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11 March 2021, Gateway House

COVID-19: Impact on India’s digital manufacturing

COVID-19 has forced India and its manufacturers to quickly step up their adoption of digital manufacturing processes. There are four elements of this ecosystem already in place – the digital infrastructure, government schemes, academic learning, and a burst of start-ups. This, supported by key policy decisions by the Indian government, will propel Indian manufacturing to higher levels of efficiency, productivity, and competitiveness.

Fellow, Indian Navy Studies Programme

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COVID-19 has accelerated[1] the process of digital manufacturing, already under way globally, and in India. Companies that saw it as an option, now understand it as an imperative. Within India,[2] digital adoption by companies has outpaced their global peers on several criteria including new business and workforce models. A rush of foreign investment into India’s digital space will expand this trend.

This is a significant shift for India, as COVID-19’s geopolitical and economic fallout is the realignment of supply chains, largely away from China. India, with its size, market and tech capability, is seen as an alternative site – though it has not been an immediate beneficiary. That has been Vietnam, with its Asian proximity and favourable regulatory environment.

However, India is cognisant of the opportunity, and the government has enacted some enabling policies. In November 2020, the Production Linked Incentive scheme (PLI) was extended to over a dozen sectors in which India is already competitive, like pharmaceuticals, automobile, telecom, textiles, electronic tech consumer products. These subsidies encourage products to be made in India, for the home and export market. Just prior to this, in September 2020, the government addressed a core problem in India – labour. It replaced 29 old laws with four, simplified labour codes, to modernise labour regulations.

Meanwhile, those companies in India, largely Indian and foreign multinationals, already on the digital manufacturing path, used the year to fast-track their digital adoption. This is particularly true in the case of older facilities, which compressed two-year digitisation plans, into a single month – with immediate results.

Piramal Glass is an example. The $330 million, Gujarat-based company is a global producer of moulded glass for the food, pharma, cosmetics and perfumery industries. When the pandemic hit, the demand for perfumes and nail polish bottles dropped, but the demand for food and pharmaceutical glass rose. This enabled the company to be classified as an ‘essential supplies’ provider and kept its operations running with a third of its workforce.

In short order, Piramal Glass had to innovate. For starters, factory hands could no longer use their electronic fingerprints to enter the facility, so the company sourced facial-recognition software from a domestic start-up called Smart Infocomm.[3] It had multiple uses – not just at the factory gate but also on the manufacturing line to alert the management on workers violating masks and social distancing placement in the factory.

Samit Datta, Global Chief Supply Chain & Technology Officer at Piramal Glass says that typically, brownfield manufacturers that operate different generations of machines and are looking to upgrade, will replace all at one go. However, they need to think counter-intuitively to optimise capital, and instead use digital technologies to upgrade. “This creates the foundation for their Industry 4.0 transformation also,” he says.

Datta used his own advice well. Piramal had planned to commission a new glass furnace, which was to increase capacity from 100 to 145 tonnes per day (tpd). Normally, 10 experts would come from Europe to install the furnace and commence operations. Instead, Piramal tapped into augmented reality using smart glasses most of it procured locally. The furnace was operational in one month. Augmented reality was used for quality assessment too. Foreign customers who would normally be sent physical samples of glass, were able to inspect their purchases via augmented reality.

Piramal had to change the existing on-site operations of its plant to allow for remotely controlled functioning. In seven days, its in-house tech team developed a work-from-home infrastructure to operate the plant remotely, adding on the existing Internet of Things (IoT) stack[4] – i.e. technology, standards and applications – for the manufacturing process.

The success was encouraging, and Piramal decided to accelerate its transformation through data analytics. In July 2020, the company hired a top management consultant to guide the process as also 11 new data engineers and scientists.

Piramal Glass’ transformation has been impressive. In recognition of its inherent business value and accelerated digital journey, the U.S. private equity firm Blackstone acquired a controlling stake in Piramal Glass in December 2020.

Another brownfield success story, of an old factory becoming a new digital player, is that of Siemens India. Its factory outside Mumbai, in Kalwa, is 47 years old and makes low-voltage switch gears. In 2016, with an eye on India’s growing market and exports, the factory was put on the transformation path, to reconfigure manufacturing lines and double the number of product variants manufactured there to 180. This was done using a proprietary digital twin software and Mindsphere – a cloud and IoT-based operating system developed by the parent company in Germany and resulted in a 20% productivity gain for the facility.

With COVID-19, the factory was locked down. In July, when production could begin again, it was with just 30% of its workers. Using the digital twin that already existed, Siemens Kalwa’s engineers reconfigured the production line to accommodate the new rules especially social distancing for the assembly line workers, and get back on track.

