August 2016

India on the march

Group Chairman Cyrus P Mistry talks about emerging sectors in India that present huge potential for growth

In the past two-and-a-half decades, India has registered steady growth in industrial output and the income of its population of 1.27 billion. And the story is just beginning.

Having built a strong base, the country is now on the point of launching into a much higher growth trajectory to improve the lives of its people and its international standing. What’s more, there is global acceptance today of the prospects that India presents.

There are excellent opportunities for growth in nearly every industry in India — in the traditional ones such as steel, cement and textiles, and in the ‘sunrise’ sectors of information technology, defence and aerospace, automobiles, electronics and more.

While the share of manufacturing in the country’s overall GDP has been around 15 percent in the recent past, the Make in India initiative aims to take this to 25 percent as soon as possible.

The demand for jobs will continue to rise. By 2020, as much as 67 percent of Indians will be in the working age category. The Make in India initiative aims to generate in excess of 100 million jobs in the next 10 years, matching the expected addition to the country’s working age population. These opportunities, if addressed well, could enable India to become a global hub for manufacturing. We will have to deploy cutting-edge technology, encourage innovative thinking, adhere to sustainable manufacturing practices and leverage our vast technical and skilled manpower towards this end.

Aerospace: Poised for take-off
When Sikorsky Aircraft Corporation, one of the world’s premier aircraft manufacturers and part of the US-headquartered United Technologies group, decided to relocate the fuselage manufacturing facility for its S-92 helicopter out of Japan, it selected India as the place to produce this crucial sub-assembly component.

Prime Minister of India Narendra Modi; Prime Minister of Sweden Stefan Lofven; and Nirmala Sitharaman, Minister of State for Commerce and Industry, Government of India, with Group Chairman Cyrus P Mistry, at the Tata group pavilion at the Make in India Week event in Mumbai on February 13, 2016

Tata Advanced Systems (TASL), Sikorsky’s joint venture partner, set up a greenfield facility in Hyderabad in record time for this purpose. Today, this world-class production unit is the single global source for the assembly of fuselages for the S-92, used for high-end transportation around the world. More than 4,000 unique parts are produced at the Hyderabad facility. The high quality standards, comparable to the best in the world, was achieved by the unit within three years of the start of production, a record in the global aerospace industry.

Not surprisingly, TASL has emerged as a leader in the aero-structures business, partnering a host of global names in the business, including Lockheed Martin Aeronautics, Pilatus Aircraft and RUAG Aviation. The Hyderabad plant is a premier facility for global original equipment manufacturers (OEMs). The TASL story is one example of how the aerospace manufacturing sector in India — covering the entire gamut from designing and producing key components to assembling aircraft — is poised to take off on a spectacular journey.

India is undoubtedly one of the most promising markets for the global aerospace industry — both civilian and military — in terms of the potential for growth. Indian carriers and the country’s defence forces are expected to place orders for thousands of aircraft valued at hundreds of billions of dollars. Airbus had some time back estimated that Indian carriers would require nearly 1,300 aircraft, valued at almost $200 billion, till 2032. Boeing recently revised its previous estimates and said that airlines in India would need 1,740 new aircraft worth $240 billion over the next 20 years.

With the third-largest armed forces in the world, India is one of the largest importers of conventional defence equipment, with imports accounting for 60 percent of its requirements. The offset obligations for global OEMs are, however, ensuring the emergence of a vibrant ecosystem of domestic manufacturers and suppliers. India will, in the coming years, emerge as a major hub for assembling and manufacturing aircraft and its components, not just by leveraging the offset opportunities, but also by catering to the burgeoning needs of the global aerospace sector. With the government having opened up the defence production sector, international OEMs are entering into strategic partnerships with Indian companies. These new ventures will not only cater to the needs of the Indian armed forces, but also enable entry into lucrative export markets.

