cii 14th manufacturing summit 2015 future of indian ... of indian manufacturing: bridging the gap...

Future of Indian Manufacturing: Bridging the GapADDENDUM TO THE BACKGROUND NOTE

Confederation of Indian Industry

CII 14th Manufacturing Summit 2015

The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep in sight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable compet itive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 82 offices in 46 countries. For more information, please visit bcg.com.

The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the development of India, partnering industry, Government, and civil society, through advisory and consultative processes.

CII is a non-government, not-for-profit, industry-led and industry-managed organization, playing a proactive role in India‘s development process. Founded in 1895, India‘s premier business association has over 7400 members, from the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over 100,000 enterprises from around 250 national and regional sectoral industry bodies. In its 120th year of service to the nation, the CII theme of ‘Build India – Invest in Development, A Shared responsibility’, reiterates Industry’s role as a partner in national development.

With 64 offices, including 9 Centres of Excellence, in India, and 7 overseas offices in Australia, China, Egypt, France, Singapore, UK, and USA, as well as institutional partnerships with 300 counterpart organizations in 106 countries, CII serves as a reference point for Indian industry and the international business community.

The Boston Consulting Group • Confederation of Indian Industry | 1

The CII-BCG Manufacturing Leadership Survey 2015 was launched to gauge the pulse of industry leaders on the current

scenario and future prospects for the Indian manufacturing sector. The survey was hosted online and sent through email to top management of CII member companies in the manufacturing sector.

The survey results, complied from 94 responses, have been selectively incorporated in the background note for the summit. We would like to thank all the respondents to the survey for their valuable inputs.

The following pages contain summarised responses for select questions in the survey. The results have been complied from survey responses received and do not necessarily reflect BCG’s view on the subject.

NOTE TO THE READERS

2 | Future of Indian Manufacturing: Bridging the Gap

Agenda

State of the industry

Manufacturing performance

Make in India

Factory of tomorrow

What was the growth of your sector and company for the last year?

9%

21%20%19%

31%

9%

17%

36%

24%

14%

>10%8-10%5-8%2-5%<2%

Sector Company

5.7%5.1%

xx% : 2014 CEO survey average yy% : 2015 CEO survey average

Companies And Sectors Have Seen Faster Growth Last Year Than the Year Before

Sources: CII-BCG Manufacturing Leadership Survey 2014, CII-BCG Manufacturing Leadership Survey 2015.

28%

19%

8%10%

35%

26%25%

19%20%

11%

8-10%2-5% 5-8% >10%<2%

5.7% 6.8%

Share of respondents (%) Share of respondents (%)


For your sector? For your company?

Higher Growth Expected Over Next Five Years Than the Previous Five Years, However Less Optimistic Than Last Year

Do you see stronger growth over the next five years compared to the last five years?

Increase in % points over last five yearsIncrease in % points over last five years

Sources: CII-BCG Manufacturing Leadership Survey 2013, CII-BCG Manufacturing Leadership Survey 2014; CII-BCG ManufacturingLeadership Survey 2015.

+2.0%

+2.4%

+1.7%

CEO survey responses 2015



+2.4%+2.6%

+1.9%




1.7%1.6%

1.1%

1.9%1.6%

2.0%

3.4%

2.9%

3.9%

1.3%1.5%1.5%1.8%1.9%

2.2%

3.1%3.3%

3.7%

Western Europe

Latin America

ChinaEastern Europe

South AsiaSouth East Asia

AfricaU.S.Middle East

2014 2015

Top Three Export Destinations for Indian Manufacturing: Western Europe, Middle East and U.S.

Sources: CII-BCG Manufacturing Leadership Survey 2014, CII-BCG Manufacturing Leadership Survey 2015.Note: Only exporting companies considered.

What is your share of revenue coming from the following geographies?

