Make in India: Indian Manufacturing in the Age of Industry 4.0. Aroop Zutshi Global President & Managing Partner Frost & Sullivan

Transcription

1 Make in India: Indian Manufacturing in the Age of Industry 4.0 Aroop Zutshi Global President & Managing Partner Frost & Sullivan 2016

2 India and Japan: The Background

3 India and Japan: A Strategic Partnership Natural Allies (in the current geopolitical context) Strong Economic Cooperation India Opportunities for high growth (>6.5%)

4 Import Export Mauritius Singapore U.K. Japan USA Netherlands Cyprus Germany France Switzerland USD billion India Japan Relations The Past The Present The Future 4 th largest FDI 7.46% ( ) $15.97 Bn Key Sectors for Cooperation Others 28% Electrical 4% Equipment 9% Metallurgy 28% 16% Services Sector Drugs & Pharmaceuticals 15% Automobiles Import / Export ( ) $53.2 Bn $91.5 Bn Japanese FDI into India (2015) Import / Export (2015) $9.9 Bn $5.2 Bn Priority Sectors Infrastructure Manufacturing $1.6* Bn Services and Skill Development Number of Japanese Companies 2013: : 3961 Factors Favoring Investments Domestic market potential Inexpensive labor India as an export hub 5 Pillar Strategy (Sectors Favouring investment) Japan Plus Infrastructure Development Manufacturing Energy Skill Development Business Environment Improvement A unique endeavor of the Govt. of India to fast track Japanese investments, facilitate and assist in removal of bottlenecks * Estimated

5 Opportunities in India Infrastructure Manufacturing Railways Science & Technology Information and Communications Technology Industrial Cities / Smart Cities Industrial / Freight Corridors Renewable Power Automotive Electronics and Semiconductors Pharmaceuticals & Chemicals Defense Metro Projects High Speed Rail Infrastructure Space Research Maritime Research Healthcare Research Cyber Security Green ICT ICT Disaster Management

6 Industry The Manufacturing Transformation: Way Ahead for the Make-In-India Initiative

7 India Economy Why Manufacturing? Make in India - Insights behind the Initiative Growth Needs A service-based economy is prone to greater market risks. Manufacturing facilitates stronger and stable growth Importdependent Need for Employment High reliance on imports limits holistic growth. Manufacturing in India will increase export opportunities and boost the overall economy. With nearly 250 million people set to enter the Indian workforce in the next 15 years, manufacturing growth has become an inevitable necessity for large-scale employment Make in India Key End-user Industries Increase FDI in Manufacturing Minimize reliance on imports Enhance job opportunities Expand Infrastructure Promote technological evolution Automobiles Defense Aviation Biotechnology Chemicals Electrical machinery Electronics Food processing Oil & gas Pharmaceuticals Source: Make in India, Frost & Sullivan Analysis

8 Frost & Sullivan s Outlook of Industry 4.0 The Four Functional Facets of the Future Industry Convergence: IT-OT-Telecom Services 2.0 Supply Chain Evolution The Industry 4.0 Business Ecosystem The cross-pollination of ideas, technologies and processes between the worlds of Information Technology and Operational technology will form the crux of the fourth industrial revolution Exploring newer avenues for service innovations, such as cloud-based service platforms and evaluating potential for new profit centers. Opportunity analysis for Information and Communications technology in services The dawn of the future factory is set to disrupt existing supply chain networks. Digitalization and increased connectivity is set to disrupt and realign existing valuechain networks The advent of advanced Information and Communications technologies will promote new interrelationships and interdependencies giving way to unexpected business collaborations and partnerships Source: Frost & Sullivan Analysis

