Dec 12, 2011Radio frequency identification is a technology that has evolved for the tracking of objects or individuals. Whether controlling the entry of people or record inventories being ported through different value chain touch points, RFID has effectively resolved many complex issues that those managing such systems face on a daily basis.
India is no exception to this rule. Here, as well, we have complex systems, volumes of objects moving in these systems and a large population that needs to be tracked for various reasons—simply for timesheet calculations, or for security concerns.
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RFID in India is driven by the RFID Association of India (RFIDAI), a not-for-profit organization that promotes the technology's use. The association has not yet been able to make a remarkable push, for a number of reasons, mostly market-driven, but it is committed to helping the industry to achieve a respectable size in this country.
Many IT software firms in India have forayed into RFID technology, offering solutions mainly for time and attendance for small and midsize enterprises (SMEs). There is also a fragmented vendor community from China supplying tags and readers to the market. But at the same time, respectable industry names, like Siemens, Wipro, Infosys and Honeywell, have established a fair base in the market.
APPLICATION AREAS
Infrastructure—Energy, Logistics, Roads and Railways
Since the 1991 inception of economic liberalization in India, the national government's Planning Commission has been working to bring the country's infrastructure on par with global standards so that India can become a viable industrial/manufacturing destination, as well as raise the living standards for ordinary citizens.
Infrastructure is also turning smart, with the implementation of specialized IT solutions—such as automatic fare collection (AFC), intelligent transportation systems (ITS) and intelligent building systems (IBS)—that have not only improved user experience, but also resulted in higher rates of technology penetration. As a reference, the Ministry of Road Transport and Highways adopted RFID technology in order to implement electronic-tolling systems for national highways.
Similarly, with regard to energy and power utilities, a shift is occurring toward smart metering, and the concept of a smart grid is being actively debated in such groups as the India Smart Grid Forum, an advisory body formed by India's Ministry of Power. A consensus is expected to emerge in the near future regarding the most optimal energy-grid architecture in the country, and RFID will play a critical role in this arena as well.
India's industrial growth story continues at a steady clip, despite the economy having become more skewed toward services during the last few decades. In fact, the services boom has led to a substantial domestic market for manufactured goods. India has emerged as a mass-consumption market, with consumers displaying increased spending capacity as per capita incomes rise.
The government had provisioned for 2 percent growth in the industrial output in the 11th Five-Year Plan, to 11 percent of the country's gross domestic product (GDP), compared with the 10th Five-Year Plan, in which the proportion stood at 9 percent. The government recently announced a policy initiative to grow manufacturing out of seven specially designated National Investment and Manufacturing Zones (NMIZs). Over the next five years, the government plans to invest Rs. 35 billion ($673 billion) annually in the seven NMIZs located in Delhi, Uttar Pradesh, Haryana, Rajasthan, Gujarat, Madhya Pradesh and Maharashtra.
Micro and small enterprises (MSEs) constitute one of the crucial industrial sub-segments. MSEs alone contributed approximately 8 percent of the country's GDP, accounting for 45 percent of India's manufacturing output during fiscal year 2010-11. The Indian government has announced several steps to improve the functioning of MSEs, raise operational efficiencies to cope with rising manufacturing costs and remain attractive in the market by offsetting the economies of scale enjoyed by large manufacturers. One key initiative includes increasing the usage of technology in the business and manufacturing processes of MSEs. The government also offers subsidies and financial assistance for utilizing RFID labels on goods produced by MSEs, under the ambit of marketing assistance schemes floated by the nation's Ministry of Micro, Small and Medium Enterprises.
Health Care
On an aggregate, India spends roughly a little more than 5 percent of its GDP on health care. At the same time, various industry statistics put the country's pharmaceutical industry among the top five markets worldwide. Health care is a major concern, and the government as well as private players have realized the need to make affordable health-care facilities available to people across the country. According to Kathleen A. Holloway, a regional advisor with the World Health Organization (WHO), the majority of Indians spend around 70 percent of their entire income on health care and drugs (see http://www.eiu.com/index.asp?layout=ib3Article&article_id=1488558933&pubtypeid=1152462500&country_id=1880000188&page_title= India healthcare: Healthcare spending pushing millions into poverty in India reports WHO>). Even then, the patients are often not cured of their illnesses, as they frequently end up buying spurious drugs through different gray-market networks. Ensuring that patients have access to genuine medicines can be effectively achieved through the implementation of RFID.
The Indian government has also launched the very ambitious National Rural Health Mission (NRHM), the aim of which is to make basic health-care facilities available to the remotest corners of the country. In such large-scale public-health programs, supervision is always a challenge. Very rarely do planners come to know the real implementation on the ground. One idea is to employ mobile technology to obtain feedback and maintain a record of what is occurring. Similarly, RFID can be used to ensure the delivery of medicines, health-care systems and equipment to the particular patients for whom they are intended.
