The Future of Emerging Markets Breaking the Barriers for Growth
The growth of the Indian process sector – India is currently renewing her image with the world to promote itself as a base for investment. Industry stalwarts give their viewpoint on different global practices and how they see the Indian market play a role in the growth of their companies.
Technology and development go hand-in-hand and play a crucial role in the growth of any country. In today’s world, it is the competitive edge that defines growth, be it a country, state or an industry. For quite a few years now, India has acknowledged the importance of Research and Development (R&D). The government has shown its keenness in encouraging R&D through the increase in R&D expenditure.
R&D in India
According to Managing Director, Burckhardt Compression India, Narasimha Rao, the engineering R&D market is estimated to grow at a CAGR of 14 per cent by 2020. “R&D is not uniform across sectors. While some sectors such as IT, automobile, electronics segments are at the forefront, there are some segments which have to go the extra mile,” continues Rao. Among process industries, currently there is a lot of innovation in the specialty chemicals segment. “Indian Oil which has one of the finest R&D centers in Asia has developed its own processes in the refining segment. Even world leaders in specialty chemicals are setting up their R&D and innovation centers in India,” informs Rao.
Furthermore, India being an emerging economy with a higher amount of disposable income, the need arises for advanced low cost goods. This is turn, will require manufactures to increase the efficiency and productivity of their processes to bring about cost-effective high-quality goods.
Innovations are Key to Savings
Another aspect to this is that R&D leads to innovations that then leads to energy savings such as optimizing plant operations and increasing efficiency of processes. Speaking on how this can particularly help process plants, Regional Representative India, Freudenberg Group, Dr Jörg Matthias Großmann notes, “The power consumption of industrial plants is often enormous. Energy efficiency solutions can help to increase both their efficiency and cost-effectiveness.”
“To begin with, an innovative measurement and evaluation process identifies energy-saving potentials within the system. During a subsequent optimization process, accurately matched, smooth-running specialty lubricants are used in place of conventional oils. These advanced lubricants reduce friction between individual components, resulting in proven reduced energy consumption and increased performance.”
Adding to this, Managing Director, Auma India, Arvind K Goel advises that research is key to finding ways to be sustainable and increase growth. He avers, “It also becomes important owing to special requirements for application in Indian industries as well as for import substitution. The industry is already aware of the need for more emphasis on R&D for a company to sustain and grow its business in the long term. It is seen that companies investing in R&D consistently tend to grow faster and gain market share.”
How to Deal with Differentiating Norms
While R&D is an important issue for sustainability, other existing facets such as automation need to be considered. The Indian process sector as a whole is increasingly adopting advanced technology. However, compared to its global counterparts, it is still lagging behind.
Expounding with an example Dr Großmann voices, “The Indian process industry is labor intensive despite technological advancement. A primary example for this is the penetration of robots in the industry. While China has over 45,000 robots deployed every year, India matches up with hardly 2,000. This also affects the qualitative nature of the products being made in India.”
Smaller Size, Bigger Opportunities?
Agreeing with this sentiment, Rao adds, “In general, the plant sizes are small compared to global players, though there are always some exceptions. Also, there are other elements such as manpower, raw material availability, etc., which keep pushing back the Indian industries, but with the new development plans led by the government, the Indian industry is likely to be more modernized.”
It is not only the government’s lookout to push industries to success. According to Goel, the norm is to focus on incorporating updated technology as opposed to vision and mission developments within the company. He mentions, “Indian process industries do not put as much emphasis new process development as on substitution of more extensive equipment with lower cost ones. Generally, the tendency is to adapt existing technologies, while reducing the cost.”
Make in India
Recently, at a well known economic forum, India was recognized as one of the most competitive nations in the world, providing a strong talent pool in the areas of science, technology and research, as well as some of the lowest labor costs in the world. This is owing to the way the country has moved away from its traditional socialist system and accelerated efforts to liberalize economic reforms. And given the current government’s focus on initiatives such as ‘Make in India’ the future seems to be a bright one.
Commenting on the initiative, Rao states, “It is still early to see a visible effect of the ‘Make in India’ initiative, but it should definitely boost the process sector. Dedicated free zones such as Dahej will create the ecosystem and provide the much needed space for process industries. The sign of things moving on the ground is clearly visible and there is renewed enthusiasm among the process industries’ stakeholders and a sense of positivity regarding the future outlook of the sector.”