9 Make in India - Enabling an Industry 4.0 Vision for India Sowing the Seeds for Advanced Manufacturing in India Manufacturing Infrastructure Make-in-India: Manufacturing Implications With new foreign investment, Indian manufacturing will need to compete with global standards for maintaining its competitive advantage Technology Provision Skilled Manpower Development New service models, technological capabilities, dynamic supply chain networks - will come to define manufacturing processes in India The fast growing adoption of additive manufacturing is helping to reduce lead-times and support new product innovation in India. Make in India Key Technology Attributes Mobility Cloud Computing Wireless Networks Big Data Analytics Virtual Reality Machine-2- Machine With an increasingly globalized manufacturing environment, Industry 4.0/Advanced Manufacturing will become a quintessential part of the manufacturing revolution in India Source: Frost & Sullivan Analysis

10 Make-In-India through Industry 4.0 An Important Transition in the Manufacturing Sector Key Technological Adoptions Industrial Mobility Cloud platform Big-Data Analytics Industrial Cyber Security Key Operations Impacted Production Planning End-user feedback management. Real-time process optimization Strategy Structure Financials Go-to-market Strategy India Key Segments Impacted Electronics Manufacturing: Includes Electronics products, electronic components, semiconductor design and manufacturing services Photonics: Manufacturing of products such as Lasers, LED lights, and fiber optic cables Automotive: Automobile and Automotive components for light motor vehicles and commercial vehicles. Renewable Energy: Manufacturing of turbine, blades, and solar photovoltaic cells Heavy Machine Tools Aerospace and Defense related products Source: Make in India, Frost & Sullivan Analysis

11 Potential Implications for Indian Manufacturing Expected GDP Contribution by Manufacturing Sector Less than 15% 25% Import and Exports ratio of manufactured products 3 Imports 2 Exports 5 Imports 4 Exports % of Global Manufacturing Output Less than 2% More than 4% Key Reasons Large-scale Foreign direct investment to build, upgrade and optimize production methods through the industry 4.0 concept Increase in demand for basic metals, automotive components, electronics, aerospace and Defense products. Source: Reserve Bank of India (RBI), Frost & Sullivan Analysis

12 Snapshot of Indian Manufacturing Segments Automotive Sales (2020): 6 Million Cars India stands at number 6 in the global vehicle sales market. Sales of passenger cars is predicted to reach 6 million by 2020 Electronics Manufacturing CAGR ( ): 9.1% India is positioned at number 10 in the global electronic market. The estimated demand for electronics is poised to cross $320 billion by 2020 Photonics Growth: 3X Times Segment key to supply components for High Tech Machinery in medical and life sciences sectors The sector is expect to grown 3x times by 2020 in the sub-continent Heavy Machine Tools CAGR ( ): 17% Limited manufacturing of in-house high-tech machine tools, 70% of the equipment is imported. High Investment in transport and other infrastructure projects to boost growth rate Renewable Energy New Investments: $6.0 Bn. Renewable energy is estimated to contribute up to 35% of total power generated in the country by 2025 Defense Defense: 2.8% of GDP Defense has grown by 10% since Currently, the largest global importer of defense equipment and arms. Source: Make in India, IESA, Reserve Bank of India (RBI), ZVEI Frost & Sullivan Analysis

13 Advanced Manufacturing in India: Identifying Potential End-user Markets Indian Manufacturing Basic Goods Capital Goods Intermediate Goods Consumer Goods Electricity Coal Finished Steel Fertilizers Cement Pipes and Tubes Aluminum ingots Auto components Railway locomotives Commercial vehicles Machine tools Ship building Tractors Electric generators Diesel engines Electric motors Boilers Textile machinery Petroleum products Cotton yarn Tires Paints Tin metal containers Bolts and nuts Plywood commercial Sugar Tea Tetracycline Wheat flour Paper and paper boards Cotton cloth Phones Artificial leather Cigarettes Liquor Penicillin The capital goods sector is expected to become the frontrunner in adopting advanced manufacturing concepts followed by intermediate goods, basic goods, and consumer goods. Source: Reserve Bank of India (RBI), Frost & Sullivan Analysis

