How India can Influence Adoption of AI / Machine Learning Globally – Part1
India is a country in South Asia. It is the seventh-largest country by area, the second-most populous country (with over 1.2 billion people), and the most populous democracy in the world. It is bounded by the Indian Ocean on the south, the Arabian Sea on the southwest, and the Bay of Bengal on the southeast. It shares land borders with Pakistan to the west; China, Nepal, and Bhutan to the northeast; and Bangladesh and Myanmar to the east. In the Indian Ocean, India is in the vicinity of Sri Lanka and the Maldives. India's Andaman and Nicobar Islands share a maritime border with Thailand and Indonesia.
According to the International Monetary Fund (IMF), the Indian economy in 2017 was nominally worth US$2.611 trillion; it is the sixth-largest economy by market exchange rates, and is, at US$9.459 trillion, the third-largest by purchasing power parity, or PPP. With its average annual GDP growth rate of 5.8% over the past two decades, and reaching 6.1% during 2011–12. India is one of the world's fastest-growing economies. India ranks 100 as per Ease of Doing Business.
The 513.7-million-worker Indian labour force is the world's second-largest, as of 2016.The service sector makes up 55.6% of GDP, the industrial sector 26.3% and the agricultural sector 18.1%.
The role of MSME for Adoption of AI / ML
The Micro Small Medium Enterprises (MSME) play a major role in Indian economy. The MSMEs of India is the cradle for the “Make in India” vision. Make in India Project is an initiative by Government of India to promote the manufacturing of goods in the country. It was initiated by Indian Prime Minister Shri Narendra Modi on 24th September 2014. The objective of the project is to encourage foreign investors to invest in India and help India to grow economically. Make in India is a movement and initiative covering 25 sectors of the Indian economy to encourage companies to manufacture their products in India and also increase their investment. This vision is the nursery where small existing businesses have the potential to become world beaters tomorrow. The larger players amongst the MSME space also are in a unique position to become global players attracting partners with technology and funds.
Manufacturing Enterprises as per the fourth Census of MSMEs of India the Report for which was published in 2012, the total numbers of MSMEs in India are 36 million employing over 80 million people. It is the second largest employer after agriculture. It also accounts for 45 % of total industrial production, 40% of total exports and contributes very significantly to the GDP. Manufacturing segment within the MSME contributes to 8% of GDP. The contribution of MSME segment to the GDP in some of the global economies is in the 25-60 per cent range. MSME in India has the potential to increase the share of contribution to GDP from the current 8 per cent to about 15 per cent by the year 2020.MSMEs also contribute to 30.50% of services. The total contribution of MSMEs to the GDP is 37.54% and the sector has an average growth rate of 10%. There are approximately 46 million Micro, Small and Medium Enterprise sector enterprises across various industries, employing 106 million people. There is a lot of potential in various sectors like IT/ITES, Telecommunication, Electronics, Healthcare, Pharmaceuticals etc.
If you are interest to learn more about Enterprise wise Analysis of MSME, please continue to part – II………
How India can Influence Adoption of AI / Machine Globally – Part 2
Enterprise wise Analysis for Adoption of AI / ML
In India, SME sector has been defined as per the Ministry of Micro, Small & Medium Enterprises which is given below:
The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise are defined in terms of investment in Plant & Machinery.
The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.
Further, the classification of the SMEs is based on the limit for investment in plant and machinery / equipment for manufacturing / service enterprises which is as under:
Investment in plant & machinery
Does not exceed US$36335
More than US$36335 but does not exceed US$726700
More than US$726700 but does not exceed US$1453400
Investment in plant & machinery
Does not exceed US$14534
More than US$14534 but does not exceed US$290680
More than US$290680 but does not exceed US$726700
As per the 4th census, 94% of the MSME industries fall under the micro category, 4.9% under small category and 0.2% under the medium category. Analysing the activity of the MSME industries, it is observed that 67.1% are under manufacturing sector, 16.8% in service sector and 16.1% in repairing & maintenance sector. Further 54.8% of these MSMEs are in urban region and 45.2% in the rural region of India.
Government of India policy framework
The Govt of India’s policy framework encourages this which also helps in creating employment on a massive scale. In India all the Policies are aligned with each other with the focus on the entrepreneur, whether he is starting up, he is growing, he wants to become a large domestic player or a global competitor; the Policy framework enables and encourages all this. Indian policies are also aligned with MSME Policies of the State Governments of India since India has federal structure. The policy regularly is reviewed taking into account the progressive policies in the Western and the Eastern Hemispheres.