Dr Großmann too has the same opinion, “The process sector is poised for growth. The opportunities this initiative presents are manifold. In manufacturing, process industries such as food processing, oil & gas and healthcare will adapt further factory automation whereby the resources will be utilized much better and qualitative output will become a hallmark of India.”
Goel too feels that the Indian process industry is coming of age and there are more and more Indian EPCs supplying products and equipment globally. “While these may not be at the highest end of technology, a beginning has been made with growing acceptances of equipments and technologies from India. It is believed that there will be high growth in this area owing to the advantages of Indian solutions.
Companies such as Freudenberg Group, Burckhardt Compression and Auma have a long standing relationship with India and continue to invest in the sub-continent. Speaking on the potential the Group sees in the country, Dr Großmann points out, “Freudenberg has always been positive of the latent potential India has to offer. We will continue to invest in India with a long term view and engage in the local market across industries.”
Apart from the various investments the company makes on a regular basis in India, one significant project is the new production site of Chem-Trend and Klüber Lubrication in Mysore, which will be open this year.
“We have invested around `135 crore— one of the largest investments in the Asia-Pacific region of the Freudenberg Group. This is where more than 20 products will be developed and manufactured for the customers in the South East Asia/Pacific region. The site at Mysore—buildings with a surface area of 17,000 m2 on a site of some 40,000 m2—also hosts product development facilities and major tribology testing facilities with equipment such as an FZG test rig. Outside Munich, Klüber India is the only facility that has one,” informs Dr Großmann.
Ready for the Coming Boom
Burckhardt Compression India (BCIN) too has its operations based in India for more than two decades and caters to various market segments in the process sector such as upstream oil & gas, gas transport & storage, refineries, petrochemicals plants (including fertilizer and chemical markets), and industrial gas markets.
“During this period, BCIN has already made sufficient investments and is well positioned to cater to the boom in the process sector as it happens. With its continuous innovation and the relentless effort of its experienced team to solve the complex problems of its clients, it is well positioned to deliver in the dynamically changing environment. We are here for a long haul and want to share our experience and expertise in the growth of India,” articulates Rao.
Speaking on the investment strategies Auma has for the country, Goel discloses, “Our company consistently invests in our local facilities to keep these in-line with the best in the world. Our R&D facilities have recognition from the Department of Science and Technology and develop products locally to meet the requirements of the Indian customers. Our focus is on high-end technologies for process automation.”
Key to Growth
Apart from bringing in investments in the country, a majority of multinational companies are using India as their pivot for increasing their market share. Elaborating on the same Goel mentions, “Auma India is an important player in the Auma Group, and it supports the supply of equipment by the Indian EPCs and valve manufacturers for national and international projects. A good percentage of Auma India’s production is used outside India in the equipment supplied through Indian companies.”
Rao too informs that his company exports goods manufactured in India. “India has the largest operation outside Switzerland in terms of engineering and manufacturing activities, investment and manpower. Burckhardt Compression Group has various types of compressors in its product basket. Out of which the smaller frame size compressors are exclusively built in India and are exported across the globe.”
A Focus for Investment...
Consistent with the investment, Rao also states that India is and will remain key for his company’s growth given the strategic location and the advantages that the country provides to its firm specific strategy.
For the Freudenberg Group, India is a market with one of the world’s biggest potentials. “For us the motto is long-term commitment for long-term success. We will continue to strengthen our market position by serving our customers in India to the best of our abilities, just as we do throughout the world,” conveys Dr Großmann. The Freudenberg Group feels that it will grow more quickly in the growth regions of the world than in established markets. In 2014, the technology group generated overall sales of `1,497 crore (+32.8% Vs. 2013) in India.
As of December 31, 2014, Freudenberg employed 2,800 full-time associates at around 50 locations in India—with four R&D centers and 14 production sites with state-of-the-art shopfloors. The company, according to Dr Großmann, will continue to invest in India over the coming years.
The Future Looks Bright
To the point It is clear that India’s latent potential is going to be the reason for companies to further invest in the process sector. Adding to this is the fact that regions such as India will show higher growth than that in established markets for companies who have a multinational presence. And in tune with the Make in India campaign, the future seems to be a bright one for the sub-continent.