By Charles F Moreira, Editor
Whilst China has its Made in China 2025 blueprint for upgrading its manufacturing sector, India has its Make in India initiative to boost investments and improvements across its various industry sectors.
Included are 25 key sectors being focused on – namely, Automobiles, Automobile Components, Aviation, Biotechnology, Chemicals, Construction, Defence Manufacturing, Electrical Manufacturing, Electronic Systems, Food Processing, IT and Business Process Management, Leather, Media and Entertainment, Mining, Oil & Gas, Pharmaceuticals, Ports and Shipping, Railways, Renewable Energy, Roads and Highways, Space, Textiles and Garments, Thermal Power, Tourism and Hospitality and Wellness.
Here we look at the role of Industry 4.0 in the Make in India initiative.
Background on Make in India
The Make in India initiative was launched by India’s Prime Minister Narendra Modi in September 2014 as part of a wider set of nation-building initiatives, according to Invest India’s “Make in India” website.
According to the World Bank, manufacturing contributed 16.5% to India’s GDP in 2016 compared to 29.7% to China’s GDP, so India’s manufacturing has plenty more room to grow and contribute more to the country’s GDP.
The Make in India initiative aims to transform India into a global design and manufacturing hub and is a timely response to a critical situation in 2013 where the emerging market bubble had burst, the promise of the BRICS (Brazil, Russia, India, China and South Africa) grouping of nations had faded, foreign investors debated whether India was a risk or an opportunity, India’s citizens were asking whether India was either too big to succeed or too big to fail and it began to look like India was heading for a severe economic crisis.
It was against this backdrop that “Make in India” became a rallying cry for India’s numerous stakeholders and partners, it has galvanised India citizens and business leaders to action, and was an invitation to potential partners and investors worldwide.
However, besides being an inspiring slogan, Make in India represents a comprehensive and unprecedented overhaul of out-dated processes and policies.
Most importantly, it represents a complete change in the Government’s mindset from being just an issuing authority to a business partner, in keeping with the Prime Minister’s tenet of ‘Minimum Government, Maximum Governance’.
“To start a movement, you need a strategy that inspires, empowers and enables in equal measure. Make in India needed a different kind of campaign: instead of the typical statistics-laden newspaper advertisements, this exercise required messaging that was informative, well-packaged and most importantly, credible”, says Make in India.
It has to (a) inspire confidence in India’s capabilities amongst potential partners abroad, the Indian business community and citizens at large; (b) provide a framework for a vast amount of technical information on 25 industry sectors; and (c) reach out to a vast local and global audience via social media and constantly keep them updated about opportunities, reforms, etc.
The Department of Industrial Policy & Promotion (DIPP) worked with a group of highly specialised agencies to build brand new infrastructure, including a dedicated help desk and a mobile-first website that packed a wide array of information into a simple, sleek menu. Designed primarily for mobile screens, the site’s architecture ensured that exhaustive levels of detail are neatly tucked away so as not to overwhelm the user. 25 sector brochures were also developed: Contents included key facts and figures, policies and initiatives and sector-specific contact details, all of which was made available in print and on site.
The Make in India initiative is built on layers of collaborative effort. DIPP initiated this process by inviting participation from Union Ministers, Secretaries to the Government of India, state governments, industry leaders, and various knowledge partners.
Next, a National Workshop on sector specific industries in December 2014 brought Secretaries to the Government of India and industry leaders together to debate and formulate an action plan for the next three years, aimed at raising the contribution of the manufacturing sector to 25% of the GDP by 2020.
This plan was presented to the Prime Minister, Union Ministers, industry associations and industry leaders by the Secretaries to the Union Government and the Chief Secretary, Maharashtra on behalf of state governments.
These exercises resulted in a road map for the single largest manufacturing initiative undertaken by a nation in recent history.
