The growth of servitisation" in recent years essentially demands that the government should redefine the term "industry"in its future Industrial Policy." Discuss.
Servitization is a business strategy adopted by manufacturers to provide service component along with traditional products as a package. This is a business mechanism of creating value by adding services to products or in some cases even replacing a product with a service. For example selling maintenance contracts for capital goods as a service being added to a product.
In the present phase of industrial revolution service sector is growing very rapidly. For example, Since 1991 economic crisis in India, industry’s share of GDP is almost stagnant around 30% (out of which manufacturing sector:15%) on the other hand, contribution of services sector grew rapidly from 15% to nearly 54% despite the lack of a specific explicit policy for the growth of service sector.
Therefore service sector has immense potential for growth and Servitisation is key characteristic of the present fourth industrial revolution as, it is already the fastest-growing revenue stream for many global companies. The Internet of Things based fourth industrial revolution will transform global supply-chains and will aggravate India’s problem of jobless growth because even though the service sector contributes a major portion, it is skill intensive and does not provide enough job opportunities.
Due to technological advancements the boundary between industries are blurring, for example, Google and Apple are in involved in car-making and, similarly, the boundary between ‘industry’ and ‘services’ are also blurring for example it is difficult to distinguish whether Uber and Ola are part of automotive value-chain or of the services sector.
Therefore policymakers while formulating industrial policy in the context of changing circumstances should give due consideration to service sector component.
To reap the benefits of demographic dividends in the era of digital technologies, the India need to re-set past mental models and new industrial policy should address both as increasing digitization and transformation of work. India could not take full advantage of third industrial revolution, however new policy should make sure that opportunities provided by fourth industrial revolution will be capitalized.
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