By Vinod Grover
India was recently ranked as the fifth largest economy in the world, with a US$ 3,730 billion worth of Gross Domestic Product (GDP) and an annual GDP growth rate of 5.9%. The country has witnessed extensive economic growth since the liberation of the Indian market in the early 1990s, paving the way for monumental growth and opportunities for the world’s largest democracy. With the advent of more recent efforts, such as the Make in India initiative we see a tremendous increase in the total Foreign Direct Investment (FDI) inflows over the past nine financial years (2014 to 2023), amounting to US$ 596 billion – a 100% increase over the previous nine years (US$ 298 billion for a period of 2005-2014).
Further, India jumped from the 142nd position in 2014 to the 63rd position in 2020 in the World Bank’s Ease of Doing Business Ranking 2020, suggesting India’s rise as a global hotspot for foreign investors. Despite India’s glowing economic rapport on the global front, the collective labour productivity decreased by 2.53% YoY in December 2022, indicating a dire need to focus attention towards enhancing productivity to improve operational efficiency across industries.
Inefficient Operations = Insufficient Innovations
Over the past decade, through an extensive focus on the manufacturing industry, there has been a thrust on the growth of key industries in India, broadening the country’s economic landscape across a plethora of industries, and paving the way for new frontiers. The gems and jewellery industry, for instance, is one of the largest and fastest-growing businesses in India, contributing to the country’s GDP growth by 7%.
Moreover, the increasing trend of lab-grown diamonds in India as an inexpensive and environmentally friendly substitute for natural diamonds has further skyrocketed the gems and jewellery industry. Similarly, the significant growth of the pharmaceutical industry, poised to reach US$ 65 billion in 2024, has contributed to its role as the third largest pharmaceutical producer by volume, providing affordable and quality-assured medicines. With the increasing focus on evolving healthcare via innovative therapies, integration of technology in manufacturing, and optimising supply chain processes, the pharmaceutical industry is projected to grow up to US$ 130 billion by 2030.
While we notice an increasing popularity of the manufacturing industry – which contributes to nearly 17% of the GDP – India still famously remains a service-focused economy, which contributes to nearly 50% of the country’s GDP. To improve India’s manufacturing capabilities to meet its ambitious goals, the Bangalore Chamber of Industry and Commerce emphasises on the need to increase the sector GDP contribution to 20%, further encouraging India to play a larger role in the global manufacturing domain.
To further encourage the manufacturing sector in India, it is pertinent to recognise the key areas of importance to boost operational efficiency across businesses. One such often overlooked attribute is productivity. While several tools exist to measure growth and identify the challenges within an industry, there are limited resources available to measure a business’s productivity. Inefficient productivity dictates an organisation’s operational efficiency, costs, delivery times, manufacturing, and profitability, thereby impeding innovative strategies when it’s most needed. Inadequate productivity could be largely attributed to insufficient performance management, outdated technologies, low employee engagement, insufficient skilling programs for on-ground teams, extensive use of temporary and casual labour in a large cross-section of Indian factories and inaccurate forecasting.
Solutions
To bolster India’s position as a global competitor in an ever-evolving market, organisations must identify their weak links to further develop robust innovations and operational efficiency. To begin with, analysing current operations and identifying waste could aid organisations in strategizing effective standardised procedures to strengthen both quality and productivity.
Additionally, the utilisation of advanced technologies by integrating automation and infrastructural advancements could further eliminate human errors while increasing productivity across all departments. According to a recent study, over 90% of the workers surveyed noted that automation not only increased their productivity but also reduced errors and helped with quicker decision-making.
Further, opting for a lean approach, such as Value Stream Mapping to develop enhanced workflow strategies could aid organisations in optimising operations without additional resources. Regular reviews and subsequent updates of operational processes can streamline operational costs and eliminate waste, paving the way for the implementation of more innovative strategies and potential savings along the process.
To harbour a spirit of innovation, organisations need to define their growth segments and subsequently identify key markers such as market presence, and changing trends, so as to develop practical strategies for implementation.
A business cannot thrive without innovation; however, it is crucial to recognise that innovation cannot thrive without operational excellence. To ensure India’s growth on the global stage as a competent competitor, we have to modernise our labour laws, embrace opportunities offered by Industry 4.0 & AI, enhance operational efficiencies, and leverage the opportunities offered by this ‘Amrit Kaal’ of India’s history.
Vinod Grover is the Managing Director – South Asia and Africa at Kaizen Institute. Views expressed are the author’s own.