Can The Drone Boom Match The IT Boom?
08 Apr 2022 | 10 min read
It would be naïve to compare today's IT industry with the Indian Drone Industry, mainly when the former contributes to 8% of India’s GDP and employs close to 5 million Indians, whereas the latter is just starting up. However, there are very significant parallels that can be drawn if we compare the journey of these two industries, from inception to growth. Let us go back in time by a few decades to know these parallels.
The Indian IT giants, Wipro and TCS, were established in the 60s but primarily operated under the radar as the Indian Economy was inwards and was strictly controlled by the government. It was only in the early 90s when The Government of India developed software Technology Parks of India (STPI), and the Indian Economy opened to the world for the IT industry to finally outsource its output to the western economies. What followed in the years after that changed the course of India forever.
The success of IT demonstrated that a nascent industry could only flourish if government interventions were timely and appropriate. Drone Industry is on a similar trend. After operating under the radar for quite some time, it was only in the last two years that the drone industry gained momentum. Rules, which were rudimentary for the drone industry have been made leaner, the import ban of foreign drones has given a much-needed push to produce in-house, and production linked incentive has created 100+ drone startups to flourish, which in turn has created 1000+ jobs. In summary, the Drone Industry, like IT, has suddenly become the talk of the town after being unknown for quite a while, owing to the government’s timely interventions and from the efforts within the industry.
Before 1984, India imposed a 135% import tariff on hardware and 100% on software. Those days, IT/Software was not recognized as an industry, and thus the companies operating in IT were not eligible for bank loans. In 1984, however, things started changing. The New Computer Policy (NCP) was announced, which reduced high import tariffs, made provisions to establish communication links for Indian IT companies to communicate with the west, and recognized IT as an industry, making it eligible for loans and grants.
Along similar lines, Drone Shakti was announced for the Drone Industry in 2022. PLI, along with other schemes to facilitate drone startups and promote drone as a service, is a part of the Drone Shakti program announced recently by the Govt of India. A Drone manufacturer could apply for up to 25% of its production outcome as incentives from the government. Similarly, the announcement of subsidies for agricultural drones helps the Agri drone manufacturers sell more of such drones in large volumes. A special budget allocated to an industry helped elevate the IT then and is expected to boost the drone industry.
When the Government of India decided to open the Indian Economy to the world, there were only 5 IITs. The Core Engineering branches, such as Civil, Electrical, and Mechanical, dominated the engineering circuits. But IT required a new set of skills. As IT gained momentum, more demand for skilled labor in software started pouring in. The supply was inadequate. The industry had to collaborate with academia to create a readily employable software engineers pool.
Today, India has 23 IITs and 31 NITs. Together, they produce over a hundred thousand engineers in a year, and from the late 90s to date, Software Engineering has remained the most sought after and the most paid skill in these colleges.
Indian Drone Industry finds another parallel here. Since the announcement of the new drone rules on Aug 21, the drone industry has created over 1000 jobs. Most of these jobs require a skill that was non-existent among Indians until recently. New Remote Pilot Training Organizations (RPTOs) are opening in unprecedented numbers to impart these new skills. Since 2020, 40 new RPTOs have already been established across India, and more institutes are coming up every day. Additionally, under the Drone Shakti Program, the government aims to impart drone-related courses to the ITIs of India.
The need for skilled labor, like IT, is being recognized over time.
It was the good old 90s. India Inc. had opened up to outsourcing IT. Coincidentally, that was the phase when the Y2K fear emerged across the developed economies. The West was ready to spend billions to get its computer programs corrected. India presented itself with the opportunity. Affordable labor meant high-cost savings for Western firms. Naturally, India was chosen. In short, the Indian IT industry found a high-paying customer on their doorstep. Subsequently, Indian software engineers remained the first outsourcing choice for Western firms. The sector which benefitted from buggy software codes hoped on to the other opportunities that came its way and kept building. The output was channelized.
Outsourcing Drone services and products, however, won’t be easy. Thankfully, some inland schemes provide enough engagement for the Indian Drone Industry. SWAMITVA Yojna- a scheme to map India aerially requires over 1000 hours of drone flying. Drone services and drone manufacturing firms are benefiting highly from this. The Indian PSUs, including IOCL, SAIL, NHAI, etc., adopt drones for monitoring purposes. Naturally, tenders worth millions of rupees are announced each week. Defense is another big consumer of Indian Drones.
Delivery using drones could be a game-changer for India’s middle and last-mile supply chain woes. Experiments across India demonstrate that drone deliveries have scaled up. The government, too, has effortlessly carried out vaccine delivery using drones in relatively more challenging terrains across India. The journey toward drone delivery looks possible with every passing day, and the Drone Industry finds more avenues to channel its output. Drone Taxi found itself a place in the recently announced drone rules. Human transportation using drones may sound futuristic, but a few Indian startups have leaped on to developing technologies that could carry people for short distances.
India benefitted from outsourcing its IT. However, most of the Indian Drone output is consumed inland. On the other hand, China has taken a head start. DJI, a Chinese drone firm, enjoys over 76% of the market share in drones. Parrot and Intel are other international firms selling drones globally. If Indian drone firms are to challenge these drone manufacturers in global markets, they must do at par with them regarding the quality of the drones and at a lower price.
PLI could be a boost for the Indian Drone manufacturers, who could save manufacturing costs while trying to ramp up their sales games outside Indian territories.
Contract manufacturing is another sector that India could look to scale. An affordable workforce and raw materials at relatively lower prices could translate to an opportunity for foreign drone OEMs to outsource their manufacturing to India. Leaner Drone regulations to attract foreign manufacturing should be the way forward for the regulators in their vision to establish India as the drone capital of the world.
IT showed India the best practices on how to build a multimillion-dollar industry. The Drone Industry could take a few cues. They have started well. And, as they say, “Well begun is half done.”
