March 2019
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National action plan for creating Samarth Udyog

Subrat Kumar Prusty

By Subrat Kumar Prusty. ITS
Director (Skill Development & Enterpreneurship). 
Department of Telecommunication. Government of India

“Focus should be from Return on Investment to Return on Innovation, says Mr. Subrat Prusty”

C-DOT 2.0 for preparing Indian Telecom services for 5th Generation Technology & services through BSNL and MTNL, Industry 4.0 through Indian telephone Industries and other telecom equipment manufacturers

1. From First Industrial Revolution to Fourth Industrial Revolution

Tooling” – the process of designing and engineering the tools that are necessary to manufacture parts – was the essential technology behind the early industrial revolution. It allowed manufactured goods to go from humans to machines and powered the production of complex mechanical inventions like the steam engine. With new economies of scale driven by machines, raw materials travelled from developing nations to industrial ones, and cost-effective goods flowed back to other nations across the world. Our modern era of global trade and tariffs began.

Today, we make raw materials and ship them around the world to factories that make parts. Those parts are shipped to other factories that assemble them into product components, which are then shipped all over the world to more factories that make ever more complex final products. This process is the legacy of the first industrial revolution.Tens of trillions of dollars in capital is travelling at any given time on boats and planes, for weeks on end, across the oceans. This antiquated process is slowly starting to change with Industry 4.0.

2. What is Industry 4.0

The fourth Industrial revolution refers to the current trend of adopting automation and digital data exchange in manufacturing technologies. It includes cyber-physical systems, the internet of things (IOT), Cloud and Cognitive computing- all seamlessly interconnected to create a decentralised, fully flexible and highly integrated manufacturing systems.

Industry 3.0: Automation of single Machines and processes
Industry 4.0: End-to-end digitisation of all physical assets and integration into digital ecosystems

Industry 4.0 is driven by 3 key principles

Digitisation and integration of value chains:  Vertical integration: All internal processes from product development, design, manufacturing, logistics, to service area are integrated with data available in real timeHorizontal Integration: Internal operations seamlessly sync with supply chain partners, customers and all other value chain stakeholders

 Digitisation of assets i.e. Products and services

Upgrading existing products and services by adding smart sensors connected to data analytics tools

Creating new digitised and integrated product and service offerings

Digitisation of business models

Exploring opportunities to generate additional revenue by offering customers end to end and value added services in a digital ecosystem

3. Status of Indian Industries

Indian Industries are at different stages of development. Some are still at Industry 1.0 and some are Industry 2.0. In Telecom sector considering the overall system of electronics and ICT industry the technology is evolving from 2G to 3G to 4G and now to 5G. With international competition many of the Indian industries are struggling to get ahead of the Technological race.

4. Connecting various stakeholders for each industry: Required skills for the industry from raw materials to finished products

The industrial ecosystem comprises many input sub streams like Engineering education & skill ecosystem and also the raw materials & initial materials like electronic chips for making electronic and telecom products. These system is fast evolving and it needs an integrated complex organic high-tech skill ecosystem. Industries are the platforms to express skills and there should be complete end to end visibility from low tech skills to high tech skills to manufacture complex ICT products for the competitive advantage.

For making technologically advanced industry (in the case Telecom and ICT industry) in the global competitive industry chain, we need to make our education and skill development ecosystem latest, relevant, no garbage and focusing on core subjects without wasting time in unnecessary.

Building future-ready industry requires future-ready education systems with curricula fit for the 21st century. Specialized education should provide in-demand skills, and address the disconnect between employer needs and existing instruction in order to optimize global talent. Specialization can start at an early age may be at the age of 10.

5. Policy can be

A) for existing industries and to make them competitive with advanced skills with investment

B) for new ones who are directly interested in advanced technology and high tech skills

C) in developing new products through innovation and new skills

D) connecting traditional professions to industry chains : the slogan traditional Blacksmith making Robots through skill development

E) for making million ships: industries can be guided in  a dedicated direction which can create high employment and give prosperity to people

F) for reducing imports from outside by making investment in core domains

G)industry with Indian language use: Hightech skill development in Indian languages

6. Why skill development should be a priority in Industrial Policy?

Per-capita income grows when productivity rises. Productivity rises when skills rise and workers have access to platforms (factories) that take advantage of those skills. These platforms are created through investments and use technologies that are created through innovation.

Innovation gives new-ness to Industry. Without innovation Industries become obsolete.

Capital flows in any economy from its sources such as savings or bank loans to its application such as investments and innovation through channels such as banks, mutual funds, pension funds and insurance funds to their applications and are driven by returns.

7. Focus from Return on investment to Return on Innovation
A secure investment that offers an attractive return on savings (RoS) attracts capital. Return on investment (RoI) and the return on innovation (RoIn) play a role in allocation of capital.

Innovation is the output of advanced skills.
Based on the structure of an economy and the dynamics of markets there is either a higher demand for innovation leading to a higher RoIn or a lower demand for innovation leading to lower RoIn.

The dynamics ofglobal competition determines the survival of Industries. In the race between the global MNCs and local industries, an effective industrial policy can help the local industries to survive, grow, innovate and compete with the global players.

An innovative firm in one part of the world tries to promote its technologies across all nations. A swarm effect occurs where many such multi-national firms connect to the investments in a country thereby choking the economy of any innovation. In such a situation, each and every economic investment transaction will see a promise of RoI, but the overall economy starts to shrink due to increased levels of imports.

Even worse, as global competitors also invest in new innovative technologies; many times before the local firms, local firms have to abandon their investments in older technologies in favor of new technologies all the time leading to a situation that is popularly known as technology tail chasing !

With rising imports and weakening currency, national firms will see continuously rising costs of technology upgradation that eventually pushes RoI levels low. Such low RoI levels can quickly lead to defaults and rising NPLs for banks.

Naturally, in such economies, capital will be redirected away from investments towards avenues to build up personal wealth (such as housing or stock markets) creating asset bubbles.

In general, a nation’s competitive advantage (a key goal for Industrial policy) mainly comes from its capabilities built through advanced technology industry which in turn depends on RoIn.

This is contrary to the popular notion that different nations have different sources of comparative advantage.
While Foreign Direct Investment (FDI) and imported technologies can work in the micro for a small number of firms, macro economic transformation requires large scale investments in innovation leading to technology upgradation that are possible only when RoIn is high.

8. Importance of Collaboration and Policy Emergence

Collaboration and policy emergence play an important role in the development and promotion of advanced technologies. Collaboration connects elements of advanced economy.

Think of collaboration of 5000 engineering colleges each developing a component for a bigger product.
Policy emergence models determine the agility with which  government can react to changing technologies and continue to drive a substantially free market economy offering high RoIn and RoI.