Why PM Narendra Modi's Make in India narrative needs a shift
Modi had recently inaugurated Samsung's new mobile making facility in Noida - Samsung is doubling its current capacity for mobile phones from 68 million units a year to 120 million units a year. This would be a phase-wise expansion, to be completed by 2020.
Prime Minister Narendra Modi's Independence Day speech was laden with comparisons to 2013 - the achievements of the BJP government versus the previous regime. He mentioned that India, today, is manufacturing "record mobile phones". Modi had recently inaugurated Samsung's new mobile making facility in Noida - Samsung is doubling its current capacity for mobile phones from 68 million units a year to 120 million units a year. This would be a phase-wise expansion, to be completed by 2020. This facility now is the "world's largest mobile factory". This development is being underlined as "a shining example of the success of the Government's 'Make in India' programme".
Nevertheless, India had the world's largest mobile phone making facility even prior to 2013. At its peak, Nokia's Sriperumbudur factory in Chennai was the world's largest with 8,000 permanent employees working in three shifts, producing more than 15 million phones a month. The company exported to over 80 countries - was one of the largest foreign exchange earners in the technology sector, exporting phones worth more than $2 billion a year.
And like in present times, the Nokia factory too received political attention as a success story of Indian manufacturing. The then prime minister, Manmohan Singh, United Progressive Alliance Chairperson Sonia Gandhi, and seven union ministers, including P. Chidambaram and Dayanidhi Maran, visited the Sriperumbudur factory while it was booming. The factory, subsequently, was crippled by two tax disputes with Indian authorities, totalling Rs 17,658 crore.
Nokia shifted production to a new factory in Vietnam. A revival of mobile manufacturing, albeit in North India, is encouraging, but is not reflective of the larger gloom - capacity utilisation in much of the country's plants is still moderate. Industry body FICCI's Economic Outlook Survey of May 2018 pointed out that the manufacturing sector "is grappling with issues related to competitiveness, which is contributing to lower export as well as overall growth" and that the government "must stand up to the challenge of carrying out the difficult reforms, especially those related to the factor markets (land and labour)".
And while the downfall of the Nokia factory was not because of technology changes, the current government needs to be mindful of the coming disruption because of Industry 4.0. Possibly, the narrative of Make in India needs to change too, considering that manufacturing no longer would create the job volumes the government imagines it would. A smart factory, which embraces newer technologies, may only employ a fourth versus the same factory three years ago. The little employment that gets created would have a higher skills bias.
While Industry 3.0 simply was about the automation of isolated machines, Industry 4.0 is about the integration of advanced automation, cloud computing, sensors, 3D printing, computer powered processes, intelligent algorithms, and Internet of things (IoT). Most greenfield factories in India are adopting these technologies in some form.
A recent PwC report, 'Industry 4.0 - Building The Digital Enterprise', had some interesting facts. India, currently, is slightly behind the global average in terms of the level of digitisation. However, there was definitive intent to invest.
About 39 per cent of the Indian companies surveyed planned to invest more than 8 per cent of their annual revenues in digital programmes over the next five years; more than 80 per cent of the respondents in India expected a greater than 10 per cent gains in efficiency; more than 60 per cent expect over 10 per cent reduction in costs from operations and an over 10 per cent improvement in additional revenue in the next five years.
That's good news for the country's productivity; not job creation.