The government has finally decided to go whole hog on electronics manufacturing in India.
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India gung-ho on "Electronics Production" - new policy
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- The story: In recent years, imports of electronics goods in India has sky-rocketed. The government was pretty alarmed by it, and has finally swung into policy action. Now, as per the new policy, India may achieve electronics production of US $300 billion by 2026. It will be, however, lower than the target of US $400 billion by 2025 set as per the National Policy on Electronics (NPE) 2019.
- New policy: The given estimate is according to a 5-year roadmap and vision document titled “US $ 300 bn Sustainable Electronics Manufacturing and Exports by 2026” released by the Ministry of Electronics and IT (MeitY) in association with the India Cellular and Electronics Association (ICEA). ICEA is the apex industry body of the mobile and electronics industry comprising manufacturers.
- Key points: Electronics manufacturing had grown from US $ 37.1 billion in 2015-16 to US $ 67.3 billion in 2020-21. However, Covid-19 related disruptions impacted the growth trajectory in 2020-21 and led to a decline in the manufacturing output to the US $ 67.3 billion.
- Growth of Electronics Manufacturing - According to the document, the reduced target still aims for a 400% increase from the current level. Mobile manufacturing that is expected to cross US $ 100 billion annual production - up from the current US $ 30 billion - is expected to constitute nearly 40% of this ambitious growth.
- There has been a complete shift in strategy which goes beyond the vision of import substitution to "Make in India for the World". This fresh outlook is aimed at transforming India's manufacturing prowess by focusing on competitiveness, scale and exports.
- Furthermore, continuing on the path of import substitution, India's domestic electronics market is estimated to reach at best US $ 150-180 billion from the current US $ 65 billion over the next 4-5 years.
- Products Expected to Lead: Amongst the key products that are expected to lead India’s growth in electronics manufacturing include Mobile Phones, IT Hardware (laptops, tablets), Consumer electronics (TV and audio), Industrial electronics, Auto electronics, electronic components, LED Lighting, Strategic electronics, PCBA (Printed Circuit Board Assembly), Wearables and hearables, and Telecom equipment.
- Problems: There are two - (i) Qualitative - non-tariff, infrastructure-related and (ii) Quantitative - tariff, free trade agreements etc.
- Recommendations: The primary focus must be building of scale through incentives and removal of cost disabilities. Swift changes in respect of existing policies within the next 1,000 days which include stability in import tariffs, decrease in import tariffs for components with no manufacturing base in India, development of skill sets and encouraging major foreign manufacturers to set up components ecosystems in India.
- Need to focus on aggregate domestic value addition in the electronics sector, as India transforms from its current state to one that is gearing to compete with the likes of China and Vietnam.
- It also details the importance of the key role Indian champions will play in addition to global companies – both of whom are already part of the Production-Linked Incentive (PLI) Schemes.
- The US $ 300 billion electronics manufacturing comes on the back of the USD10 billion PLI Scheme announced by the government to propel forward the Semiconductor and Display ecosystem.
- The government has committed nearly US $ 17 billion over the next 6 years across four PLI Schemes – Semiconductor and Design, Smartphones, IT Hardware and Components.
- Summary: Electronics exports may account for significant contributions to the Indian economy in terms of foreign exchange earnings and employment generation. The issues like increasing labour costs in China, the geopolitical trade and security environment, and the Covid-19 outbreak are compelling many global electronics majors to diversify their supply chains. India is one of the leading contenders for alternate solutions. India should take advantage of the situation. Above all, the depressing situation where India keeps importing heavily from its arch geopolitical rival - China - will be mitigated too, in case the policy goals are achieved.
- EXAM QUESTIONS: (1) Examine the developments of the Electronics Industry in India over the years. What are the challenges faced by the authorities in this regard? (2) Success of ‘Make in India for the World’ depends on focusing on competitiveness, scale and exports” Discuss with logical arguments.
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