The manufacturing industry in India heaved a collective sigh of relief in October when the Union Cabinet gave the nod to the National Manufacturing Policy. The focus on employment-intensive industries such as IT hardware and electronics and those with significant strategic importance like aerospace, telecommunication equipment, defense and solar energy will give a boost to the competitiveness of the entire nation while the promised policy interventions in skills development, accelerated adoption of information technology and procedural and governance reforms for the SME segment can give a fillip to growth across all strata of the manufacturing sector.

The creation of large integrated industrial townships dubbed National Investment and Manufacturing Zones has been criticized by some as one more “smoke and mirrors” attempt at creating a discriminatory policy after the lukewarm response received by the Special Economic Zones. However, the focus on seven smart cities coming up under the Delhi Mumbai Industrial Corridor with a possible five more NIMZs to be accommodated does hold great promise for a manufacturing renaissance. At a recent meeting organized by the CII in Kolkata with CM Mamta Banerjee and Commerce Minister Anand Sharma, the NMZs were spoken about as an opportunity to revive industrial activity in recently ignored states like West Bengal and it remains to be seen how quickly the NMZ opportunity will be grabbed by active states seeking to compete for corporate investments.

However, the fact remains that irrespective of policy inducements, Indian industry has a long way to go to attain the competitiveness level in manufacturing that Chine in general and countries like Malaysia and Thailand in the particular segment of Electronics Manufacturing have been able to attain. As in the case of the IT Services industry where the erosion of the wage arbitrage factor has given an impetus to the quest for non-linear revenue growth with focus on IP creations and productivity tools, the manufacturing industry too will have to substantially improve its productivity metrics to attain the scale that is possible and needed to build India as a future manufacturing destination. One of the key factors of productivity to focus on is the use of information technology to enhance quality and predictability in the design and manufacturing processes and platform BPO and cloud computing solutions to convert CAPEX to OPEX and instill lean thinking in Manufacturing IT departments.

The problem that has plagued manufacturing industry in India is that the IT thinking, particularly in the homegrown corporations has been largely incremental. Moving from finance and personnel computing computerization to materials and manufacturing planning systems was completed with some success a while ago but the lack of a real Return on Investment focus has made subsequent outlays on business intelligence, supplier and distributor integration and product life cycle and engineering functions very patchy, predictably yielding indifferent results. There are enough global benchmarks to show that investments of less than four to six percent of annual revenue of manufacturing firms in information technology are rarely adequate to move the productivity needle and organisations that seriously choose to compete in the global arena will have to study best in class practices in their respective industry sectors and develop a comprehensive view of technology usage within and beyond the factory walls to truly transform the enterprise.

Alternate models of consuming IT will be automatically comes under the lens once CEOs demonstrate serious intent to deploy IT everywhere and a recent study that suggested that over eighty percent of Indian CIOs are seriously considering cloud computing as part of their corporate IT strategy underlines this move. Large manufacturing firms today are realizing the value of putting their production plans on their intranets to enable their multiple suppliers to connect with them through Software as a Service solutions and link up their dispatch schedules to the requirements posted by the OEM. While it will take a lot of evangelism and some persuasion to get smaller companies to embrace technology effectively, the overall improvement of supply chain effectiveness will be the driver of cloud deployment. The ability to optimize costs will also be a driver in enabling this transition.

The advantage of the proposed manufacturing zones is that they could be equipped with industry strength data centres which drive the information intensity of sector clusters. Imagine a ten billion dollar electronics manufacturing cluster potentially coming up in a multi-square kilometer NMZ in rural India which has investments made by the NMZ promoter in IT applications and platforms in a central data center. The OEMs, large independent factories and SMEs and Micro SMEs could all avail manufacturing and materials planning, quality and maintenance management and supply chain optimization solutions through a hybrid cloud where all possible data is shared within a closed group to enable information exchange and collaboration. The proximity of the participants in this collaborative effort could be a welcome driver to true information usage and process transformation.

The time has come for all eco-system providers to stop serving their own narrow interests and create a new way forward for India to be the leader in new sectors. There is a great manufacturing challenge and opportunity in front of us. We need to ensure that the IT imperative is not lost as we plan the march ahead!

Dr Ganesh Natarajan is CEO of Zensar Technologies and Co-Chair of the National Knowledge Council of the CII.