Automation Industry: A Boost to the Indian Economy

By Karishma Malhan | Edited by Khushi Shah

Automation in simple terms is minimising human efforts through the creation and use of electronics and technologies that boost reliability and efficiency in performance. A major goal of automation is converting complex tasks into simple ones thus enhancing productivity and making our lives easier. It functions virtually in all industries like manufacturing, transportation, defence, systems, utilities, and many more. Taking the retail industry into account, we can say that Artificial Intelligence is a tangible and intangible force that is carefully crawling its way into every part of human life. The real question is whether it is a boon or bane for the economy and human life.

The history of automation dates back to the introduction of the Industrial Revolution, from replacing manual labourers with machines resulted in the transformation from an agrarian economy to a manufacturing economy followed by the advent of the Internet and the ATM, the world has come a long way. Mass production at cheaper costs took place and the products had a limited distribution, where people had to rely solely on the shops near them for purchases. One cannot overlook the force of AI leading mankind in the future. Today, because of the invention of automated stores where global sites like Etsy, EBay, Amazon, Zara, and Nike conduct shipping all over the world, the market has become much more flexible and automated stores can be considered as a significant contributor towards “The Fourth Industrial Revolution’’ which is characterised by the advancements of technology. Industry 4.0 increases productivity of the companies, higher productivity of the companies makes them seek high skilled employees which also in turn increases competitiveness. Employees will have to constantly compete in order to survive in the company and will constantly improve their skills to match the level of machines.This will affect the labour market as employees will be constantly judged on their knowledge,skills and efficiency.A developing country like India,is still far from thriving from the benefits of industry 4.0 with its weak manufacturing. Automation is focused on reducing monotonous and replicable routine work, increasing the individual’s bandwidth to focus on the more intricate dealings in a fulfilling and progressive manner to further develop the economy thus encouraging creativity and empowerment.

It focuses on skill building. Skills like advanced IT, programming skills, higher cognitive, social and emotional skills will increase in demand and physical and basic cognitive skills such as basic data input and processing skills will be replaced with automation. Automation has thus brought about a shift in the type of the work performed by humans, laying the foundation for creation of several new opportunities, especially for low skilled workers who would learn the necessary skills to survive in the future. It also reduces human error and increases calculated risk taking behaviour free from human worries and distractions.

Evolution of Industrial Revolution 

Revolution Year Information 
IR 1.0 ⚙️1784Coal, steam, water
IR 2.0 💡1870Electricity, mass production 
IR 3.0 🖥1969Electronics and Nuclear, IT
IR 4.0 🤖2000 onwardsInternet and Renewable energy, Cyber-Physical Systems

Source: The Fourth Industrial Revolution: what it means and how to respond. (2016, January 14). The World Economic Forum. Retrieved November 4, 2022, from https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/

In a fully automated convenience store chain in Seoul, E-Mart 24, kiosks are made for customers to enter using their credit card for them to be authenticated and access the QR code. Lasers are used to detect customers. AI voice chat bots provide information about the location of existing products, and brand promotions, and act as a help centre. Weight sensors are used to ascertain the number of products the customer has taken and payment is made instantly when the customer leaves the store. This displays the powers of digitalization and that AI can indeed take over the world one day. The retail industry constitutes a significant part of global economic output and is necessary for maintenance and continuation of world economic growth.

Today, customers can simply select the item they wish to purchase on the website and place their order and this allows direct selling to consumers. This is known as Direct-to-Consumer (DTC). The strategy here is to eliminate all middlemen to avoid unnecessary costs that arise out of employing intermediaries between manufacturers and consumers. It is the complete opposite of the traditional marketing system. India houses more than 800 D2C brands which primarily use e-commerce platforms like Amazon and Flipkart to sell their products.