Average share of revenue (%)


Companies Aspire to Increase Contribution Of Exports, Especially from Developing Economies

0.7%1.3%1.5%1.5%1.8%1.9%

3.1%3.7%

5.5%

1.0% 1.2%1.7%

2.8%2.3%

2.9%3.2%3.3%

4.5%4.2%

9.5%

AustraliaWestern Europe

U.S.Middle East and

Africa

South Asia China Eastern Europe

South East Asia

East AsiaLatin America

What is your share of revenue coming from the following geographies?(Current Vs Aspiration for 2024)

20242015

Average share of revenue (%)

Source: CII-BCG Manufacturing Leadership Survey 2015.

Agenda



Make in India

Factory of tomorrow


Given the recent announcements and the Government's intent to drive manufacturing growth, how do you see the manufacturing sector's growth in India over the next five years?

Expectations For Growth in Manufacturing For the Next Five Years Remain High

Growth expected over the next five years¹

Sources: CII-BCG Manufacturing Leadership Survey 2013, CII-BCG Manufacturing Leadership Survey 2014, CII-BCG Manufacturing Leadership Survey 2015.¹Average of growth expected by the respondents.

2015

5.1%

8.1%

20142013

8.6%

Translation of Vision Into Policies Remains One of the Top Challenges Over the Next Five Years

What do you foresee as the biggest challenge for manufacturing growthin India over the next five years? (Top three)

Concern2015

Rank Survey responses (in %)1

Inability of bureaucracy to implement policies appropriately 1 25

Infrastructural constraints 2 19

Lack of translation of vision of the Centreinto the right policies 3 15

High cost of capital 4 8

Demand slowdown 5 7

Low/no innovation 6 7

Unstable polity 7 6

Currency fluctuations 8 4

Rising labor costs 9 4

Manufacturing overcapacity 11 2

Others 10 3

Sources: CII-BCG Manufacturing Leadership Survey 2014, CII-BCG Manufacturing Leadership Survey 2015.1Percentage of responses identifying the concern to be one among the top three concerns.

-4%

+9%

+2%

+3%

-3%

-3%

-3%

-4%

+1%

0%

xxchange over survey results in 2014

0%


What would be the key demand-side driver for manufacturing growth in India for the next five years?

40%

51%

9%

43%50%

7%

34%

60%

6%

Both Domestic and ExportsDomestic Exports

2013 2014 2015

Larger Portion of Respondents Expect Exports to Make A Greater Contribution As Compared to Domestic Demand

Share of respondents (%)

Sources: CII-BCG Manufacturing Leadership Survey 2013, CII-BCG Manufacturing Leadership Survey 2014, CII-BCG Manufacturing Leadership Survey 2015.

Western European countries

South Asian countries

(Bangladesh, Sri Lanka...)

U.S.A.Eastern European countries

Latin American countries (Brazil,

Mexico...)

South East Asian countries

(Thailand, Vietnam...)

China

35%

29%

7%

26%

13%

7%

3%5%

7%

23%

7% 7% 7%5%

Which countries will be our biggest competitors in the export markets,between now and 2020? (select top three)

20152014

China Seen As Less of A Competitor In Export Markets Than Before

Survey responses (in %)



3

889

1315

17

28

South America

Eastern Europe

ANZWestern Europe

South AsiaNorth America Rest of Asia (includes China and

Japan)

Middle East and Africa

Middle East And Africa, North America, South Asia identified as Key Geographies to Drive Exports

What are the key geographies1 to drive exports in, over the next five years (select top two)?

Source: CII-BCG Manufacturing Leadership Survey 2015.1Identified as either Top one or Top two geography.

Indian Manufacturers Getting Better At Both Product And Process Innovation

29%

7%

2015

58%

7%

32%

2014

54%

On average, do you see Indian manufacturing companies getting better at innovation?

Survey Responses (in %)

Sources: CII-BCG Manufacturing Leadership Survey 2014, CII-BCG Manufacturing Leadership Survey 2015; BCG analysis.