Hemant Narvekar, Factory head, Siemens, Kalwa led the effort. He said that the new norms compressed timelines and expense as they “could be quickly simulated and tried in the virtual environment, before executing them in the real world”.

The ecosystem for digital manufacturing in India is now visible. It’s not as deep as it is in the West or China but is developing breadth and depth. Four elements of this ecosystem are in place: the digital infrastructure, government schemes, academic learning, and a burst of start-ups.

Digital infrastructure: A significant part of the digital infrastructure, has been laid by India Stack,[5] an open-source services platform and application programming interface, developed by a public-private partnership as a public good. It is free for entrepreneurs, small and big business, government and developers, to build their products on. During the pandemic, this platform singularly helped the Indian government disburse funding and subsidies to individuals and entities across the country, instantaneously and at low cost.

Now, with the pandemic easing up, and with new legislations and schemes for entrepreneurs, this platform is being used to build and scale up new ideas. It will help India move beyond services to products, says Sharad Sharma, founder of iSpirt, the non-profit which created India Stack. If the transition is smooth, India can become like Korea – a high-value design and product manufacturing powerhouse. While services will continue to be the big employer, he foresees manufacturing becoming advanced – and creating the kind of value that companies like Piramal Glass have done, and beyond that. India will finally leave behind its jugaad or make-fix era.

Government schemes: To capture this nascent and promising trend, the government has moved swiftly. November 2020 saw a $20 billion incentive scheme for 13 competitive sectors of manufacturing to create domestic self-sufficiency. In addition, a serious effort is underway to create the supporting institutions for manufacturing and for the Micro, Small and Medium Enterprises (MSMEs), which comprises over 90% of Indian business. Nitin Gadkari, India’s infrastructure and MSME minister, said on December 15, 2020 that he expects MSMEs to create 50 million new jobs over the next five years, and contribute 40% to India’s GDP, up from 30% now.

To make this happen, new initiatives like Smart Advanced Manufacturing and Rapid Transformation Hub (SAMARTH) by the Ministry of Heavy Industries, have begun. One such government initiative in Pune is C4i4, which provides a transformation road map for its customers, both MSME and MNC. C4i4 offers coaching and consulting specifically for manufacturing MSMEs that are looking to digitise. During the pandemic, demand for its services have grown by 30%, not just from small business but big exporters too.

Dattatraya Navalgundkar, Executive Director at C4i4 Pune, says, “The pandemic has accelerated the adoption of digital technologies across the value chain. Although MSMEs face cashflow challenges, lack trained manpower and expertise, they need business continuity and are eager to start the digital transformation journey.”

C4i4 is now developing its own standards, to create an Indian version of the World Economic Forums’ Lighthouse Network, but for MSMEs, to encourage their endeavors.

For the first time, Indian states have started to take manufacturing seriously. The mass migration of workers from various parts of India during the early months of the lockdown, was an opportunity for state governments, to identify the skill sets of their residents. Three Indian states with large migrant populations stand out in this – Uttar Pradesh, Madhya Pradesh and Bihar. As the migrants came home, while they were being tested, treated and quarantined, their work and skills were also being recorded and mapped.

Subsequently, the states developed industrial policies/manufacturing policies and frameworks – and some like UP, Gujarat and Karnataka also revised their outmoded labour laws to create a positive environment for investors. For instance, the government of UP passed an ordinance, the Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020, which relaxes laws related to unions, work dispute settlement, regulations on work conditions, for three years.

Academic learning: India is also the first country in the world to develop and run a post-graduate degree course in digital manufacturing, at the prestigious Birla Institute of Technology and Science– Pilani, Rajasthan.

B. Venkataraman, the Associate Dean of the institute, had been hearing industry leaders talk about digital manufacturing since 2014, so a survey was conducted to see if it would be a compelling course. The survey found that though the existing programmes were suitable for the current generation of manufacturing, the manufacturing of the future needed much more. Like skills in industrial IoT, additive manufacturing, big data analytics, industrial cybersecurity, logistics and supply chain optimisation, autonomous equipment, and digital tools for product and system design, simulation and production.

The institute decided to take the initiative and teach the subject. There was no faculty readily available to teach, and without working experience, it would be meaningless for undergraduates. So, BITS nurtured and developed a faculty and introduced the two-year course for working professionals from the manufacturing industry.

Companies like GE, Tata Motors, Mercedes Benz, Bharat Forge, Alstom, JSW Steel and Bosch, supported the course – 800 inquiries were received in the first year, 2019. The fifty applications that were accepted became the first batch for Digital Manufacturing/Industry 4.0, starting June 2019 – on a virtual campus for the working executives. Therefore, the pandemic didn’t change much, except for not conducting some on-campus lab work. With two batches inducted in an academic year, the fourth batch has now commenced, with another 50 working professionals. That makes 100 digital manufacturing graduates from India, every year.