Retail is the second largest employer in India, after agriculture, contributing more than 10 percent of the country's GDP during fiscal year 2009-10 (source: CRISIL). This sector has the widest established network in India, and a retail establishment can be found in the remotest of areas.
The organized retail sector has been actively establishing a footprint in the country over the last few years, and has now acquired a launch pad with "thin" networks already in place in metros, as well as in Tier I and some Tier II cities. All major global chains have tied up with Indian partners, and media reports indicate that the government may finally allow these global leaders a majority shareholding in multi-brand retail in the country, albeit under conditions not yet specified. Currently, the contribution of organized retail constitutes less than 5 percent of the nation's total retail market; with additional players expected to enter the market, and with existing retail chains likely to scale to denser networks, the share of sales for organized retail stores is expected to increase.
Worldwide, retail business is a heavy user of RFID tags, from inventory management to payment systems. With the proportion of organized retail's contribution to the economy expected to increase during the next few years, RFID technology usage is very likely to witness a rise as well.
Others
There are several other areas in which RFID can be applied to bring in efficiencies and reduce operational costs and complexities as well. No sector in the economy is asset-less, and assets are always valuable. Businesses need to track and secure their assets, and use them optimally for the intended purpose.
Some other sectors that can heavily benefit from RFID technologies include defense, education and financial services, to name a few. Viewing these sectors through an Indian perspective, we see an all-around growth in RFID adoption, as the sectors themselves grow and rely more heavily on technological solutions.
If some user concerns, such as cost, are adequately addressed, RFID adoption can show a significant increase. Some favorable market conditions that have set a different scenario for RFID technology in India may be summarized as follows:
• Technology adoption in India has greatly increased, and there is an upward movement toward applying advanced technology solutions in various vertical industries.
• Government has always adopted an encouraging tone regarding the adoption of technology.
• Large-scale infrastructure developments and mega-projects are requiring foolproof security solutions, which is not possible manually.
• Many IT solutions providers are pushing RFID technology to open up new revenue streams.
• Some business decision makers see strong value in RFID technology, as it helps them to check for pilferage and theft.
• India is a huge market geographically, and managing distribution and logistics for such a wide and diverse network has always been a tall order. RFID can become a key enabler.
• Buildings, malls and other public infrastructure facilities, such as airports and railway stations, are adopting technology in architecture and design, so solutions based on access control and monitoring technologies like RFID can be more easily applied.
• Many investors—particularly foreign investors—influence infrastructure being used for projects in which their investments are being channeled. This also pushes up the usage rate for technology solutions in projects.
• Public opinion is strongly in favor of effective and clean governance. Technology-based solutions, such as RFID, can play a vital role in achieving this goal. This will help the government not only efficiently implement and execute social-security schemes, but also considerably reduce establishment and supervision costs.
RFID adoption in India is expected to remain an uphill task for a few more years. According to CyberMedia Research, the main issues facing the technology's use in India are as follows:
• Decision makers have limited knowledge about RFID applications.
• RFID is seen as an add-on cost—a polish upgrade of existing processes—and not as something that brings efficiencies to a system.
• There is a lack of government regulations and standardization. Except for toll collection, the Indian government has not adopted a standard in any other application areas, making it a vendor-dominated market and causing integration problems for end users.
• Cost is still an issue. Potential business users want to see RFID tag costs become affordable to the larger end-user community.
• A very limited percentage of the population believes in and experiences reliable technology alternatives; hence, larger groups remain apprehensive regarding adoption. There are many "what if?" scenarios.
• The availability of labor at cheap rates, and in large numbers, to perform mundane and routine jobs of manning, guarding, cleaning, refilling and serving, discourages an increase in utilization rates of technology solutions.
• Service delivery levels in India across vertical industries have yet to reach international standards. The usage of such high-tech solutions would add value to the overall delivery and customer-engagement process.
OUTLOOK
CyberMedia Research believes that with present market conditions evolving as they are, the adoption of RFID will grow and reach a significant level by 2015, as a large portion of infrastructure and mega-projects are completed.
Furthermore, with both companies and government adopting a strategy to reduce the role of unskilled and semi-skilled labor in offices and manufacturing plants, as well as create more value-enhancing jobs, technology will be predominantly used to replace the need for a physical presence in manning and securing assets, whether individuals, goods or equipment.
Faisal Kawoosa is the senior manager of the semiconductor and electronics practice at CyberMedia Research, a research, consulting and advisory services firm focused on information technology, telecommunications, electronics, semiconductor smart infrastructure, health care, government and energy. Vishaal Bhatnagar, CMR's associate VP of marketing and communications, contributed to this article.