Product innovation Process innovation

20%

20%

2014

12%

47%

21%

2015

59%

12%

9%


Neither agree nor disagree Somewhat disagreeStrongly agree Strongly disagreeSomewhat agree

6% 1%1%5%


Attracting Talent Continues To Be Moderately Challenging For Indian Manufacturing

On average, do you see Indian manufacturing companies getting better at attracting top talent?

22%

14%

20%

43%

2014

11%

2015

26%

12%

48%

Neither agree nor disagree

Somewhat agree

Somewhat disagree

Strongly disagree

Strongly agree



1% 2%

Agenda



Make in India

Factory of tomorrow


Government's Drive Seen as Effective in Improving Policy Environment and Skill Development, But Less So in Infrastructure and Exports

18% 22% 17% 26% 26%18%

17%22%

37% 38% 37%

36%

50%46%

34% 29% 30%40%

9%6%

7%9%

OverallPolicy environment and branding

Skill development

Fostering manufacturing

clusters

Exports Infrastructure

Somewhat agree


Somewhat disagree

Government's drive to improve manufacturing sector has been effective

More respondents believe that the Governments' drive has been effective


3% 3%


Strongly disagree

Strongly agree

3% 3%

3% 4% 3% 2%


Only 20 Percent Feel That Ease Of Doing Business Has Improved

22%14% 13%

28% 39%

23% 26%

33%28%

33%42%

16% 15%

28%20%

18%

Somewhat agree

Project clearance and approvals

Land acquisition process

Somewhat disagree


Overall

Strongly disagree

Labor laws

Has 'ease of doing business' improved in your industry, state?

3%1%


Strongly agree


What more should the government do to drive growth in the manufacturing sector?

3%

OthersHave stronger focus on skill development

14%

Foster manufacturing

clusters (SEZs, NIMZs)

8%

Give more incentives

(for example, export, ADD...)

6%

Smoothen land acquisition

process

15%

17%

Reform labor laws

19%

Develop state-of-the-art-

infrastructure

18%

Speed up project

clearance and approval

Labor Law Reform and Infrastructure are the Top Two Issues that the Industry Wants the Government to Focus More On



Strongly disagree

8%

Somewhat disagree

19%


29%

Somewhat agree

37%

Strongly agree

7%

Has Make in India become closer to reality as compared to 2014?

About 45 Percent Executives Surveyed Think Make-in-India has been Closer to Reality In 2015 as Compared to 2014




Agenda



Make in India

Factory of tomorrow

Technology Will be Increasingly Used to Drive Competitive Advantage

What elements of the manufacturing factory and supplychain have seen the most change due to technological

advancements over the last five years (FY 11-15)?

What elements of the manufacturing factory and supplychain will see the most change due to technological advancements over the next five years (FY 16-20)?

Sources: CII-BCG Manufacturing Leadership Survey 2015; BCG analysis.

% of respondents Element

75% • Innovation in general (across the value chain)

58% • Productivity improvement

57% • Improvement in product quality

55% • Shortening of product development life cycle

52% • Real time manufacturing and stock management based on demand

46% • Improvement in product delivery

23% • Procurement

% of respondents Element

72% • Improvement in product quality

68% • Productivity improvement

46% • Improvement in product delivery

43% • Shortening of product development life cycle

39% • Real time manufacturing and stock management based on demand

34% • Innovation in general (across the value chain)

30% • Procurement

0%

-10%

41%

-15%

12%

13%

-8%


Automobiles, Electrical Machinery and Medical Equipment at the Forefront of Incorporating Technological Advancements

21123444

1314

49

Non-metallic products (includes

glass, cement, ceramic, building

materials, etc.)

Food products (includes beverages

and tobacco)

DiversifiedChemicals (includes pharma-ceuticals)

Metal products

Textile, apparel, leather and fur

products

Basic metals

OthersMedical, optical

and precision

equipment

Automobiles and

transport equipment (includes parts and

accessories)

Electrical and

electronics machinery

Which industry sector do you think are at the forefront of incorporating technological advancements into their manufacturing approach?


