The fourth industrial revolution is currently taking place, and it has the potential to completely transform the Indian economy. However, we must take care to prevent smaller businesses from falling behind.
From the 17th to the 20th century, manufacturing industries underwent both gradual and drastic improvements in operational levels. In the past, developments in procurement, procedure, production, distribution, and feedback increased the operational efficacy of several sectors.
Implementing big data, robotics, the internet of things (IoT), artificial intelligence, machine learning, and cloud services for automation and autonomous operations in sectors is now referred to as industry 4.0.
It becomes necessary primarily as a result of rising demand and market competitiveness.
India is one of the fastest-growing economies among emerging ones. Due to the soaring population and market competitiveness brought on by globalisation and privatisation, it is subject to rising demands.
In order to support the demand-driven economy and maintain the competition on the international markets, it is important for the Indian industry to accept improvements in manufacturing procedures.
The implementation of Industry 4.0 across India’s manufacturing sectors is supported by a number of policies. Across the nation, smart manufacturing hubs are emerging, including one at the Indian Institute of Science in Karnataka’s Centre for Product Design and Manufacturing.
This mirrors the ambitious goal of raising manufacturing’s contribution to the GDP from its current level of 16% to 25% by 2025.
According to management consulting company McKinsey & Company, Indian enterprises might increase their operating profit by 40% and decrease their anticipated capital investment by 10% simply by implementing Industries 4.0.
Adopting Industry 4.0 would certainly bring many advantages to the manufacturing sectors. Given the constraints and difficulties faced by Indian companies, its implementation is crucial. Industry 4.0 adoption in the nation is still in its infancy, and it will take time and effort to completely revolutionise the sector.
The systematic use of cutting-edge technology and procedures is mandated by Industry 4.0. These complex technologies need a lot of financial investment and trained labour to operate.
Given the large presence of Micro, Small and Medium Enterprises (MSME), the issues of capital requirements and trained labour are only getting started in the manufacturing industry of India (MSME). Even though MSMEs make a substantial contribution to the nation’s overall manufacturing production, exports, and employment, they face similar challenges in terms of capital and skilled labour.
MSMEs often serve as a captive industry and a provider of a particular component to a major industry, hence they are unable to take advantage of economies of scale. One of the main barriers preventing MSMEs from making capital investments in cutting-edge technologies and the following automation and expansion is this.
Therefore, the lack of economies of scale and a skilled labour shortage present a barrier to the implementation of Industry 4.0 for India’s MSMEs. In the sections that follow, we go into more detail about these two important constraints, scale and expertise, as well as the effects they have on Indian companies.
Aid from policy for large-scale issues
The cost advantages businesses receive when the total cost of manufacturing can be divided over a higher output are known as economies of scale.
Small manufacturing companies do not profit from economies of scale because their market, investment size, and production are constrained. Due to their limited operating margins, MSMEs are unable to invest in the cutting-edge technologies that are the foundation of Industry 4.0.
This limits the expansion of MSMEs. Large manufacturing companies, on the other hand, have the power to experiment and execute Industry 4.0 since they benefit from economies of scale. This increases the businesses’ productivity and profit margin.
A big profit margin could also imply modernization and technical advancement. As a result, major companies that implement Industry 4.0 may eventually grow larger as a result of a positive cycle of investment and growth.
While MSMEs lag in implementing Industry 4.0 due to limited investment opportunities and technological innovation.
The production and employment levels across the economy may be impacted as a result of the potential gap between MSMEs and major corporations widening over time. Therefore, it is essential to offer governmental support, especially to MSMEs, so they may adopt Industry 4.0 through wiser investments.
Upskilling workers to meet skill demands
For the implementation of Industry 4.0, which necessitates advanced equipment and automated systems, trained labour is just as important as capital. To operate the sophisticated procedures, competent labour is required.
The availability and price of competent labour present two problems. For the implementation and operation of cutting-edge equipment and systems, skilled labour is in short supply. Even if they are available in some cases, their cost is a problem.
An MSME firm’s hiring of skilled labour raises operating costs and presents an operational challenge to the viability of the firm. Therefore, the barrier for MSMEs seeking automation, sophistication, and upgradation is not just the capital investment but also the hiring of skilled labour.
When it comes to skilled labour, there is some good news. Industries may benefit from upskilling current employees through academic partnership, apprenticeship, and industrial training.
Overall, the productivity of the sectors is increased by the workforce transition from low-skill (manual) occupations to high-skill (automation) positions. This suggests that Industry 4.0 deployment, which includes labour upskilling, will increase the sector’s production and efficiency.
Better margins and the potential for additional modernization investments may be hedged by labour upskilling. In other words, over time, the industry can experience an upward cycle of upskilling, modernization, and expansion.
In conclusion, we covered the two aspects of Industry 4.0 application in Indian industry—scale and skill—with a focus on MSMEs. MSMEs are unable to invest in modernising their operations and implementing Industry 4.0 because of their lack of scale and expertise.
