India’s testing and measurement (T&M) industry is undergoing major changes due to a transforming Indian economy and advancements in technology.
by Madhukar Joshi
A Rs 1,300+ crore market with checkered progress in the recent past, but strong growth prospects in the long-term has been the story of India’s testing and measurement (T&M) industry. While two disruptive changes, demonetisation and GST, have had an adverse effect, the industry has proven its resilience to withstand shocks, and grow.
India’s T&M market constitutes a vast ecosystem of product and service providers including equipment manufacturers, software vendors, distributors, importers, C&F agents, consultants, and dealers. In addition, there are large and mid-sized system integrators who use T&M equipment and tools to provide turnkey project implementation services to enterprises and public sector undertakings (PSUs) in India.
The hardware solutions in this category include (but are not limited to) calibration systems, data loggers, flow meters, head space analysers, humidity measurement systems, industrial tools, material testing and coating systems, medical and speciality equipment, microscopes, multi-meters, oscillators and analysers, oscilloscopes, power testing and analysis instruments, power harmonics testers, probes, semiconductor testing solutions, signal generators, solar simulators, spectrum analysers, switching and data acquisition systems, work benches, and so on. The software products primarily deal with T&M automation, data capture, analytics, and reporting.
Surviving the disruption
The last one year has been eventful for India’s T&M sector. During the last quarter of 2016, the economy witnessed a severe cash-crunch as demonetisation sapped 85% of currency in circulation. While demonetisation didn’t exert a serious blow to the organised sector, the unorganised market suffered nearly for two quarters. “The adverse effects waned following an initial shock. By March-end, businesses had figured out how to tackle the situation,” recalls Priyesh Chaudhary, executive director, management consulting, PwC India.
Another disruption that followed was the introduction of the Goods and Services Tax (GST). A fundamental reform that eliminated a dozen taxes (See Table 1), GST is expected to streamline indirect taxation in India. However, the adverse short-term effects of GST could be seen on three fronts—malfunctioning of the GSTN platform, lack of clarity about rate slabs, and a general lack of awareness about the Government’s policy direction. While GST-led confusion adversely impacted T&M sales for a quarter, industry participants expect recovery during the current, i.e. October to December 2017 quarter.
PwC’s Chaudhary assures: “Although GST rollout came with some teething troubles, the Indian industry will overcome these soon. The Government is taking steps to stabilise the GSTN platform. The industry too is making an effort to achieve tax compliance across IT systems, business processes, and distribution and supplier networks. The good part is, manufacturers are already experiencing the benefits of the new tax regime. For instance, the removal of entry taxes has slashed down the days wasted for goods in transit.”
Mentioning that there still exits confusion with respect to interpretation of GST rules, Farook Merchant, founder and MD, Messung Group, says that it will take a while for the industry to fully understand the new system. However, terming it as a game changer, he says that GST will prove beneficial in the long run. The simplified taxation (due to GST), according to him, is already delivering positive results. “Now we do not have to worry about many taxes (such as excise) or collecting various forms, such as a C form,” he illustrates.
T&M industry trends
Nearly every industry requires T&M solutions. Heavy consumers include sectors such as aerospace and defence, automotive and locomotive, broadcasting, chemicals and fertilisers, consumer electronics, education and research, environmental sciences, pharmaceuticals, oil and gas, steel, telecommunications, the manufacturing sector in general, and utility—to name a few. Some of the key business trends that will reshape the future of the T&M industry are listed below.
1) Infrastructure investments will drive future growth
Initiatives such as Digital India and Make in India are already proving beneficial to sectors such as aerospace and defence, electronics, and telecommunications. The infrastructure push given by the central government is being seen as another bright spot.
Under Sagarmala, the government plans to develop 14 Coastal Economic Zones (CEZ) while mobilising investment of Rs 4 lakh crore in India’s infrastructure sector. Similarly, under Bharatmala, with an investment of Rs 6.92 lakh crore by 2022, government plans to build a 83,677 km highway network covering the length and breadth of India. Many large-scale infrastructure projects are under-way, simultaneously. These include the Arunachal Pradesh railway network, Chardham highway project, Gujarat-Gorakhpur gas pipeline, inland waterways, Mumbai trans harbour link and Shivaji memorial, Ahmedabad-Mumbai bullet train, Rashtriya Rajmarg Zila Sanjoyokta Pariyojna, Setu Bharatam, Ude Desh ka Nagrik (UDAN), bridge over Chenab (world’s highest bridge), to name a few.
The government’s infrastructure focus is expected to trigger a massive growth in the economy, which, in turn will drive demand for T&M products and services, affirms Chaudhary of PwC India.