Automobile manufacturing: In the fast lane
Some of the most exciting developments in manufacturing in the country are occurring in the automotive sector. Both domestic and international companies are investing large sums in India to expand their existing operations or build greenfield plants. They are also investing in R&D facilities and looking at global markets.

India’s exports of automobiles have nearly doubled in the past five years and are set to expand further. India is expected to emerge as the world’s third-largest automotive market by 2016, accounting for more than 5 percent of global vehicle sales. A growing middle class with high aspirations, both in urban and rural areas, is fuelling demand for cars and two-wheelers. It is estimated that in less than five years, demand for automotive vehicles will top 6 million units a year.

Meanwhile, a growing concern about the environment and climate change is impacting the industry, driving innovation in the development of low-carbon technologies, new engines, alternative fuels and autonomous vehicles. Indian technologists and engineers are contributing significantly to these developments, both within the country and abroad. India is also emerging as a global hub for automotive components as all leading manufacturers source engines, transmission and steering parts, suspension and braking parts, and metals from India. The auto component industry is catering to the needs of the burgeoning domestic automobile sector.

Smart products for smarter consumers
Yet another sector that promises huge potential for growth in India is electronic systems design and manufacturing (ESDM). This sector includes some of the fastest-moving consumer products, including mobile phones, flat panel TVs, LCD monitors, desktops, laptops, notebooks, servers and digital cameras.

When Mangalyaan, India’s first inter-planetary mission to explore the solar system, was launched in November 2013, the Mars orbiter had digital signal processor-based data control hardware to help it access data from the payload and transmit it to the ground station. Tata Elxsi worked with the Vikram Sarabhai Space Centre to design, fabricate and test the proto board, which was completed within three months and had zero defects. For a nation with almost a billion mobile phone users — a fifth of whom are already using smartphones — the ESDM segment is one of the fastest growing and, hence, most attractive for large investors, both domestic and international.

Demand for electronics hardware is projected to touch $400 billion by 2020, according to a task force report of the Department of Electronics and Information Technology. But there is likely to be a huge gap of nearly $300 billion between demand and production, confirming the tremendous potential for investments in the ESDM sector.

Sunrise sector
While the Indian economy will continue to expand at a breathtaking pace over the coming years — on the back of brisk demand for defence equipment, cars, two-wheelers and other vehicles, and electronic products — a major challenge facing the nation is in the field of energy. There is an urgent need to reduce our dependence on oil and gas imports. The looming threat of climate change demands reduction in the use of conventional energy sources. Renewable energy — especially wind and solar — provides a viable alternative, and its share to meet India’s growing energy needs is set to expand sharply.

India’s current power generation capacity adds up to about 275GW, but renewable energy accounts for just 37GW of this. The government has set an ambitious target of generating 100GW of solar power and 60GW of wind power by 2022, boosting prospects for the renewable energy sector. Estimates are that investments of about $250 billion will be needed to meet these targets over the next seven years. With the cost of solar modules and other components tumbling sharply in recent years, there is now a near grid parity between solar and thermal power. Consequently, solar energy is one of the sunrise sectors in India today, along with the associated business of manufacturing modules and components.

India — with its vast pool of skilled people, formidable industrial infrastructure, young demographic profile, and a robust and growing market — offers immense growth opportunities for manufacturing units across sectors. Carrying forward its legacy of investing in areas that lead to the nation’s prosperity and growth, the Tata group plans to significantly enhance its presence in these emerging manufacturing sectors in India, which promise to shape the future of the country’s economy.

This article was written for the Confederation of Indian Industry and has been reproduced with permission.

This article is part of the special report on the evolution and future of the concept of 'Make in India' in Tata companies, featured in the April 2016 issue of Tata Review:
Overview: Transforming India
Tata Motors: Pathway pioneer
Tata Chemicals: Innovation attention
Titan Company: Time to watch this space
Tata Elxsi: Design rules
TAL Manufacturing Solutions: Source code
Tata Advanced Systems: World stage beckons