Industrial Automation Magazine India

Less than 5 percent of Indian workforce is formally skilled

Published on : Thursday 02-04-2020

Jabez Mendelson, Team Leader, TechVision, Frost & Sullivan.

How do you assess the current state of Indian manufacturing industry in terms of modernisation?

The Indian manufacturing sector has evolved over the years, especially with the advent of Industry 4.0, which has created a great opportunity for the Indian manufacturing sector to fulfil its global ambitions. However, the adoption rate of automation and digital technologies has been significantly slow in India when compared to other countries. Furthermore, Frost & Sullivan’s analysis in the report titled “Impact Assessment of Automation in the Indian Manufacturing Sector” confirms that the sector has more MSMEs whose focus has been high production volumes and minimal profit margins. The MSMEs show resistance to adopting automation technologies due to the high cost associated with it. However, the Indian manufacturing sector is focused on steadily increasing its global manufacturing market share. Some of the Indian government’s initiatives encourage partnerships with global MNCs, who bring in advanced technologies in manufacturing.

What could be the reasons for the slow pace of modernisation of manufacturing industry in general despite the availability of technology?
The reasons include:
Challenges faced by MSMEs: Frost & Sullivan’s ongoing research on the Indian manufacturing sector estimates the percentage of small and medium-sized manufacturing companies to be relatively high in India when compared to countries across the globe. With just the assembly and packaging OEMs receiving high shares of profits, the smaller companies that perform a majority of the production operations are incapable of adopting the high capital industrial automation solutions. Access to economical digital technologies for medium and small scale manufacturing companies is a challenge, restricting the adoption of automated technologies. Also, the MSME sector in India is facing stiff competition from not only countries like China, due to the cheap imports, but also from countries that have a free trade agreement with India.

Lack of basic infrastructure: The Indian market lacks the basic infrastructure required to support high levels of data and power for implementing smart and digital technology solutions. With a lack of adequate physical and digital infrastructural support, unfavorable land and labour laws, the installation and large scale adoption of automated and connected solutions will be slow.

Labour productivity in India: Around 50% of India’s population is in the working-age group. Also, over 44% of its total population is below 25 years of age. However, it has been estimated that only less than 5% of India’s total workforce is formally skilled. This showcases the lack of skilled labour in India which impacts supply chain management, transportation, production planning, and maintenance.

What more can the government do to boost manufacturing in India with the vision for a USD 5 trillion economy by 2025?
According to the three-sector model in economics, the economy of a country can be segmented into three sectors of activity: extraction of raw materials, manufacturing, and services. The Indian economy has undergone all the three stages of structural evolution with the service industry contributing the highest to the economic growth of the country. With India being the base for a majority of the IT companies, government and industries should leverage this opportunity to encourage skill development, facilitating the deployment of industry 4.0 solutions. Also, for a country like India to achieve overall economic growth, every State must participate. Given India's disparities in income and regional differences, there must be standardised guidelines in place to ensure the steady growth of human and economic skills across all states. Strategies and opportunities must be adopted by the government to enable Indian manufacturers to exploit opportunities in the manufacturing market globally.

Is sustainable development a difficult goal to achieve for a growing economy like India?
Although NITI Aayog and some states have taken policy initiatives, there are several challenges associated with planning, implementing and monitoring sustainable development goals (SDGs) to reap their benefits. Also, Frost & Sullivan’s analysis of the Indian economy estimates that factors such as rising financial instability, household debts, non-performing assets and trade wars, which put growth at risk, can hurt attaining SDGs. To achieve progress in sustainable development, NITI Aayog could work with Central Statistics Offices (CSOs), research organisations and academic institutions along with District level planning departments. This will help them address their current challenges and achieve better local
feedback on implementation, monitoring, and evaluation of SDGs. Once these challenges are addressed, the SDGs planned by the government can be achieved in the long term.

The automotive industry is a good example of modernisation but the success is not replicated in, say textiles, where exports are not in line with the potential?
India’s textile industry has cost advantages compared to both developed and developing countries. However, the Indian textile industry has stiff competition from smaller developing countries. For instance, countries such as Bangladesh and Vietnam have started to export more apparel than India as they do not have great domestic markets. These competitors have affiliated their apparel manufacturing industry with export markets thereby becoming an obstacle to the export potential of the Indian textile industry.

At the moment the renewable energy segment in India is growing, but so is the demand. What should be the ideal energy mix when it comes to manufacturing?
Frost & Sullivan estimates that a favourable regulatory framework will drive solar and wind energy installations, which is likely to account for 53.1% of the total power sector investment by 2021. Coal, gas, and nuclear power are likely to account for 26.9% of the total investment. SHIP – Solar Heating for Industrial Processes – is expected to gain further adoption in India and can potentially lead to the creation of an ideal energy mix.

(The views expressed in interviews are personal, not necessarily of the organisations represented)
Jabez Mendelson is working on key consulting assignments of coveted private sector/government clients, offering market intelligence and analysis after conducting secondary & primary research. He also develops strategy for market entry and competitive analysis that help clients in decision-making, creates compelling technology and business forecast models; and provides current and prospective clients with automation and electronics technology forecasting in the automotive and manufacturing sectors.

#April 2020 Magazine Cover Story

Transforming the Industry. Experts debate the factors that are holding back the Indian industry in quest of modernisation, and improved productivity. Digital Transformation is the buzzword for industry in the wake of the Fourth Industrial Revolution or Industry 4.0. Like much of India with various States at different stages of development, the Indian industry too is not a uniform entity in terms of modernisation and technology. The automotive industry is perhaps the most automated and leading on the digital transformation front as well, but many other segments, especially the MSME component that forms the largest chunk, are still at various stages of modernisation. To read the full cover story Please click here