They also demonstrated the transformational power of public-private partnership, and have become a hallmark of the Make in India initiative. This collaborative model has also been successfully extended to include India’s global partners, as evidenced by the recent in-depth interactions between India and the United States of America.
Achievements so far
In a short space of time, the obsolete and obstructive frameworks of the past have been dismantled and replaced with a transparent and user-friendly system that is helping drive investment, foster innovation, develop skills, protect Intellectual Property (IP) and build best-in-class manufacturing infrastructure.
The most striking indicator of progress is the unprecedented opening up of key sectors – including Railways, Defence, Insurance and Medical Devices – to dramatically higher levels of foreign direct investment.
A workshop titled “Make in India – Sectorial perspective & initiatives” was conducted on 29th December, 2014 under which an action plan for 1 year and 3 years has been prepared to boost investments in 25 sectors.
The ministry has engaged with the World Bank group to identify areas of improvement in line with World Bank’s ‘doing business’ methodology. A 2 day workshop and several follow up meetings were held to formulate framework which could boost India’s ranking which is currently 130 in terms of Ease of doing business.
An Investor Facilitation Cell (IFC) dedicated for the Make in India campaign was formed in September 2014 with an objective to assist investors in seeking regulatory approvals, hand-holding services through the pre-investment phase, execution and after-care support.
The Indian embassies and consulates have also been communicated to disseminate information on the potential for investment in the identified sectors. DIPP has set up a special management team to facilitate and fast track investment proposals from Japan, the team known as ‘Japan Plus’ has been operationalised with effect from October 2014.
Similarly ‘Korea Plus’, launched in June 2016, facilitates fast track investment proposals from South Korea and offers holistic support to Korean companies wishing to enter the Indian market.
Various sectors have been opened up for investments like Defence, Railways, Space, etc. Also, the regulatory policies have been relaxed to facilitate investments and ease of doing business.
Six industrial corridors are being developed across various regions of the country. Industrial Cities will also come up along these corridors.
“Today, India’s credibility is stronger than ever. There is visible momentum, energy and optimism. Make in India is opening investment doors. Multiple enterprises are adopting its mantra. The world’s largest democracy is well on its way to becoming the world’s most powerful economy”, Make in India added.
Industry 4.0 in India’s Automobile sector
Before we get down to Industry 4.0 or the 4th Industrial revolution in India’s automobile industry, first let us understand what “Industry 4.0” means.
The Industrial Revolution or perhaps we might say “Industry 1.0” began in Britain from around 1760 whereby coal, water and steam power were used in the production or iron and steel, and to power machinery such as textile weaving looms operated by hundreds or thousands of workers within a factory.
Prior to factories, production was done individually at home, cottage-industry style where output capacity was limited compared to factory production.
The 2nd Industrial Revolution (“Industry 2.0”) began from around 1870 until the start of World War I and it saw the introduction of mass production, the assembly line and the use of electrical power and thus increased output and productivity.
The 3rd Industrial Revolution (“Industry 3.0”) is ongoing today and began with the invention in 1968 of the programmable logic controller (PLC), a specialised type of computerised controller, by Bedford Associates in the United States. Bedford founder Robert E. Morley established the Modicon company which introduced the Modicon 084 PLC in 1969.
PLCs enabled the intelligent automation of manufacturing processes and Industry 3.0 has since evolved to include the use of digital electronics, such as microcontrollers, microprocessors, computers, artificial intelligence, robots, as well as quality control, goods receiving, storage, goods shipment, security and other operations all centrally controlled and monitored by a computer running software such as an enterprise resource planning (ERP) system.
Industry 4.0 was an initiative started by the German government in 2006 with the intention to digitise the manufacturing sector in order to increase productivity. The German government adopted the idea in its High-Tech Strategy for 2020.
You Tube video – Industry 4.0 • A Brief History – courtesy The Boeing Center for Supply Chain Innovation
The term “Industry 4.0” was first publicly introduced in 2011 as “Industrie 4.0” in Germany by a group of representatives from different fields (such as business, politics, and academia) under an initiative to enhance the German competitiveness in the manufacturing industry. In the United States, it is called “Smart Factory”.
