Emergence of Automatic Identification and Data Capture opportunities in India

The Economy of India is the
10th largest in the world by nominal GDP and the fourth largest by purchasing
power parity (PPP). India’s GDP witnessed consistent growth rates in excess of 9
percent until 2007. Despite the global economic turbulence, India continues to
remain one of the high growth economies and its GDP is expected to deliver
consistent growth in this decade. With a nominal GDP of $1.43 trillion in 2010,
India is expected to surpass China as the world’s fastest growing economy by 2018 and
become a $3.5 trillion economy by 2020. The services sector contributed a
major component of the GDP accounting for 57.2 percent in 2010. Industrial and
Agriculture segments contributed 28 percent and 14.6 percent, respectively.
Following strong economic reforms from the post independence socialist economy, the
country’s economic growth progressed at a rapid pace, as free market
principles were initiated in 1991 for international competition and foreign



Automatic Identification
and Data Capture 
(AIDC) refers
to the methods of automatically identifying
objects, collecting data about them, and entering that data directly into computer systems
(that is, without human involvement). Technologies typically considered part of
AIDC include bar codes, Radio Frequency Identification (RFID), biometrics, magnetic
stripes, Optical Character Recognition (OCR), smart cards, and voice recognition


Frost & Sullivan
classifies the following technologies under the ambit of

AIDC, namely: Smart Cards, Radio frequency Identification Device (RFID) and


The Automatic Identification
and Data Capture market in India is fast emerging as a significant contributor towards helping
organizations manage their operational efficiencies effectively. High-end AIDC technologies such as radio
frequency identification (RFID), biometrics and smart cards are helping both Government and
Private sector enterprises in realizing their objectives, whether in security
systems, track and trace solutions, or personnel identification.


AIDC technologies such as RFID
have found favor in Supply Chain Management (SCM), which includes inventory
management and logistics, followed by government procurement. This has driven
wide scale adoption of such technologies.


However, challenges continue to
exist in the form of continued low levels of awareness about the AIDC product,
high hardware prices thereby leading to projects not moving beyond
Proof-of-Concept stage (PoC). There also exist underlying security concerns about
privacy. Frost & Sullivan expects new opportunities to emerge, paving the
way for a continued fall in hardware prices, leading to a faster rate of
adoption amongst industry peers. AIDC technologies are anticipated to garner
momentum between 2010 and 2020, when India is foreseen to witness massive
government spend to help transform the Indian economy.





A vast majority of India’s 1.2
billion population resides in villages. The central and state Governments formulate
numerous welfare schemes for the benefit of the vast rural population. However,
challenges in their implementation result in a major proportion of the beneficiaries
not availing the benefits of welfare schemes. This calls for use of technology to
check pilferage in the distribution system and also to ensure better transparency by
maintaining end-user identity data onto a central government database. AIDC
technologies in the form of smart cards and biometrics are coming to the rescue of
various Government projects ranging from Unique Identification Authority of
India (UIDAI) to Mahatma Gandhi National Rural Employment Guarantee Act
(MGNREGA) to various Financial Inclusion Schemes.

India’s telecom penetration is
witnessing new highs in the form of Mobile SIM adoptability in rural areas.
Assuming that India will not pass a regulation to remove inactive SIM cards, the SIM
card volumes are to reach 1.5 billion by 2015 from 640 million in 2010, which is
almost 2-3 times the subscriber base in the U.S.

The Indian Government would
embark on a massive infrastructure spend to help build world-class roads,
airports, railways and ports all of which would lead to an enhanced transportation and
logistics infrastructure (for example, a freight corridor), which would propel
faster adoption of AIDC technologies such as RFID.



AIDC applications in India span
various verticals including Logistics/Transportation, Government, Automotive, Retail,
Financial Services, Process Industry, Healthcare, etc.



For Smart Cards, Mobile
SIM card application garners the lion’s share with the most phenomenal growth coming
in from multiple SIM card usage per subscriber For RFID, primary
consumers and the early movers have been the supply chain management applications
followed by Government procurement For Biometrics, Government
and Law Enforcement agencies have been the primary users of this



The AIDC Market in India is
expected to grow from the current US $ 581 million to nearly US $ 1.3 billion by
2014 at a Compound Annual Growth Rate (CAGR) of 22.37 percent. Of all the AIDC
technologies, Smart Cards takes the lions’ share with 2010 revenues pegged at US
$ 510 million and expected to reach US $ 903 million by 2014.



