Article
Are you ready for Automation? When will investment in automation really make sense in the Indian manufacturing sector?
Abstract
A well-documented and known fact that automation is rapidly transforming the global manufacturing sector, and India is no exception. As labor costs continue to rise and the demand for high-quality, low-cost goods increases, Indian manufacturers are increasingly investing in automation solutions.
This article examines the role of automation in the Indian manufacturing sector in the next 10 years. It begins by discussing the challenges and benefits of automation and then provides an overview of the current state of automation in India. The article then presents an analysis of the estimated year in which it will make sense for manufacturing companies in different states of India to invest in automation and yield an acceptable ROI.
The article concludes by discussing the implications of automation for the Indian manufacturing sector and the role that &diligence can play in helping manufacturers prepare for the future.
Introduction
Automation is the use of technology to perform tasks that were previously done by humans. It can be used to automate a wide range of tasks, from simple repetitive tasks to complex cognitive tasks.
Automation offers a number of benefits to manufacturers, including:
- Increased productivity and efficiency
- Reduced labor costs
- Improved quality and consistency
- Enhanced safety
- Reduced waste
However, automation also comes with some challenges, such as:
- High upfront investment costs
- Job displacement
- The need for skilled workers to operate and maintain automation systems.
The Current State of Automation in India
The adoption of automation in India is still in its early stages, but it is growing rapidly. According to a report by McKinsey & Company, the automation market in India is expected to grow from US$1.5 billion in 2019 to US$11 billion in 2030.
The most common types of automation used in Indian manufacturing include:
- Industrial robots
- Computer numerical control (CNC) machines
- Automated material handling systems
- Automated inspection systems
- Robotic process automation (RPA)
Automation in the Indian Manufacturing Sector in the Next 10 Years
The role of automation in the Indian manufacturing sector is expected to grow significantly in the next 10 years. This is due to a number of factors, including:
- Rising labor costs
- Labor unavailability
- Increasing demand for high-capacity, high-quality, low-cost goods
- Government initiatives to promote automation
- Technological advancements in automation
A study by &diligence found that the estimated year in which it will make sense for manufacturing companies in different states of India to invest in automation and yield an acceptable ROI is between 7 and 9 years from now (2023). This is based on the assumption that labor costs will continue to rise at an average rate of 6.6% per year.
Graph 1 shows the India Labor Cost Index for 10 years from 2010 to 2021. It has increased by 55% with a year-over-year growth of 6.6%. Currently, the average CTC for manpower is ₹15,000/month/person. As shown above, if we are looking at replacing manpower with automation, the ROI factors at 3-5 years.
- In 2024, Delhi will become the first state to achieve CTC/month/person more than ₹30,000, followed by nine states that are expected to reach the ₹25,000 mark by 2029.
- 67% of Indian State will cross ₹25,000 before 2032.
Graph 2 shows the estimated number of years it would take the CTC to reach ₹25,000/month/person for different states in India. The table below shows the year-over-year CTC growth and the exact year when companies will find it viable to invest in automation.
- According to our research, when CTC reaches an average of ₹25,000/month/person, ROI will drop to 1-2 years, making automation an extremely viable investment.
- Of course, the specific ROI of an automation project will vary depending on a number of factors, including the specific type of automation technology being implemented, the size and scope of the project, the inflation rates & minimum wages, company-specific labor policies, and the industry in which the company operates.
Implications of Automation for the Indian Manufacturing Sector
Automation is expected to have a significant impact on the Indian manufacturing sector in the next 10 years. It is expected to lead to increased productivity and efficiency, reduced labor costs, improved quality and consistency, enhanced safety, and reduced waste.
However, automation is also expected to displace some jobs. It is estimated that around 10-15% of the jobs in the Indian manufacturing sector could be lost to automation in the next 10 years.
It is important for the Indian government and the industry to work together to ensure that the benefits of automation outweigh the challenges. This will require investing in education and training programs to help workers develop the skills they need to operate and maintain automation systems. It will also require creating new jobs in other sectors of the economy to absorb the workers displaced by automation.
The Role of &diligence
&diligence can play a vital role in helping Indian manufacturers prepare for the future of automation. We can help manufacturers:
- Assess their current state of automation and identify areas where automation can be implemented
- Develop a roadmap for automation
- Implement automation solutions
- Train workers on how to operate and maintain automation systems
- Manage the change process associated with automation
Conclusion
Automation is expected to play a much more significant role in the Indian manufacturing sector in the next 10 years. Indian manufacturers need to start preparing for this future shift now. &diligence can play a vital role in helping manufacturers to prepare for the future of automation.
Recommendations
To prepare for the future of automation, Indian manufacturers should take the following steps:
- Assess their current state of automation and identify areas where automation can be implemented.
- Develop a roadmap for automation.
- Invest in education and training programs to help workers develop the skills they need to operate and maintain automation systems.
- Create a change management plan to help.
This article has analyzed the estimated year in which it will make sense for manufacturing companies in different states of India to invest in automation and yield an acceptable ROI. The findings suggest that automation will become a necessity for Indian manufacturers within 7-9 years.
We at &diligence have made it our mission to help manufacturers adopt the right automation at the right time in the right manner.
