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By Somshubhro Pal Choudhury and Anil Paranjape
Editor’s Note: This is part 2 of a two-part series on the role of productivity in making ‘Make In India’ a successful program. You can read Part 1 here.
Case for Robotics in Industry 4.0
Automation and robotics technologies are in their infancy in Indian medium-size factories since technical feasibility and return on investment (RoI) are preconditions for deployment. Factories review RoI basis a 2-3 year horizon, which becomes a difficult RoI with the cheap cost of labor.
RoI needs to be examined basis higher output levels, better quality, reliability to compete globally and beyond labor substitution. High capex costs are however a deterrent.
In this context, the Industrial Robot Sales report by International Federation of Robotics (IFR) throws up a few interesting facts: Global industrial robot sales increased 15 percent to 253,748 units in 2015 with 75 percent of the total sales volume from 5 countries – China, Korea, Japan, US and Germany. Sale of robots in India was a mere 2,600 robots compared to 70,000 in China and 50,000 in Europe. Robotics is nascent in India with startups like Shastra Robotics, Gridbots and Systemantics solving niche automation tasks with home-grown affordable robots.
India is an OPEX driven economy and any business model innovation from CAPEX to OPEX and financing could sway automation in the right direction. The new greenfield projects by large manufacturers will hopefully lay emphasis on automation while the existing factories adding new lines and expanding are likely to look at immediate RoI and may miss the opportunity.
Silver Linings to manufacture Job Growth
Despite manufacturing sector not creating jobs, the wider ecosystem is rife with opportunity. Some opportunities will evolve more organically as manufacturing activity and global product demand increase. Simply put, more production to meet demand will create more jobs (albeit more skilled ones) in the core and ancillary industries. Any large manufacturing setup will create several peripheral ancillary industries in the cluster. As more factories are setup, demand for more peripheral or support jobs in supply chain to support the plants or the workers in these plants (in terms of services) will arise.
Even though such industries are moving towards bigger use of machinery (not necessarily automation), the Indian Council for Research on International Economic Relations (ICRIER) study did not find a significant decrease in Labor/Machine ratios where such shifts happened. This makes these industries a bright spot for job creation.
As manufacture and sale of products rises, opportunity for more pre-sales, implementation, logistics, installation, and support jobs throughout the entire supply chain will no doubt be seen.
This makes traditional labor intensive manufacturing industries like leather, apparel, food a bright spot for job creation as issues with respect to skilling, SME support, export promotion get addressed.
In traditional labor intensive manufacturing industries like leather, apparel, food etc., an ICRIER study points out that the employment generation in these industries is hampered by non-availability of skilled workers, bad labour laws, lack of more female workers, lack of credit, lack of infrastructure etc.
Even though such industries are moving towards bigger use of machinery (not necessarily automation), the ICRIER study did not find a significant decrease in Labor/Machine ratios where such shifts happened. This makes these industries a bright spot for job creation, especially as #MakeInIndia government initiatives in skilling, SME support, availability of credit, export promotion, etc, address some of the underlying issues that hamper job creation in these industries.
Pressures to increase plant utilisation which is currently at 70 percent average and more shifts of shorter duration will also increase job creation possibilities.
Low plant utilisation is also a result of issues such as non-availability of raw material, components, maintenance, labor laws, labor skills etc. As these issues get addressed, plant utilisation will improve and more people will be needed to run factories for longer periods.
Future of jobs in manufacturing
If we do some crystal gazing and imagine how manufacturing itself may fundamentally change in the near to midterm future, more job opportunities emerge.
The world-over, the definition of employment is changing from lifelong to job-hopping to cyclical to temporary. Concerted efforts are required to condition the labor to accept more temporary and cyclical job opportunities.
While the net results of these countervailing forces, simultaneously reducing and increasing job growth, are somewhat speculative, one thing is clear. Employment models need to evolve so that a large army of cyclical and temporary workers will need to be managed during periods of high and low employment demands. This needs new comprehensive thinking, program design and concerted execution by the Government and the industry working in unison.
#MakeInIndia and the growing consumption economy is great news for India, but the quantum increase in manufacturing jobs, a goal of #MakeInIndia will remain a challenge despite several fold increase in factories. In the interest of ensuring India has a competitive edge in the long run, while raising the bar on productivity and quality of output, India would do well to derive a metric focused on productivity and quality to make-good India’s potential and achieve the dream of India’s manufacturing sector touching $1tn by 2025.
The authors: Somshubhro Pal Choudhury is an IoT Advisor Bharat Innovations Fund and Anil Paranjape is a Venture Partner, Bharat Innovations Fund
Make in India: Importance of Robotics in the manufacturing segment, and how it can still create jobs