14 States Attractive for Make in India; Policy Initiatives Enabling Make in India a Profitable Proposition

15 Ease of Doing Business - Indian State Rankings, 2015 Gujarat, Andhra Pradesh, Jharkhand, Chattisgarh and Madhya Pradesh are the Top 5 Himachal Pradesh 23.95% Chandigarh 10.04% Punjab 36.73% Haryana 40.66% Delhi 37.35% Gujarat 71.14% A World Bank report analyzed the implementation of reforms by states in India during the first half of calendar year Gujarat leads with 71.14% Maharashtra 49.43% Goa 21.74% Karnataka 8.50% Kerala 22.87% Rajasthan 61.04% Madhya Pradesh 62.00% Jammu & Kashmir 5.93% Uttarakhand 13.36% Uttar Pradesh 47.37% Bihar 16.41% Sikkim 7.23% Arunachal Pradesh 1.23% Assam 14.84% Nagaland 3.41% Jharkhand 63.09% Odisha 52.12% Chattisgarh 62.45% Telangana 42.45% Andhra Pradesh 70.12% Tamil Nadu 44.58% Puducherry 17.72% Meghalaya 4.38% Tripura 9.29% Mizoram 6.37% West Bengal 46.90% Andaman and Nicobar Islands 9.73% Source: Department of Industrial Policy and Promotion, World Bank, Ministry of External Affairs 15

16 Best Performing States on Key Industrial Parameters Gujarat, Madhya Pradesh, Tamil Nadu, Jharkhand, Andhra Pradesh, and Maharashtra evolve as Leaders Industrial Land Allotment is one of the basic criteria for any manufacturer wanting to set up a facility while obtaining infrastructural Utilities is essential for any manufacturing unit. The fewer and easier the processes are, the more convenient and cost-efficient the unit is. Lastly, labor regulations covering licensing, registration, approval or renewal processes are key to the success of a labor-centric manufacturing sector. Madhya Pradesh Availability of information on industrial land banks Gujarat- Robust Geographic Information System to track industrial land and ensure key infrastructure such as road and water Tamil Nadu Online zonal plans for industrial lands available to aid building plans Gujarat Utility connections given within 15 days Maharashtra Offers investor friendly services Madhya Pradesh Reduction in the number of documents to two Land allotment and obtaining construction permit Gujarat Online labor dept. processes licensing and renewal of licenses Jharkhand Online portal offering registration, licensing, and renewals Andhra Pradesh Offers factory plan approval processes Obtaining infrastructural utilities Labor Compliance Source: State Assessment Report 2015,World Bank, Times of India, DNA India, India Today 16

17 State Initiatives in Alignment with Make in India Focus Sectors Key sectors wise developments Electronics Manufacturing The Maharashtra Government is likely to release a new electronics policy to attract the industry. The Madhya Pradesh Government has announced three Electronics Manufacturing Clusters. Setting up Semiconductor Wafer Fabrication (FAB) manufacturing in Uttar Pradesh and Gujarat. Automotive Manufacturing Automotive Mission Plan II cornerstone of Make in India. Major Automotive Component Manufacturers (OEMS) are expected to invest around INR 10,000-15,000 Crore ($ billion) in Gujarat. 100% FDI allowed under the automatic route. Defense Manufacturing 121 licenses have been issued for defense manufacturing under this initiative to Gujarat, Maharashtra, Karnataka, Telangana, and Andhra Pradesh. FDI allowed up to 49% in the defense sector. Space and technology France to partner India in its next Mars 2 mission the Indian Space Research Organisation (ISRO) plans to launch this in India-UAE to set up a fund which will have military equipment, space technology, and nuclear energy as some of the focus areas. Sources: Livemint, Times of India, Business Standard, Fibre2fashion,Make in India, SIAM, Business Standard, IBEF, Economic times, Indian Express, Reuters, Deccan Herald 17