Burst of start-ups: Multiple government schemes like Make in India, Start-up India and Digital India, initiated in 2014, had seen a limited response. But 2020 saw a surge of digitisation, intra-company and in start-ups. According to Nasscom,[6] the software industry association, 1,600 new start-ups were added in 2020, and 12 new unicorns are now added to the total of 38 unicorns. Indian states have invigorated and updated their own start-up policies, in order to reach grassroots talent. They have begun to compete with each other,[7] each offering start-up challenges, incubation and acceleration programmes, and venture funding.

The start-ups already established pre-COVID 19, have seen bustling business. Aditya Vermani, Co- Founder and Business Head of ClairViz Systems, says that digitisation which was seen as a ‘Good to Have’ feature in the pre-COVID 19 era, is now an imperative. “Despite factories running at 30%, manpower, digital work instructions and maintenance gained traction. We were able to maintain our revenue growth, in the constrained financial environment,” he says.

Yash Rane, CEO at Chizel, a unique platform that offers manufacturing as a service and sees itself as a budding Amazon for manufacturers, says that manufacturing shops are shifting to cloud-based, mobile-first accounting systems and human resource solutions, and to IoT devices to track machine performance. “Although they look like small adoptions, they are laying a solid foundation for the next wave of transformation. In very short order, digital manufacturing will become the new normal,” he says.

These are all good signs – but they are not enough. COVID-19 has depleted the reserves of governments, companies and individuals, making China’s efficiency of supply and production, and affordability, still very attractive. Countries like Japan that are officially supporting their companies to rehabilitate their industries are still not depending on India to either become a reliable “+1” for their China strategy or be part of their multiple supply chains. The old India problems of “issues of land use and allocation, working infrastructure, logistics, transport, and consistency of tax administration” continue to create hesitancy amongst foreign investors.[8]

Still, the efforts being made are significant.[9]

Consultants like McKinsey have played a significant role, quietly evangelising digital manufacturing with Indian companies that are ready for the next leap forward. Their work is paying off – 2021 will likely see more than two Indian companies join the Lighthouse network. Gartner’s Magic Quadrant, which had one Indian software company – Altizon – and two others with back offices in India (QiO and Flutura) on their list, may also see a surge in the coming years.

Commander Amrut Godbole is Fellow, Indian Navy Studies Programme at Gateway House.

Sagnik Chakraborty is Researcher, Cybersecurity Studies Programme at Gateway House.

Manjeet Kripalani is Executive Director and co-founder at Gateway House.

This article is a part of Gateway House and India EXIM Bank’s study, ‘Digital Manufacturing in India‘, exclusively written for Gateway House: Indian Council on Global Relations. You can read exclusive content here.

For interview requests with the author, or for permission to republish, please contact outreach@gatewayhouse.in.

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References

[1] A recent McKinsey report titled ‘How COVID-19 has pushed companies over the technology tipping point—and transformed business forever’ illustrates digital adoption that would have normally occurred between 15 to 22 months being deployed in less than a month during the ongoing pandemic.

[2] In the report- KPMG in India 2020 CEO Outlook: COVID-19 Special Edition, published by KPMG, stated that 50% of Indian CEOs within the manufacturing space have acknowledged the acceleration of digital growth and also identified a 20% increase in risk due to emerging/disruptive technologies.

[3] Smart Infocom, “Smart Infocom.”

[4] The IoT stack at Piramal Glass consist of the Real Time Manufacturing Insights (RTMI) – a cloud-based, IoT enabled platform to enable real time monitoring and advanced insights for end-to-end plant operations. The stack also included another platform – the Unified Energy Management System (UEMS) for management of utilities like energy, water and air.

[5] India Stack, “WHAT IS INDIA STACK?”

[6] “Indian Tech Start-up Ecosystem – On the March to a Trillion Dollar Digital Economy.” NASSCOM, January 7, 2021.

[7] Ministry of Commerce and Industry, Department of Promotion of Industry and Internal Trade. State Ranking System. Accessed February 10, 2021.

[8] Singh, Gurjit. “Enticing Post-COVID Japan to India.” Gateway House, June 25, 2020.

[9] Since Dec 2017, UP has done road shows across India, and seen investment start to come in the state. In July 2019, Uttar Pradesh launched 250 investment projects worth Rs. 65,000 crores. The Defence Expo 2020 saw 23 MoUs worth Rs 50,000 crores being signed. Additionally, UP received an FDI of $467 million from October 2019 till September 2020. Other states such as Jharkhand and MP have received an FDI of $2644 million and $225 million respectively in the same period.