Let it be understood that big businesses evolve from small business only and go on to become several large companies. Examples are, “Honda‟ to “Microsoft‟, from “Infosys” to “HCL” in India.
The objective of Indian Policy for MSME is to encourage establishment to put stress on growth so that they become global player.
In Indian MSME a major and accelerating trend observed in the last one decade has been the role that innovation is playing in driving the growth and expansion of small businesses to a billion dollar enterprise. Several factors are playing a role in this.
I) Development of Information Technology: complex but, easy to use IT Technologies has become a major driver.
II) Growth of e-commerce as a new business platform which hardly existed 15 years back.
III) Growth of cellular networks and smart phones combined with the above two mentioned technologies have created a new market place.
IV) Data analytic tools and advanced IT Systems have given new insights into understanding of markets and consumer behaviour and shaped the marketing as well as growth strategies.
V) Context of globalisation has ensured that the logistics and supply chain has become global, whether it is manufacturing or services.
VI) Global financial crisis of 2008-10 has only accelerated these processes and trends.
With the advent of these interventions, the Indian MSMEs are using IT platforms at every stage of their operation, whether it is buying of raw materials, manufacture of products, marketing of goods or raising of finance. This also has helped the enterprises to have access to adequate and timely credit at a reasonable cost is the most critical problem faced by this sector.
With the liberalization and globalization of the Indian economy, the small enterprises in India have unprecedented opportunities on the one hand, and face serious challenges, on the other. While access to global market has offered a host of business opportunities in the form of new target markets, possibilities to exploit technological advantage, etc., the challenges in this process have flowed mainly from their scale of operation, technological obsolescence, and inability to access institutional credit and intense competition in marketing. As a result, the sustainability of a large number of MSMEs will be in jeopardy in the face of competition from imports. Though India has the advantage of a large pool of human resources with skill sets, required for manufacturing, marketing, servicing yet as liberalization prevails in the global economy, small firms in India will be under tremendous pressure of factors like innovation, restructuring of operations and problem in achieving production efficiencies. The competition between a small and big firm is not only in price and size, but also compete on the basis of their ability to innovate. Hence, in order to maintain sustainability in this ever-changing global economy, SMEs should also adopt innovative techniques and should undergo with continuous improvement in their product, process, like big players.
Hence it is very important to measure productivity in SMEs so that necessary corrective measures can be taken by the enterprises. The term productivity describes the measurement of how efficient production is, comparing a company or a country’s output against its input. It is therefore a vital factor in both companies’ performances, and countries’ economic growth.
In a highly competitive environment, SMEs from both the manufacturing and service sectors have to focus on productivity to meet the requirements of customers; they must nurture a strong productivity mind-set and embrace continuous productivity improvement on a company-wide basis.
Focus of Productivity will influence adoption of AI / ML
“Productivity is, above all, a state of mind. It is an attitude that seeks the continuous improvement of what exists. It is a conviction that one can do better today than yesterday, and that tomorrow will be better than today.” European Productivity Agency, Rome Conference, 1959
Productivity is thus critical for the long-term competitiveness and profitability of SMEs, as well as their survival. It requires constant effort to adapt economic activities to the ever-changing business conditions to create value for all stakeholders based on the process approach.
By laying a strong foundation of productivity, Indian SMEs have been able to enhance their organizational systems and processes to achieve sustained business excellence in the long run. In the quest to achieve business excellence, Indian SMEs are adopting a holistic productivity management system to manage their organization’s productivity journey in a systematic manner.
In order to ensure effective management of business processes, Indian SMEs have established and implemented an appropriate productivity measurement system to provide information on how effectively and efficiently they manage their resources. This has helped them determine if their productivity effort is progressing well.
Productivity measurement is an important communication tool to share current performances relative to the goals and/or standards that the SMEs have established. It provides an objective basis to recognize and reward both individual and team contributions to the productivity effort in the company through the application of a productivity gain sharing scheme. Moreover, productivity measurement could also help to identify the learning and development needs of employees so that the competency of the workforce can be further enhanced.
Productivity measurement identifies the appropriate measures or metrics to be used, and the computation of their results guides in determining the effectiveness and efficiency of the resources used. In India the major productivity indices used are:
Enhance Sales Revenue (Output)
ii) Increase Output per Unit Cost of Production (Output)
iii) Optimize Labour Utilization (Input)
iv) Optimize Capital Utilization (Input)
The results of each of these key performance indicators can then be compared against the corresponding results from the past year to determine the trend in productivity performance and growth rate within the company. Furthermore, SMEs can compare the computed results with their respective sector and/or national averages for benchmarking purposes and continual improvement.