Unlike Industry 3.0, Industry 4.0, whilst still very much a vision, involves decentralised, autonomously intelligent, Internet of Things (IoT) enabled production machines, smart sensors, management and cyber-security systems which communicate and share information with each other over Wi-Fi or Ethernet cables and coordinate each other autonomously. They also collect data and share it with cloud-based big data business intelligence and analytics systems.
Basically, each part of the production process is smart and it is said that it is more quickly adaptable to changing production requirements, including just-in-time (JIT) production.
For example, an RFID tag attached to a bottle contains all information about the type of fluid such as a particular colour of shampoo it should be filled with.
(You Tube video – Industrie 4.0 – The Fourth Industrial Revolution – courtesy Siemens)
The development and introduction of Industry 4.0 in industry is expected to span over the next 20 years.
Is India ready?
The Confederation of Indian Industry in collaboration with accounting and consulting firm Grant Thornton India jointly published the report, India’s Readiness for Industry 4.0 – A Focus on Automotive Sector
“Automotive sector being the key driver for many technological advances, is now looking and exploring the ways to understand and internalise the same (i.e. Industry 4.0)”, said M M Singh, co-chair, Regional Committee on SMEs Confederation of Indian Industry (Northern Region) & executive advisor, Maruti Suzuki India Ltd.
“The Indian automotive sector, given its potential contribution to GDP and employment, presents a significant opportunity to be one of the biggest growth drivers for the economy. We need to emerge as a world-class automotive manufacturing hub”, M M Singh added.
To achieve this requires a concerted effort by the government and the automotive industry to create an enabling ecosystem and India’s key strengths such as a large domestic market; a cost competitive value chain which includes low design, testing and validation costs, frugal engineering capabilities and low labour costs; and strategic geographical location which greatly enables India to become a world class automotive manufacturing base.
According to the India Brand Equity Foundation (IBEF), the Government of India aims to increase the contribution of India’s manufacturing output from the current 16.5% of India’s GDP to 25% by 2025.
With IoT being one of the key aspects of Industry 4.0 for India, it is expected to capture close to 20% of the global IoT market in the next five years. The IBEF forecasts that India’s IoT market will grow at a compound annual growth rate (CAGR) of 28% between 2015 and 2020, and the Indian government’s initiatives such as Green Corridors and Make in India will certainly help India achieve this target.
“With this vision, the massive expansion in the Indian automobile industry makes the country ready for the era of ‘Industrial Revolution 4.0’ where
manufacturing process can be integrated with growth drivers of Industry 4.0 and capitalise on the opportunity presented to Indian automotive market”, said Saket Mehra, partner with Grant Thornton India LLP.
However, India still has a long way to go in terms of network readiness as it ranked 91st on the World Economic Forum’s Network Readiness Index 2016, behind Singapore (1st), Malaysia (31st), China (59th), Thailand (62nd) and Sri Lanka (63rd) amongst other countries.
The Networked readiness Index is a key indicator of how countries are doing in the digital world. It depends on whether a country possesses the drivers necessary for digital technologies to meet their potential, and on whether these technologies are actually having an impact on the economy and society.
The digital revolution may change the nature of innovation, which is increasingly based on digital technologies and on the new business models it allows.
Though it seems convincing that Industry 4.0 can become a success story for Germany’s engineering sector; however, the detailed study for “Industry 4.0 Readiness” may further do its part in this effort to highlight the challenging milestones that many companies must still pass on the road to Industry 4.0 Readiness.
Leapfrogging to Industry 4.0
In its International Yearbook of Industrial Statistics 2016, the the United Nations Industrial Development Organisation (UNIDO) ranked India sixth amongst the world’s 10 largest manufacturing countries.