DTC has contributed to an upsurge in the income level which both employed and unemployed population are benefitting from, it involves low investment, low risk as no intermediaries are involved who can damage or mistreat the owners and it provides for high returns. The bulk of direct selling businesses contract out the manufacturing, packaging and delivery of their goods, which directly supports jobs throughout the value chain. In 2021, it was found that 8 million graduates hunted for work each year, yet only 10% were hired and many were compensated inadequately. These unemployed and employed individuals can improve their talents and adopt an entrepreneurial mindset through direct selling. Thus they become an invaluable asset to the labour workforce and are able to enhance creativity and raise the standard of living in the future as if they come from a poor household they are creating sources of income and increasing their productivity and increasing their confidence, saving them from the cycle of poverty even by remaining unemployed.

An example is Boat lifestyles, an electronic D2C brand famous for its quality headphones, speakers and other gadgets and has earned a revenue of a whopping 1500 crore rupees because of its customer centric behaviour and constant use of social media platforms to advertise its products thus showing the power of technology.According to statistics, 55% of consumers would rather purchase products directly from brands rather than from multi-brand merchants. This enables remote access to customer data which guides the industry personnel toward better decision-making. Pricing, targeting and boosting profits are all accomplished throughout and it thus lays the path away for Omniscient commerce that seeks to provide a unified customer experience to people all across the world, without any barriers to shopping. Nike is an example of adopting this approach. In 2020, it shrewdly introduced a membership scheme known as a loyalty scheme which enabled them to create as many as 250 million customer profiles. 70 million members joined at the time of COVID. The pandemic sparked the need for DTC since one-to-one selling was not possible at the time. Since then, the sales have been moving rapidly upward. Under this, they had complete authority to track how far members ran, their location and even their digital footprint which helped them set up stores nearby and create a more intimate, personalised relationship which helped them constantly update their website and meet the customers needs.

However, even automation comes with its own set of disadvantages. Automated systems and mechanisms,and  robotic features are expensive and a high capital investment expenditure is required to make it work. Cost of Labour, materials, security, regulations and infrastructure are all making automation expensive. Uber suffered a loss of $3 Billion in 2018 partly because of their continuous investment in autonomous vehicles of more than billions over the years. It requires high levels of maintenance as compared to ordinary machines and if there are errors in programming, it could dangerously impact the economy. As mentioned earlier, if the system in the automated store malfunctions or if it is hacked and the cameras disabled, then the store can be easily robbed due to lack of supervision otherwise.

Without employees and their unique personalities integrated with attention, enthusiasm and care, the generation of excitement is reduced. If one has to visit a self serving store one would question the need to step out of their house when service is available from the comfort of their home. A crucial point to note is that automation revolves around cutting labour costs, however in a country like India, the majority of the labour workforce comprises the middle class who hold manual and data entry jobs. This could lead to an unemployment surge resulting in mass unemployment, and hindering the economy. One can recall the long lasting impact of the introduction of computers which displaced millions of jobs.

Nevertheless, this view has been challenged. Automation does not simply result in people losing their jobs, but also creates opportunities in other aspects of production. ATMs were designed to replace the wide number of human tellers altogether. An ATM is used for instant cash generation or to make deposits. This facilitates convenience and efficiency. However, human tellers focus on customer needs as ATMs cannot be used to deposit cheque’s or for other services.Banks then decided that they could open up more branches, and thus the tellers are focused more on customer cantered requirements rather than just dealings in cash, building more business for the bank.

According to a draught discussion paper from NITI AAYOG, AI is expected to boost India’s yearly growth rate by 1.3% by 2035 and turn the country into the ‘AI garage of the world’ (National Strategy for Artificial Intelligence, NSAI), (Analytics India Magazine)

The Privacy and exploitation of consumer data also poses a major concern as it has also been observed that volumes of data collected globally is expected to increase from 33 trillion gigabytes in 2018 to 175 trillion gigabytes by 2025 posing a primary concern of privacy and exploitation of consumer data. Customers would have to be willing to share each and every detail about their life with the brand. 

China, the world’s most populous country, the position which the United States expects will be taken over by India as quickly as next year has utilised automation immensely for economic growth. It is the fastest growing market worldwide with the biggest robot market in the world. “Its annual sales are currently the highest level ever recorded for a single country :80,000 units.” (International Federation of Robotics) This is the position that India should strive to achieve.