Sources: CII-BCG Manufacturing Leadership Survey 2015; BCG analysis.

Appendix—Respondent profiles


Respondents Spread Across all Industries Including Diversified Businesses

Please specify the (major) sector of operation for your company


Includes construction equipment, material handling equipment...


21%

2%1%1%2%

9%

4%6%

3%

8%

12%

29%

13%

0%1%1%2%

7%7%9%

11%11%

15%

22%

OthersFood products

Textile, apparel, leather

Medical, optical and precision

equipment

Non-metallic products

Basic metals

Chemicals (includes pharma-ceuticals)

Electrical and

electronics machinery

Metal products

Diversified businesses

Auto-mobiles

and transport

equipment

Rubber and

petroleum

2014 2015

Most Respondents Having a Global Footprint while Manufacturing only in India

Please specify your company's footprint (Indian / global)



22%

47%

19%

12%

30%

49%

13%9%

OtherSales in multiple countries, manufacturing only in India

Sales in India, manufacturing in multiple countries (incl

Sales in India, manufacturing in India

2014 2015


Respondents Across Various Company Sizes with Majority from Businesses of more than 1,000 Crores Revenue

What is the size of your company's India operations? (in terms of annual turnover in Rs. Crore)


70%

9%13%

3%4%

62%

10%

18%

6%5%

>1000 crores500-1000 crores200-500 crores100-200 crores<100 crores

20152014



Abraham StephanosManaging Director, Tata Steel Processing And Distribution Ltd.

Aditya Bansal General Manager, CEAT Ltd.

Ajay Kumar Tannu Executive Director, OMR Bagla Automotive Systems India Ltd.

Alok Taparia Assistant Vice President, Hindusthan National Glass & Industries Ltd.

Anil Bali Vice President, Deki Electronics Ltd.

Anil Goel Chairman, Duroshox Pvt Ltd.

Anirudh Narayan Mathur Executive – Managing Director Office, Daikin Air Conditioning India Pvt. Ltd.

Antony Cherukara Vice President, Kirloskar Oil Engines Ltd.

Ashish Bharatram Managing Director, SRF Ltd.

Ashish Vaishnav General Manager - Cooling Business, Thermax Ltd.

Ashwani Bhardwaj Managing Director, Hubergroup India Pvt Ltd.

B. S. Shinde Senior Assistant General Manager (EA To Joint Managing Director, Kay Bouvet Engineering Ltd.)

Bhaskar Bhat Managing Director, Titan Company Ltd.

Blaise Costabir Managing Director, Gmi Zarhak Moulders Pvt Ltd.

Channabasappa Mugali Assistant Manager, Business Planning, Harita Fehrer Ltd.

D. V. Ranganath Vice President (Materials), Bajaj Auto Ltd.

Deepak Desai Assistant General Manager- Sourcing And Vendor Development, Godrej & Boyce Mfg Co Ltd.

Devarajan Mohan Joint Managing Director, Cavinkare Pvt Ltd.

D. K. Sharma Executive Vice President & Business Head, Godrej & Boyce Mfg.Co.Ltd.

Farhad Forbes Director, Forbes Marshall Pvt Ltd.

Firdose Vandrevala Execuve Vice Chairman, Essar Steel Ltd.

Galla Vijay Naidu Chief Executive Officer, Mangal Industries Ltd.

H. A. Dumasia Vice President - Manufacturing, Godrej & Boyce Mfg Co.

Hakimuddin Ali Managing Director, Calderys India Refractories Ltd.

Ishan Mehta Executive Vice President - HR, Escorts Ltd.

J Ardeshir Group Chief Executive Officer, Forbes Marshall Pvt Ltd.

Jaikrishna B. President (Group HR), Amara Raja Batteries Ltd.

Jamshyd Godrej Chairman & Managing Director, Godrej & Boyce Mfg. Co. Ltd.