18 2015: A Year of Significant Improvements for Doing Business in India Before Make In India Campaign After Make In India Campaign Focus Areas World Bank Ease of Doing Business Ranking: 134 in 2015 Time taken to start a business: 34 days Required: Paid-up capital of INR 100,000 ($1,629) to start a limited liability company Time taken for getting electricity: days Global Competitiveness Ranking ( ): 71 Jumps 4 places in the ranking to 130 for 2016 Time taken to start a business: 29 days No paid up capital required Time taken for getting electricity: 90.1 days Global Competitiveness Ranking ( ): 55 Make in India Campaign: support Manufacturing Skill India: Equip Indians with vocational skills Digital India: Increase Internet access for everyone in India Start-up India: Promote bank financing for startup ventures to boost entrepreneurship and encourage job creation India stood out among South Asian countries in terms of taking steps to introduce better and more efficient business regulations Within a year, days required to start a business have been reduced from 34 days to 29 days. The current Government aims to propel India into the top 50 countries by 2018 Source: World Bank Ease of Doing Business Report

19 Key Policy Announcements enabling Investment Inflows 24x7 custom clearance to speed up clearance of goods for import and export (EXIM), reduce dwell time and lower transaction cost Single Window Project as a common platform for EXIM to meet requirements of all regulatory agencies Adoption of Digital Signature to end physical submission of documents and encourage paperless working Reduction in number of mandatory documents for EXIM: only three, down from 11 Setting Up of Customs Clearance Facilitation Committee Rationalization of penal provision in central excise and customs to encourage compliance and early dispute resolution Facility of electronic payment of duty was extended to all Central Excise assessees Time limit for taking CENVAT credit of duty/tax paid on inputs and input services increased from six months to one year Application process for Environment and Forests clearances made online through MOEF portal In the past, project sanctioning took about months. The singe window clearance system is expected to reduce approval time to days. The Government has initiated a start-up fund of INR 10,000 Crore ($1.5 billion) to help entrepreneurs in India. Source: Press Information Bureau of India 19

20 Factors Favoring India as an Investment Destination for Manufacturing Favourable Demographics According to the World bank, India s population will increase to 1.35 billion by 2020, up from 1.2 billion in 2015 Nearly 70% (906 million) will be of working age. With 356 million in the age group of years, India will have the world s largest youth population. University educated workforce expected to rise from million to 114 million by India Growth Story Consumption Growth Story According to the IMF, India is expected to grow at an average of 7.6% during , as compared to an average 6.2% growth in China. Growth acceleration to be driven by business-oriented reforms and improved investor sentiment FDI in India expected to rise by 45% in Foreign investment limits raised in several sectors including private banks, defense, and non-news entertainment media. Consumption accounts for around 68% of the GDP of India. Expanding middle class, rising incomes, and increasing spending power along with a large youth population and rapid urbanization will continue to boost consumption. India s middle class, which is about 50 million or 5% of the population, will reach 200 million by India will add more people than China to the global middle class by 2030 creating a huge market for companies. Manufacturing Hub One of the major advantages of manufacturing in India is the low cost for labor. The average labor compensation in the organized manufacturing sector in India rose from $0.68 an hour in 1999 to $1.50 in 2015, whereas the compensation rate during the same period rose to $3 an hour in China. According to India s National Manufacturing Competitiveness Council, an estimated 100 million jobs will move out of China over the next few years in labor-intensive sectors. India could be one of the beneficiaries. Source: IMF, United Nation, Morgan Stanley, PIB 20

21 Top 3 Predictions The Make-in-India initiative is poised to transform Indian manufacturing into the age of Industry 4.0 Energy, automotive, and electronics are likely to become first movers into advanced manufacturing, and emerge as substantial contributors to the growth of India s GDP The Indian manufacturing space is set to witness the emergence of local micro factories, catering to decentralized manufacturing operations and customized production Source: Frost & Sullivan Analysis

22 Thank You