucker strikes. This has resulted in a lot of smaller warehouses instead of regional distribution hubs and smaller distributed manufacturing centers, instead of manufacturing in one location.

What is the Government doing on the challenges? Within manufacturing, one of the most significant direct infrastructure constraints is the unreliability of the power supply. However, the state of the rail and road networks are also major factors, as is the amount of available distribution capacity. In addition, India's complex indirect tax system, coupled with routine bureaucracy, can make the process of moving goods between states an incredibly complex process. This implies that the idea of Just In Time (JIT) manufacturing becomes a difficult proposition unless a manufacturers' customers and suppliers are located in the same state.

The infrastructure issues are clearly visible to anyone who visits India. Many of those companies which are already here have established effective 'workarounds' to combat some of the challenges. However, the infrastructural deficit is what remains at the forefront of the minds of many decision-makers outside India and it does so at the expense of the positive points - the quality workforce, the protection of intellectual property, etc..Thankfully, the policymakers are moving in the right direction; it's now a case of how quickly real changes can be made.

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* Contributed by -
Amandeep S. Bedi & Namit Puri,
Indian School of Business (ISB),
Hyderabad.