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Make in India, the Smart Way
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Make in India, the Smart Way

Ravi Kumar Pillai

When it comes to the strategic weight of nations, their share in global trade is perhaps the most important indicator. Manufacturing holds the key in unlocking the economic prowess of Nations. India’s share of the global economy today is less than half of what it was when the nation was born in 1947. India’s trade value is less than 1 percent of overall world trade. Consider this in the context of India being home to 1.37 billion citizens, nearly 18% of global population. How do we expect ourselves to be taken seriously in the highly competitive world of manufacturing and commerce?

India and China attract comparison in any global discussion on development. While in 1950, the two economies were almost of the same size, today China’s GDP is over US$ 14 Trillion, four and a half times that of India. The nominal GDP per capita of India is US$ 2030 and while China’s is US$ 9645. The average Chinese citizen is nearly five times richer than his Indian counterpart.

What powered the meteoric rise of China was manufacturing for the world with a missionary zeal. While China became the factory to the world, India became the global back office. Indian manufacturing got stuck in the quicksand of archaic regulatory procedures, insensitive bureaucracy, lack of economies of scale, low productivity and drying up of major investment. While India slipped into insignificance in global manufacturing, our domestic market was increasingly flooded with cheap and abundant supply of Chinese goods. Even the Christmas Trees and Navratri idols have come to bear the “Made in China” tag.

The wheels of destiny are offering a second chance to India to look at manufacturing as a serious growth strategy in the context of the US-China schism, cooling down of Chinese economy and the emerging opportunities to leverage digital technologies to enhance manufacturing competitiveness.

There is fast erosion of the cost advantage of offshoring due to escalation in salaries and operating costs in countries like China, South Korea and other Far Eastern nations. With the emergence of smart manufacturing, it makes sense to re-shore factories to the developed nations: the new industry needs fewer people with sophisticated skill sets. Being closer to the consumer is a definite advantage in this age of personalization and focus on customer experience. Can India become a serious player in the manufacturing sector in this scenario?

The environment which enabled China to become a global powerhouse of manufacturing has changed; today manufacturing is becoming more localized. The chance of attracting big-ticket transnational investment in offshore manufacturing is on the decline.

Global Value Chains (GVCs) are becoming the new paradigm of manufacturing and international trade. Different stages of the manufacturing value chain can be located in different geographies to leverage the relative advantage like availability of raw materials, infrastructure, skilled labour, regulatory environment, supply chain dexterity and market proximity. Co-creating products across boundaries can achieve three strategic objectives –manufacturing competitiveness, aligning production to markets and softening the political pressures against off-shoring.

The Fourth Industrial Revolution (also referred to as Industry 4.0) is currently unfolding before our eyes; it is built upon the foundations laid by breakthrough inventions and human ingenuity in the past – introduction of the steam engine and rail transport (The First Industrial Revolution, 18th Century), the birth of electric power and assembly line method of production (The Second Industrial Revolution, 19th Century) and the emergence of nuclear power, electronics and biotechnology (The Third Industrial Revolution 20th Century).

The ongoing Fourth Industrial Revolution is defined by the Internet and wireless/mobile technologies. Connectivity, Intelligence and Communication are the strategic capabilities of digital technologies, platforms and applications. 5G Mobile Networks and the Internet of Things would weave the mesh supporting a series of multi-disciplinary innovations that impact almost all walks of life. Riding on these path breaking changes, smart manufacturing is slated to redraw the contours of industrial production as we have understood. Let us look at some of the emerging technologies and innovations that make Industry 4.0 truly transformational.

Big Data Analytics: The collection and comprehensive analysis of real time data from successive stages of manufacturing would impact positively the cost, quality, customization and environment-friendliness of the manufacturing lifecycle. IoT enabled production line would enable predictive analytics to improve maintenance practices, supply chain efficiency and market alignment, to highlight just three key functionalities.

Robotics: Collaborative robots are already deployed on production lines in performing precision machining, hazardous operations and repetitive activities. Robotic Process Automation or deployment of software robots in the process flow would facilitate collection and communication of real time data. Machine Learning and Artificial Intelligence help in predictive analytics, modelling and quick responses to emergencies and opportunities.

Virtual Twinning: Simulation with the support of Analytics and Augmented Reality can create virtual twins of the live products or processes to support prototype generation, product development and testing. This can drastically cut-down the time to market for new products.