Besides Germany, China with its “Made in China 2025” and India with its Make in India initiative are looking at adopting Industry 4.0 as a means to increase their share of the global manufacturing GDP.
In pursuit of this objective, India encourages multi-national and domestic companies to manufacture their products in India but this comes up against numerous “crippling” regulations and an under-developed infrastructure, so India’s government is focusing on more investment-enabling policies and infrastructure improvements to better facilitate such investments.
With Industry 4.0, India can innovatively move towards Smart Manufacturing, whilst it can leapfrog over several stages which other countries had gone through from an agrarian society to their current stage of development and on to Industry 4.0 which is expected to transform India’s manufacturing by bringing operational efficiencies to manufacturing industries like automotive, electrical and electronics.
The major areas of focus shall be the technological advancement across various industries. These include IIOT (Industrial Internet of Things), 3DP (3 dimensional printing) 3D sensors, social software, augmented reality, location awareness are considered to usher in the next era of smart production. These automation technologies collectively are moving the manufacturing industry towards the next phase of technological advancement.
Industry 4.0 is a holistic automation, business information, and manufacturing execution architecture to improve industry with the integration of all aspects of production and commerce across company boundaries for greater efficiency.
Internet of Things is one of the most important aspects of Industry 4.0 for India which is expected to capture close to 20% share in global Internet of Things (IoT) market in the next five years. The global market is expected to touch US$300 billion by 2020.
Major Indian states are taking initiatives to adapt to Industry 4.0. Andhra Pradesh has taken an initiative to capitalise on the IoT potential in the country.
The state government has approved the first-of-its-kind IoT policy with an aim to turn the state into an IoT hub by 2020 and tap close to 10 % market share in the country.
The Indian government has created Green Energy Corridors to bring in more renewable energies, to make smart grids that will support the variable input of renewable energies and create storage.
India has committed over US$1 billion in this initiative and has started projects in many states, such as Andhra Pradesh, Rajasthan, Tamil Nadu, Gujarat, and Himachal Pradesh.
India’s first smart factory, moving from automation to autonomy, where machines speak with each other, is being set up in Bengaluru. It is making progress at the Indian Institute of Science’s (IISc) Centre for Product Design and Manufacturing (CPDM) with an investment from the Boeing Company.
A smart factory, armed with data exchange in manufacturing and the Internet of Things (IoT) is the future and experts are calling it revolution Industry 4.0.
Reports expect the smart factory industry to touch US$215 billion by 2025 and all major economies are likely to accept it.
Various Indian companies are increasing their focus and partnering with other companies for developing new IoT and M2M (machine-to-machine) solutions, the Digital India initiative from the Government of India is expected to enhance the focus on IoT in tackling the domestic challenges.
Industry 4.0 in the automotive industry
The Indian automotive industry has also taken some notable steps towards industry 4.0. Bajaj Auto was one of the first automotive enterprises to initiate automation in the industry. It commenced the process of automation in 2010, today it uses 100-120 “Co-bots” (collaborative robots) in its production facilities.
(You Tube video – First collaborative robots in India – Bajaj Auto – courtesy Universal Robots channel)
Maruti Suzuki manages 7 process shops and 5 assembly lines by around 1,700 robots. Ford has managed to operate the assembly lines and body shop of its Sanand Plant by 437 robots.
Hyundai has also taken steps to minimise its labour cost by utilising over 400 robots in Sriperumbudur Plant.
The production lines of Tata Nano consist of over 100 robots in the Sanand Plant of Tata Motors.
Other enterprises such as Renault are doing some rather interesting work in the field of automation of business process to prevent accidents.
As a result, companies are warming up to the idea of connected machines.
Overcoming chellanges from above and below.
India faces competition from China and Europe and there is a risk of her being crowded out by the increasing technical capabilities of these regions as they are focusing on medium-value segment where India has always been prominently operating.
Historically, China has focussed on the low technology-low manufacturing value add space while Europe has focussed on high technology – high value add segment.