2) Compliances will ensure sustained demand
Compliance with rules, regulations and standards is another factor assuring sustained demand for T&M products and services. The central and state governments have made energy conservation a priority area. The state government bodies such
as Maharashtra Energy Development Agency (MEDA) and Tamil Nadu Energy Development Agency (TEDA) have issued energy conservation guidelines for businesses. Compliance with these has created the need for power and harmonics testing and analysis equipment for usage validation, characterisation, performance, and conservation, informs Thirunavuakarasu T, GM, sales, Microtek Instruments.
Compliance with global safety standards (such as IEC standards) is another factor delivering sustained demand for T&M solutions, while encouraging the organised sector. “Large enterprises follow strict procurement policies about buying only from the brands whose equipment meets global standards. This discourages the cheap alternatives that do not meet safety and engineering quality norms,” Thirunavuakarasu T says.
3) Consolidation via mergers and acquisitions (M&A)
Besides its use in day-to-day business and equipment replacement phases, T&M plays a crucial role in helping organisations win a competitive advantage. The fragmented nature of the industry and the strategic nature of T&M as an enabler for innovation have led to many M&A (See Table 2).
While the M&A activity largely played out in the USA and UK, several deals were of global nature. Given the strategic importance of the sector and innovation happening within the T&M space, the M&A activity will continue in 2018.
4) Remote monitoring and management
The T&M equipment has undergone multiple stages of evolution. The first phase came when manual monitoring of parameters and information gathering was gradually replaced by automated data capture on handy clamp-on type instruments.
“The emergence of the new control system architecture, supervisory control and data acquisition (SCADA) facilitated acquisition of data via GPS/GPRS and allowed for regular monitoring of aspects — such as energy consumption — at several locations. It can be useful even for building management system, surveillance, and energy audit,” informs Haren Shah, senior marketing executive, Meco Instruments.
Shah cites an example of Meco’s product, Meco MFM, which is powered by Modbus protocol and comes with power meter software. Installed at several bank branches, ATMs, commercial and industrial locations, departmental stores, malls, and hospitals in India, the product’s T&M results can be viewed on PC with graphical user interface. “Customers can see data in tabular format, check historical trends, download as excel or export the file to any enterprise software platform for analytics and decision making,” Shah informs.
5) Fast track digitalisation
The next phase of evolution in the T&M space is coming from rapid digitalisation nearly in every industry. The technologies of cloud, analytics, and artificial intelligence (AI) are being explored, tested and adopted by many leading organisations. With cloud computing becoming competitive, companies do not have to pay for expensive software or instrumentation, especially for analytics, any more.
Cloud model helps achieve optimal utilisation of resources while trimming software costs — from a few lakhs to a few thousands. “Earlier the expensive instrumentation tools required hiring the services of special laboratories. Now, these are available from cloud vendors,” observes Messung Group’s Merchant. Stating that cloud and AI will soon dominate all aspects of engineering, he explains: “T&M pertains to three areas — testing and measurement, monitoring, and control. Of this, the control function depends on manual analysis of data today. As a result, the decision making is a tad slow. But as AI revolutionises the domain, decisions will be faster and more accurate.”
Mobility is another trend in the industry today. While customers already use mobile devices to view analytical reports, T&M vendors can be seen employing mobility to make their equipment user-friendly. Vijay Rai, marketing Head, Fischer India, shares an example of his company’s small form factor precious metal testing and coating thickness instrument, Handheld XRF. Packaged in the form of a lightweight suitcase, the instrument is fitted with a tablet for quick reading and reporting. “Our clients’ field executives are always on the lookout for testing machines that can be carried around easily. The lightweight Handheld XRF that comes with a tablet addresses that need effectively,” Rai says.
Innovation is the future
Even as advanced technologies continue to drive business growth, the future of the T&M sector will be defined by innovation. To stay competitive, companies launch new (and better) products. Every new product has to undergo R&D and testing. The car companies in India, for example, witness a jump in their revenues upon introduction of models with innovative, customer-friendly features. Similarly, in the pharmaceuticals sector, while the generics business does require T&M equipment, the need for testing substantially grows when companies invest in intellectual property through new drug discovery.
“Nearly all consumer targeted industries such as automobile, mobile and electronics, home appliances, and pharmaceuticals, will create an innovation-driven demand for T&M equipment, software and services in the years to come,” says Chaudhary of PwC. He believes that irrespective of the blips in the recent past, there is growth ahead for the Indian economy. “All major global forecasts indicate that India’s long-term growth story remains intact. We are looking forward to at least a decade of strong growth in India. This, in turn, will also help the T&M sector in a big way,” Chaudhary says.