India has the potential to become a global manufacturing hub if it speeds up the adoption of technology on the shopfloor, according to a new paper by foreign policy think-tank Gateway House.

The country could be a beneficiary of the global decoupling from China as companies start to move their manufacturing operations out and need a new supply chain partner, it said.

“India needs to look at digital manufacturing and go beyond industry 4.0 – it needs accelerated manufacturing, but needs to create jobs as well,” said Manjeet Kriplani, executive director, Gateway House. She said Indian software firms and startups would have an important role to play in helping domestic enterprises make this transition.

Digital manufacturing goes beyond just Industry 4.0, blending manufacturing with IT, including artificial intelligence, virtual reality and the Internet of Things. Already, the United States and Japan have called to move manufacturing out of China, primarily on security concerns.

In July, the Japanese government said it would pay companies to move their manufacturing operations out of China, putting aside over $500 million for this. Indian enterprises need to build strong digital manufacturing capabilities in order to take advantage of this situation, the think-tank said.

This can be a great opportunity for India, but things are moving slowly because of the Covid-19 pandemic, said Rajan Navani, managing director, Jetline Group.

“We are a source of tech talent to the world and can make the most of this opportunity. But Indian industry needs to invest much more than what they currently are,” said Navani, who is also Chairman of CII’s India @75 initiative.

Most of the automation and tech initiatives in India are driven by multinationals, and by the time Indian companies do invest, it is more about playing catch up. The pandemic is driving faster adoption of digital technologies in India, said Ashish Gaikwad, managing director, Honeywell Automation India.

With changing customer demands, quality parameters, and environment and safety regulations, the manufacturing sector will adopt automation and Industry 4.0 much faster, he said.

“As we slowly embrace a ‘new normal’, we are ready to serve our customers’ needs to help provide a safe, secure, and productive work environment with our mobility solutions. Across our businesses, we have a suite of products and solutions that enable remote operations, worker safety, and rapid adjustment to the post-Covid-19 world,” said Gaikwad.

The company is currently implementing various solutions in pharma companies to provide complete visibility of essential manufacturing processes and help speed up time to market.

Chizel, a startup that offers manufacturing as a service, has seen a sharp spike in international inquiries after the early days of the pandemic.

“There is demand from European and Australian companies that were earlier sourcing parts from China. These are mainly heavy engineering companies and equipment manufacturers,” said Yash Rane, founder, Chizel, which provides an online platform for customers to upload their drawings. Chizel then manufactures them through its network of job shops.

The challenge, said Rane, is convincing them of the quality of the end-product. Several of these companies have worked with Indian companies before and have concerns over quality even though it is a cost competitive option. Small and medium businesses, often an important part of the supply chain, are also realising the importance of technology.

A recent study by Cloud firm Digital Ocean found that demand for digital services by SMEs in India far outpaces demand in the United States. Respondents in India (in businesses with under 1,000 employees) reported greater spending on IT security and the cloud, and higher demand for cloud services in the next 3-6 months.

Indian businesses also need to increase focus on sustainability. Treeni Sustainability Solutions provides enterprises sustainable supply chain management solutions. “Adopting sustainable supply chain practices is another factor that would help enterprises attract global customers as they look at reducing the supply chain dependence on China,” said Ankush Patel, CEO, Treeni.

Even as some Indian businesses are making the transition and adopting more digital manufacturing practices, experts pointed out that it needs to happen at a wider scale for the country to truly benefit.