India's Advanced Manufacturing- Accel report 2025

 

Source-Accel's Advanced Manufacturing Report '25

IS INDIA READY FOR 4TH INDUSTRIAL REVOLUTION? (part1)

Finance Minister Arun Jaitley announced that the DoT will set up test centre for 5th generation telecom technology with IIT Chennai. As per budget document, the FM has proposed to allocate Rs 134.48 crore for setting up of the "5G connectivity Test Bed".  Further the minister said the government would invest in research in new areas such as machine learning, artificial intelligence, robotics as it looks to prepare the country for the technology of the future. "Technologies such as machine learning, artificial intelligence and others are the technologies of the future and NITI Aayog will establish a national programme to conduct research and development in these areas,".  These new generation technologies are associated with 4^th Industrial revolution. Are we getting ready for the Factories 4 ?

The term Industrial Revolution was first popularized by the English economic historian Arnold Toynbee to describe Britain’s economic development from 1760 to 1840. It witnessed the emergence of mechanization, a process that replaced agriculture with industry as the foundations of the economic structure of society. Mass extraction of coal along with the invention of the steam engine created a new type of energy that thrusted forward all processes thanks to the development of railroads and the acceleration of economic, human and material exchanges. Other major inventions such as forging and new know-how in metal shaping gradually drew up the blueprints for the first factories and cities as we know them today.

The first Industrial Revolution and most technological developments preceding it had little or no scientific base. It created a chemical industry with no chemistry, an iron industry without metallurgy, power machinery without thermodynamics. Engineering, medical technology, and agriculture until 1850 were pragmatic bodies of applied knowledge in which things were known to work, but rarely was it understood why they worked. The second Industrial Revolution accelerated the mutual feedbacks between these two forms of knowledge `science’ and `technology’. Historians have labeled the years from 1870-1914 as the period of the Second Industrial Revolution. While the First Industrial Revolution caused the growth of industries, such as coal, iron, railroads and textiles, the Second Industrial Revolution witnessed the expansion of electricity, petroleum and steel.

The Third Industrial Revolution, or the Digital Revolution, refers to the advancement of technology from analog electronic and mechanical devices to the digital technology available today. The era started during the 1980s and is ongoing.  Advancements during the Third Industrial Revolution include the personal computer, the internet, and information and communications technology (ICT). The first industrial revolution used water and steam to mechanize production, the second used electric energy to create mass production and the third used electronics and information technology to automate production.

The Fourth Industrial Revolution builds on the Digital Revolution, representing new ways in which technology becomes embedded within societies and even the human body. The Fourth Industrial Revolution is marked by emerging technology breakthroughs in a number of fields, including robotics, artificial intelligence, nanotechnology, quantum computing, biotechnology, The Internet of Things, 3D printing and autonomous vehicles.

The fourth revolution is unfolding before our eyes. For India, the Fourth Industrial Revolution brings tremendous opportunities to leapfrog many stages of development, hastening its journey towards becoming a developed economy. In many ways, the Fourth Industrial Revolution is a leveller. The technologies being used in India will be the same as those in use in the developed world. Robots, AI, IoT are all technologies transforming industry in the West and are ready to do the same in India.

We missed the first and second Industrial revolutions but IT manpower gave us a strong foothold on the global platform in digital era.  Along with lure of opportunity, there exists threat of `premature industrialization’.  De-industrialization sets in for developed economies after they reach high level of economic prosperity.  Manufacturing as a share of total employment peaked at 45% in the UK before World War I, while in the US, it peaked in the range of 25-27% in the 1970s, before dropping off in both cases. But the UK and the US were both prosperous economies at the respective point in times at which this deindustrialization occurred. Harvard economist Dani Rodrik sees what he called “premature deindustrialization” as manufacturing shrinks in poor countries that never industrialized much in the first place. Manufacturing as a share of employment peaked at about 15% for Brazil in the late 1980s, and has been declining ever since. In India, manufacturing peaked at 13% in 2002 and has been in decline since then. We have a thriving service sector but need jobs in manufacturing too.

Analysis by World Economic Forum `Readiness for Future ofProduction’ analyses strengths and weakness of India. Of the 100 countries we are ranked 30 for structure of production but lower at 42 for drivers of production. The focus thus has to be on improving the areas where we are week. Our weakest area is Technology & Innovation. To understand this we need to reflect on Intellectual Property. We will address this in next part- are there patents in 1^st Industrial Revolution?

Missed manufacturing- next cycle may be century away.

Prime Minister in his message to the report `National Strategy for Manufacturing (2006)' acknowledge that share of manufacturing in national income had shown only a marginal improvement from 15.8% in 1991 to 17% in 2003. He wanted it between 25% to 35%. This goal of 25% was never reached. Share of Manufacturing has come down to 15.2% in 2012-13 from 15.7% in 2011-12. 

Despite regular announcements to boost up manufacturing with policy interventions, it seems India would never achieve the coveted 25% share. Researcher Dani Rodrik says de-acceleration in manufacturing is cyclic and inevitable, both developed and developing countries have gone through the phase of accelerated growth followed by decline in manufacturing. The critical difference is the peak reached before the decline sets in.

In UK before world war 1 had 45% of workforce in manufacturing, now less than 10%. USA had 25-27% of workforce in manufacturing in early nineteenth century , now less than 10%. In Sweden manufacturing peaked to 33%, Germany to 40% before decline had set in.
India peaked at 13-15% in 2002 and has since trended down. When US, Britain, Germany, Sweden began to deindustrialize their per capita income reached $10,000 (at 1990 prices). India switched to service sector at much lower per capita income.

Will India stagnate as a service economy at low income level?
Read more at http://www.project-syndicate.org/commentary/developing-economies--missing-manufacturing-by-dani-rodrik#kTJKPCAZbH1yIdLC.99