On 29th April 2021, we hosted a Webcast with Konrad-Adenauer-Stiftung on, The New Age of Globalization: Digital Manufacturing Opportunities for India. The panelists were Sunil Mathur, Managing Director and Chief Executive Officer, Siemens Ltd., Rajat Gupta, Senior Partner, McKinsey & Co., Mumbai, and Michael Mandel, Chief Economic Strategist, Progressive Policy Institute, Washington D.C.
This webcast discussed the potential of Digital Manufacturing in India leading to a new age globalisation of manufacturing, and developing resilient, transparent and trusted supply chains. It detailed the role of MNCs, start-ups and government in accelerating digital adoption, and how to draw India into the emerging global trading system, taking into account the effects of the COVID-19 pandemic.
Key Findings
♦ Pandemic and digital adoption: Digital manufacturing has the potential to revive the pandemic-ridden economies in India and across the world. The pandemic has accelerated digital transformation of the manufacturing sector in India. Digital connectivity, especially in manufacturing, is helping in overcoming supply chain constraints, adding resilience to operations.
♦ Compulsion for Digital Co-operation: Co-operation between India and Western countries can cushion problems the latter faces – like ageing work force and loss of institutional knowledge. The West can transfer latest technologies to local Indian operations, and avoid monopolization of supply chains.
♦ Technology for the factory floor: Affordability and maturation of technologies is driving digitization of factory floors. Accelerated digital adoption provides flexibility in operations, better asset utilization and cost savings as well as higher quality and productivity.
♦ Starting right: Only 1/6 th of the manufacturers that embark on digital transformation, succeed.
The key to success is following the correct path:
(i) Go Micro.
(ii) Focus on Value Creation.
(iii) Leverage existing digital infrastructure.
(iv) Build capabilities.
(v) Scale-up.
Opportunities and Challenges for Indian manufacturing: India wants to increase manufacturing from 16% to 25% of GDP. India can attract foreign manufacturers to serve the local market, drive exports and help local job creation (as Amazon did). The Productivity Linked Incentive schemes will help. Indian industry, reticent about digital adoption two years ago, now sees it as an imperative, including the SMEs. Indian manufactured goods have a 5%-15% cost disadvantage, mostly due to high costs of logistics, infrastructure, power, productivity of labour and land availability. Digital adoption can bridge the cost disadvantage – in three years, process manufacturing can be 6%-7% more competitive.
Recommendations:
(i) India’s near-term advantage in software skills will not last long; imperative to overcome issues of logistics, land, labour and affordable power for long-term competitiveness.
(ii) Foreign MNCs must follow the example of Siemens in bringing in new technology to their local manufacturing operations.
(iii) Resilience is necessary, through policy intervention. India must work with like-minded countries to evolve strategic manufacturing policies and supply chains backed by digital technology.
We have also published a paper on the topic, Digital Manufacturing in India. Read the paper here.