Jatender Mehta Managing Director, Omax Auto Ltd.

K. Vaidyanathan Chief Operating Officer, Heg Ltd.

K. Srinivasan Managing Director, Carborundum Universal Ltd.

Koji Tsuyuguchi Executive Vice President (Tech & Tss), Trl Krosaki Refractories Ltd.

M. M. Singh Executive Advisor, Maruti Suzuki India Ltd.

M. R. Shankar Head Of Purchasing, Akzo Nobel India Ltd.

Milon K. Nag Chairman And Managing Director, K. K. Nag Pvt. Ltd.

Gyanesh ChaudharyChief Executive Officer And Managing Director, Vikram Solar Pvt. Ltd.

N.N. Shukla President - Operations, Bhawani Industries Pvt. Ltd.

ACKNOWLEDGEMENTS


R Mukundan Chief Executive Officer, Tata Chemicals Ltd.

N Sukumar Senior Vice President - Supply Chain, Reliance Industries Ltd.

N. V. Venkatasubramanian Chief Executive Officer, L&T Valves Ltd.

N. Sriram President And Director, Endress+Hauser(India) Automation Instrumentation Pvt Ltd.

Nadir Godrej Managing Director, Godrej Industries Ltd.

Neeraj Sarda Director, Sarda Metals & Alloys Ltd.

Nikhil Sawhney Managing Director, Triveni Turbine Ltd.

P Ramnath Chief Executive Officer, Sterlite Copper.

Prasad B. S. V. Senior Vice President, Biocon Ltd.

Pratik Kumar Chief Executive Officer, Wipro Infra Engineering Ltd.

R Kannan Head CPM, Hinduja Group Ltd.

Raghuraman Marketing, Brandix India Apparel City.

Rajesh Alreja Associate Vice President, Godrej & Boyce Mfg. Co. Ltd.

Rajesh Mohata Chief Marketing And Commercial Officer, Vedanta Ltd.

Rajesh Shah Co-Chairman And Managing Director, Mukand Ltd.

Ramesh Datla Managing Director, Elico Ltd.

Ranganath N. K. Managing Director, Grundfos Pumps India Pvt. Ltd.

Robin Banerjee Managing Director, Caprihans India Ltd.

S Sandilya Chairman, Eicher Motors Ltd.

Sanjay Budhia Managing Director, Patton International Ltd.

Saroja Vivekanand Managing Director, Visaka Industries Ltd.

Shankar Krishnan Group Head - Strategy, Shapoorji Pallonji Group.

Shashikumar Nair Head - HR/Admin., Pae Ltd.

Sudhir Bhalerao General Manager - Manufacturing, Voltas Ltd.

Sudhir Mehta Chairman And Managing Director, Pinnacle Industries Ltd.

Sumit Mazumder Chairman And Managing Director, Til Ltd.

Suresh K. V.President, Zf India Pvt Ltd.

T Vinod Kumar Chief Financial Officer, Kirloskar Oil Engines Ltd.

Umesh Asaikar Executive Director And Chief Executive Officer, Deepak Nitrite Ltd.

Vijay Kalra Chief Of Manufacturing Operations - Automotive Division, Mahindra & Mahindra Ltd.

Vikram Pandit Executive Vice President, Praj Industries Ltd.

Vipin Sondhi Managing Director & Chief Operating Officer, Jcb India Ltd.

© The Boston Consulting Group, Inc. 2015. All rights reserved.

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For information or permission to reprint, please contact Confederation of Indian Industry at:Email: [email protected] Web: www.cii.inTel: +91 22 24931790Fax: +91 22 24939463/ 24945831Mail: Confederation of Indian Industry Western Region 105, Kakad Chambers 1st floor, 132, Dr Annie Besant Road, Worli, Mumbai – 400 018 India

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9/2015

Future of Indian

Man

ufacturing

Confederation of Indian Industry

cii 14th manufacturing summit 2015 future of indian ... of indian manufacturing: bridging the gap...

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