High-tech growth is driving the manufacturing sector in India

The Indian manufacturing sector has reason to be optimistic with finance minister Nirmala Sitharaman’s Budget announcement this year. With a growth-driven vision of achieving a $5-trillion economy by 2024, the Budget focussed on revitalising the manufacturing sector and bringing sunrise and advanced technology industries to India, stepping up the momentum of the ‘Make in India’ vision. Technology manufacturing, especially towards establishing a holistic component ecosystem, can play an important role in accelerating the growth of the sector and helping realise India’s potential as the manufacturing hub for the world.

Today, India has become a strategic market for all—a manufacturing base for enterprises and a hotbed of innovation for technology leaders. Advanced and emerging technologies such as Artificial Intelligence (AI), the Internet of Things (IoT), robotics, machine learning (ML), etc., are gradually catalysing transformation across industry segments such as healthcare, manufacturing, transportation, and retail. This has opened new avenues for Indian manufacturing companies to design products and come up with disruptive solutions that have global potential.

Innovation, opportunities and an integrated ecosystem

To keep pace with the digitisation and adoption of emerging technologies, several industry sectors have undergone a sea change. For instance, some Indian technology manufacturers have created a niche for themselves by leveraging robotics. Through innovative solutions they have not just transformed warehousing but are all set to change other industry segments such as shipping and logistics, automobile and manufacturing units, etc. Similarly, integration of AI and natural language processing in consumer products offer a plethora of opportunities to the electronics industry to devise innovative solutions that address household and enterprise usage. For instance, AI-driven surveillance cameras can be used by civic bodies to curb crime.

Reports by the Everest Group and Nasscom show that more than 7,200 technology startups were founded in India in the last five years. Of these, eight evolved to become unicorns in 2018 and almost half of them are operating in deep-technology areas. The proven technology prowess of India and a burgeoning startup community creates the right environment to drive innovation in the high-tech industry, which will further add to the growth of the technology manufacturing sector.

The government of India has already allocated Rs 400 crore to strengthen the higher education system in the country, which in turn will help address the demand for a skilled workforce. The government’s impetus towards training 10 million youth in industry-relevant skills will further help address the high-tech skills shortage and create a talent pool in advanced technology domains such AI, ML, IoT and robotics. Additionally, incentives offered by the government for sunrise industries in the form of tax relief and policy reform is aimed at attracting global companies to set up mega-manufacturing plants. These sops also encourage domestic manufacturers to explore the advanced technology and sunrise industry landscape.

More importantly, the onus of nurturing, mentoring and launching the tech-based ecosystem doesn’t depend on government initiatives alone but is a collective collaboration between industry, academia, and government. The Indian technology industry is equally committed to nurturing local talent and supporting government initiatives through active collaboration. There are several programmes that have been undertaken by industry leaders in partnership with the government that are providing the right environment to foster innovation, offer technical support, infrastructure and mentorship to help convert prospective business ideas into a profitable business proposition.

The road to realising India’s potential

Fuelled by a burgeoning demand for technological innovations from the growing middle class and rising disposable income, the Indian electronics market is one of the fastest growing in the world. In a written reply to the Rajya Sabha, Minister for Electronics and IT, Ravi Shankar Prasad said that India's domestic electronics production is estimated at Rs 4.58 trillion in 2018-19, which despite accelerated growth in recent years, still represents only 3.3% share of the global market. This suggests a significant demand-supply gap in the electronics market resulting in dependence on imports to meet demand, which ultimately increases the overall cost of the product.

If we consider the case of printed circuits boards (PCBs) that form the core of almost all electronic products, India meets just 30% of the overall demand through domestic PCB manufacturers and imports the rest. There’s a huge unmet demand to expand and create the right component manufacturing ecosystem in India. It will not only address the readily available component requirements for global manufacturers, but also set precedence for high-tech industries to expand their footprint in India.

Similarly, with the intellectual capital available in the country and competitive talent costs, the research ecosystem in India offers a significant opportunity for global companies to establish their research and development (R&D) centres in India, which can ultimately drive domestic manufacturing. Through these R&D centres, the companies can focus on developing innovative and cost-effective solutions for global markets as well as address the local needs of the region.

As immediate next steps, industry and the government must focus on addressing the challenges ranging from inadequate infrastructure, domestic supply chain and logistics, and quality power, to the high cost of doing business and limited design capabilities, R&D efforts and skilled resources. With continued problem-solving and the right impetus, high-tech manufacturing can be the fundamental foundation for a manufacturing-based economy.

Views are personal. The author is vice president and managing director, sales and marketing group, Intel India.