Cloud Technologies: Smart manufacturing will require increased data sharing across devices, locations and processes. With advancements in cloud technologies, the response time to refine and realign the operational set-up and quality parameters could be reduced to just milliseconds.

Additive Manufacturing: Popularly called 3D Printing, additive manufacturing uses advanced three-dimensional printers to carryout layer-by-layer creation of products as per concept and design. Initially tried out for making components using industrial plastic, 3D Printers are now being experimented to create metallic items. 3D Printing is expected to mature into a reliable, versatile and cost-effective manufacturing technology in future.

Smart manufacturing, as a concept, is still in the early stages of its life cycle. Where does India stand in terms of readiness to embark on smart manufacturing on a scale that would be transformational? True, there have been a few notable initiatives to adopt smart manufacturing in India, especially deployment of robotics, sensors and analytics. The research and development work in smart technologies carried out by General Electric GE) at their world-class facility in Bangalore is at the cutting edge. Similarly, the engagement of robots by Bharat Forge, a world leader in automotive components, to carryout precision machining has earned global acclaim. To be transformational, such initiatives should be widespread, across sectors and should cover the end-to-end manufacturing ecosystem. The Indian manufacturing lags the transformational maturity attained by Germany, Japan, United States, South Korea and China who are the global leaders in manufacturing.

By the time Prime Minister Narendra Modi put manufacturing back on the national agenda with “Make in India” slogan, we as a nation had created several structural and political obstacles to the aspirations of Indian industry to achieve global standards. The most regressive of such steps has been the politicization of land acquisition and populist legislation in this regard at the behest of UPA-2. The damage to our industrialization due to this single step was so devastating that global and domestic investors ceased to take India as a serious option for locating manufacturing projects. The US$ 12 Billion investment in integrated steel plant proposed by South Korea’s POSCO in Orissa (original MOU signed in 2005) is still in limbo due to difficulty in land acquisition. Arcelor Mittal’s offer to set up a global scale facility in joint venture with Steel Authority of India (SAIL) to make auto-grade steel is caught up in procedural wrangling even after two-and-a-half years. Yet another proposal by global petroleum giants ARAMCO (Saudi Arabia) and ADNOC (UAE) along with Indian PSUs in Oil sector to set up a massive greenfield oil refinery in the Konkan area of Maharashtra is yet to move forward due to resistance of local landowners fueled by political interests. Compare these cases with the land-on-a-platter policy of China and you would get why the world is reluctant to invest in Indian manufacturing projects.

Swift land acquisition, transparent and realistic labour laws, a bureaucracy alive to the industry’s needs and strict checks on corruption and crony-capitalism are the prerequisites for success of a national manufacturing thrust.

Transformation to a smart manufacturing model where Indian industries in a few selected sectors (like Automobile, Capital Goods, Petroleum and Chemicals, Pharmaceuticals and FMCG, to suggest some critical sectors) would be encouraged and supported to reach global standards requires the Government to address the structural concerns of the Industry.

Even in China, the upgrade in manufacturing technologies and practices were driven by the Multi-National Corporations (MNCs) who set up shop there. It became a win-win situation with the West getting quality products at competitive price and China gaining in terms of access to global technology, extensive skill development, surge in jobs, boost to export revenue and prosperity to people at large.

In the current scenario, attracting external and domestic investment in the manufacturing sector would require concerted effort by Government in implementing the structural, legal and commercial reforms required to enhance ease of business, legal framework and governance practices on par with the benchmark economies of the world.

Smart transformation cannot happen merely as a result of survival instincts of companies pushed to the wall. Smart manufacturing requires investment and vision on the part of companies as well as structural and financial incentivization by the Government. Hence lifting manufacturing from sustenance level to aspirational level should be the policy priority for Government. Private capital and the spirit of enterprise should be attracted, supported and encouraged for industry to leapfrog to the level attained by the developed economies.

Let us revisit the question, “Can we really make in India at global standards?”. Yes, we can, with clarity of thought, urgency of action and sincerity of purpose by the Government. The next five years will prove whether we can successfully move from slogan to action when it comes to making in India.

*Ravi Kumar Pillai is CEO and Principal Consultant at Cherrypick India, Trivandrum and can be reached at ravikumarpillai9@gmail.com

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