India’s manufacturing zone of comfort has been in the middle, both on the technology and value add axis.
However, China is now moving up from low technology – low value-add into the medium technology zone, whilst Europe is expanding down from high technology – high value add to medium technology zone, hence expanding the market for European companies.
These moves increase competition in India’s manufacturing base, in addition to that from emerging manufacturing bases such as Vietnam, Turkey and Taiwan.
On the other hand, these developments may provide India with an opportunity to second manufacturing destination for these other countries, which raises questions as to whether India should look towards Industry 4.0 as an added advantage for manufacturing and a lucrative investment destination by other countries.
Fortunately, the tide appears to be in India’s favour as China’s shrinking labour rising labour cost and strengthening Yuan against the US Dollar has encouraged investors to look towards more cost-effective destinations like Vietnam, Indonesia and India.
India has the advantage of an ample supply of skilled technical labour and low cost of manufacturing. Already Havells, Godrej, Bosch and other large manufacturers have shifted units to India.
India’s other advantage over the others include:-
- A growing working population and an expanding middle-class are expected to remain key demand drivers. GDP per capita has grown from US$1,432.25
- in 2010 to US$1,500.76 in 2012, and is expected to reach US$ 1,869.34 by 2018.
- India has the world’s 12th largest number of high-net-worth individuals, with a growth of 20.8%, the highest among the top 12 countries.
- Disposable incomes in the rural agricultural sector shows increasing trends.
- India has a large pool of skilled and semi-skilled workers and a strong educational system.
Favourable government policies like lower excise duties, automotive mission plans, the constitution of NEMMP (National Electric Mobility Mission Plan 2020), FAME (Faster Adoption and Manufacturing of Hybrid land Electric Vehicle) are advantageous for the sector.
As a result, Indian automotive industry occupies a prominent place within the Indian economy.
Due to its deep forward and backward linkages with several key segments of the economy, automotive industry has a strong multiplier effect and is a critical driver of economic growth.
A sound transportation system plays a pivotal role in India’s rapid economic and industrial development.
The well-developed Indian automotive industry fulfils this catalytic role by producing a wide variety of vehicles – i.e. passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors and so forth.
As the 6th largest automotive producer in the world, India on average produced 24 million vehicles in 2016. India has the 5th largest passenger vehicle and commercial vehicle market contributing to 7.1 % of India’s GDP by volume.
As to why invest in India’s automotive and auto-components industry:-
- By 2026, India is expected to be the third largest automotive market by volume in the world.
- Tractor sales in India are expected to grow at CAGR of 8-9% in the next five years, enhancing India’s market potential for international brands. Two-wheeler production has grown from 8.5 million units annually to 15.9 million units in the
- last seven years. Significant opportunities exist in rural markets as well.
- The emergence of large automotive clusters in the country include – Delhi-Gurgaon-Faridabad in the north, Mumbai-Pune-Nashik-Aurangabad in the west, Chennai- Bengaluru-Hosur in the south and Jamshedpur-Kolkata in the east.
- Global car majors have been ramping up investments in India to cater to growing domestic demand. These manufacturers plan to leverage India’s competitive advantage to set up export-oriented production hubs.
- As a research & development (R&D) hub, India’s government provides strong support in setting the National Automotive Testing and R&D Infrastructure Project (NATRiP) centres. Private players such as Hyundai, Suzuki, GM are keen to set up an R&D base in India.
- Electric cars are likely to be a sizeable market segment in the coming decade.
- India is an emerging global hub for sourcing auto components.
- India is geographically closer to key automotive markets like the ASEAN region, Japan, Korea, Europe and has a huge domestic market.
- India is cost competitive compared to other manufacturing countries and has favourable trade policies with no restrictions on import-export.
- India’s government allows 100% FDI through an automatic route.
- India has an enabling infrastructure which includes automotive training institutes, automotive design centres, special automotive parks and virtual special economic zonesr automotive components.