In India, more than 160 million workers are expected to be added over the next 20 years, about 69% of the employment sector is at risk due to automation. This finding indicates that automation is inevitable and resistance towards it is futile. However one should consider that automation is a driving force toward economic growth but should be exercised with caution. Taking the example of Nike, information on digital profiles helps the shops grow by mingling online and offline data which provides an optimum and balanced shopping experience to boost sales. 

In a world where only automated stores and robotics were to prevail, it would be difficult to keep human beings engaged and satisfied in their life as even the happiness quotient is related to how well an employee is doing at their job. ‘According to findings from FORBES, employees who are paid more than the competitive equilibrium wage rate are up to 20% more productive at work than unhappy ones’. However, automation would result in shirking of workers resulting in dangerous consequences, public unrest and decreased productivity thus deviating from the Maslow’s needs hierarchy theory.

Automation is essential when the working age population of the country is declining as rapidly as that of China and Korea however it is not the same case for India, it being a developing country. Automation should be applied cautiously and gradually for its optimum utilisation. Resistance is not possible as Artificial Intelligence is the future of the Indian economy. The benefits of AI are ultimately long lasting and the world that is already tech-savvy will only welcome it. India has to apply automation for expansion in trade, meeting consumer demand, manufacturing output, reducing labour costs and for ensuring a competitive advantage. India currently has a GDP of approximately 9 percent and to maintain this consistently, automation is the need of the hour. Therefore, automation is a likely reality but India is still far away from achieving that dream.

References

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2. Bughin, J., Hazan, E., Lund, S., Dahlström, P., Wiesinger, A., & Subramaniam, A. (2021, January 23). Skill shift: Automation and the future of the workforce. McKinsey & Company. Retrieved November 3, 2022, from https://www.mckinsey.com/featured-insights/future-of-work/skill-shift-automation-and-the-future-of-the-workforce

3. Deoras, S. (2020, July 30). Ai is expected to boost India’s annual growth rate by 1.3% by 2035: Niti Aayog. Analytics India Magazine. Retrieved November 3, 2022, from https://analyticsindiamag.com/ai-is-expected-to-boost-indias-annual-growth-rate-by-1-3-by-2035-niti-aayog/

4. DTC: What to know about selling direct-to-consumer (+ who is doing it well). BigCommerce. (n.d.). Retrieved November 2, 2022, from https://www.bigcommerce.com/articles/direct-to-consumer/

5. ForbesIndia. (n.d.). Why automation will not take away jobs – Forbes India blogs. Forbes India. Retrieved November 2, 2022, from https://www.forbesindia.com/blog/technology/why-automation-wont-take-away-jobs/

6. Fully automated store opens in Seoul. IoT M2M Council. (2021, September 14). Retrieved November 3, 2022, from https://www.iotm2mcouncil.org/iot-library/news/smart-retail-news/fully-automated-store-opens-in-seoul/

7. How automation is transforming the retail industry. Indian Retailer. (n.d.). Retrieved November 2, 2022, from https://www.indianretailer.com/article/technology/digital-trends/how-automation-is-transforming-the-retail-industry.a7045

8. How the top 10 D2C Startups in India are setting themselves apart. EasyEcom. (2022, September 23). Retrieved November 3, 2022, from https://www.easyecom.io/blog/the-top-10-d2c-startups-in-india-setting-themselves-apart/

9. Ifr. (n.d.). Robots: China breaks historic records in automation. IFR International Federation of Robotics. Retrieved November 2, 2022, from https://ifr.org/news/robots-china-breaks-historic-records-in-automation/

10. Pai, U. L. (2017, May 25). India Needs Automation. Automation World. Retrieved November 2, 2022, from https://www.automationworld.com/products/software/news/13303420/india-needs-automation


11. Robots are getting expensive – medium. (n.d.). Retrieved November 2, 2022, from https://medium.datadriveninvestor.com/automation-is-getting-expensive-1a4656b1bd9a.     

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