Some of the key highlights
expected to drive adoption of AIDC technologies in India include:


Aadhaar project – Unique
Identification Authority of India has a target to enrol 600 million citizens by
2014; over 46 million enrolments have already been done until August 2011. A
combination of Smart card and Biometric technology shall be put into


Jawaharlal Nehru Solar
Mission has set an ambitious cumulative target of generating 20,000 MW of solar
power by 2022. As part of this strategy, the Government has mandated that
each solar or photovoltaic (PV) module placed into use must carry an RFID
tag, so that it can be easily identified and tracked throughout its useful life.


National Highways Authority
of India (NHAI) has mandated the use of RFID technology for toll collection
across all of its 100+ toll centers through an electronic toll collection
(ETC) system.


Issuance of Smart Card-based
Drivers’ license and Registration Certificate in many states to ensure
uniformity and inter-operability across the country.


Continually expanding mobile
penetration and the growing preference for multi SIM mobile phones is
catapulting the demand for smart cards in the SIM market. Similarly evolving compliance
for EMV cards is expected to usher higher growth in the smart cards segment.


The Commerce Ministry and
Drugs Controller General of India (DCGI) have mandated that 96 Pharma
products come under track and trace umbrella by 2011 to help control the entry
of counterfeit medicines in the market and assist the enforcement teams in
carrying out faster checks.



The AIDC markets in India are
strongly propelled by various Government programs as well as demand from the
banking, hospitality and telecom segments, to name a few. Efforts taken to create
awareness of AIDC technology and its benefits amongst users have created a positive
impact on its adoption. Similar to low awareness, there are a few other
challenges that need to be addressed to ensure a more glorious growth for the AIDC
markets in the country. Some of these are detailed below.


Lack of Financing Models


Since the AIDC Industry is
still at a nascent stage, the scale of projects may not be that high; consequently,
financing options are lacking. This is particularly true in cases where a customer would
seek to try out AIDC technology first and then evaluate a possible
full-fledged roll out for its remaining departments. There is also a need for companies to offer
ccustomized ROI frameworks thereby reducing opportunity costs and lowering


Absence of a local
manufacturing environment


Low yield manufacturing volumes
for producing AIDC hardware in India, result in the need to import or procure
AIDC hardware or technology, which adds up to the costs. This in turn leads to higher
project costs along with longer delivery cycles to implement an AIDC solution with
long gestation periods to justify Return on Investment. There is also a
lack of framework from the Government circles that can encourage indigenous
production. Also high cost of manufacturing sensors has fuelled the growth of
assemblers in India.


Size and Complexity


In spite of standards in place
allowing end users to multi-source AIDC solutions, coupled with possession of
mature IC technology, technology know-how and decent competency levels in the
country, size and complexity are the biggest challenges faced in the Indian
market preventing massive rollout of the technology.


Threat from Substitutes


Availability of alternate
technologies such as Bar codes causes companies to shy away from adopting high-end
AIDC technologies in spite of the known fact that barcodes would invite line of
sight, for which manual intervention, in the form of labor would be required. Hiring
manual labor as against investing in high-end technology may prove to be a
cost effective option.




The massive population in India
and the on-going Government drive for numerous welfare and ID programs portend
a strong future for the AIDC industry in India. Be it UID or NREGS or RSBY or any
central/state program, AIDC technologies are expected to be in demand at
various stages of implementation. The Department of IT, Ministry for communication
has identified a couple of AIDC technologies as those with significant
potential in the domestic market and is encouraging R&D in these technologies for
indigenous development of products that shall be used in the various identification programs
in the ensuing years. Private sector is also buoyant about the opportunities for
AIDC which is evinced from their increasing investments in product
development, manufacturing facilities as well as branding activities. The chart below
depicts the outlook for the AIDC industry in India.


By Frost & Sullivan
[email protected]