Current Affairs 2022: Centre's Roadmap to Achieve US$300 Bn from Electronics Industry

By Tanieya Kumari

Government prioritises mobile phones, IT hardware, consumer electronics (TV and audio), strategic electronics, industrial electronics, wearables and hearables, PCBA, auto electronics among other things for manufacturing. 

The Ministry of Electronics and Information Technology (MeitY) has released a roadmap for five years and a vision document for the electronics sector. The document is titled ‘$300 billion Sustainable Electronics Manufacturing & Exports by 2026’. The electronics business is classified among the world's largest and fastest expanding industries. In today's digital world, electronic devices have a significant influence on us. With the globe more linked than ever before and the digital push triggered by the COVID-19 pandemic, demand for electronic gadgets is projected to rise continuously.

The Government of India has extensively highlighted the electronics industry's development, potential and strategic relevance within the National Policy for Electronics (NPE), 2019. The NPE was founded with the goal of positioning India as a worldwide centre for Electronics System Design and Manufacturing (ESDM), among other things. The ESDM industry has been identified to have a place within 25 priority sectors in the Government's Make in India initiatives and serves as a vital pillar in contributing to India's economic progress.

The electronics sector has the capacity to become one of the highest exports of India in the next 3-5 years. The National Policy on Electronics (NPE) 2019 established a target of $400 billion in revenue by 2025. However, the COVID-19 pandemic presented unexpected and unprecedented obstacles and contemplating this, the NPE 2019 projections for electronics output in 2025-26 at US$ 300 billion seems quite feasible.

Key Products for Manufacturing in the Electronics Sector:

Mobile phones, IT hardware, consumer electronics (TV and audio), strategic electronics, industrial electronics, wearables and hearables, PCBA, auto electronics, LED lighting, telecom and electronic equipment are among the priorities of manufacturing. These products constitute over 80% of the gross electronics industry. 

For India to be the universal electronics manufacturing hub in the long term, it must proceed with a coherent vision that can be achieved by following short-term goals.

Short-Term Vision (1-4 years) for the Electronics Industry

• Build competitiveness and scale
• Shift and develop sub-assemblies and components ecosystem
• Build design ecosystem
• Nurture Indian champions
• Steadily remove impediments to creating a sizeable manufacturing ecosystem  in India

Long-Term Vision for the Electronics Industry

• Make in India for the world
• Make India the no. 1 electronics manufacturer and exporter
• Become a major player within the global value chain
• Build an ecosystem comprising primarily mobile phones, IT hardware and consumer electronics of US$ 1 trillion+ within the next 10 years

Different nations specialise in various electronic parts and components. As India aspires to gain a substantial market share in the electronics manufacturing ecosystem, the next goals must be:

• To attract the globally leading firms for electronics manufacturing in India.
• To encourage shifting/ relocation of tier 2 and 3 companies as imports are bound to continue considering the globalized nature of supply chains. 
• To sustainably develop domestic manufacturing firms that may require the creation of local companies, therefore, capturing a pie of the international market share.

Challenges Ahead for the Electronics Industry

While the policies have had a positive impact on the manufacturing ecosystem, there are simultaneous challenges related to this. Such as:

• Cost disabilities 
• Lack of Component ecosystem
• Ease of doing business
• Punitive duty structures and tax levies
• Restrictive PLI conditions
• Regulatory uncertainty
• High import tariff on electronic components

Policy Recommendations

1. Easing the price of doing business

• Winner takes all
• Economies of scale and global competitiveness
• Providing incentives and removing cost disabilities
• A dedicated effort on Ease of Doing Business (‘EoDB’) under the aegis of MeitY

Recommendations for Ease of Doing Business:

• Policy for building large-scale labour-intensive factories and hiring 40,000 to1,00,000 workers
• Faster clearance time on ports
• Lower the cost of logistics for domestic as well as global operations
• Availability of uninterrupted electricity at competitive rates
• Financing at a nominal rate
• Conducive labour environment for large-scale operations

      2. Shifting of Ecosystem

• Stability in import tariffs (for existing ecosystems)
• Decrease in import tariffs (for components with no manufacturing base in India)
• Encourage major foreign manufacturers to set up components ecosystem in India
• Clarity in foreign investment policies
• Development of skillset

       3. Infrastructure support for plug and play facilities including dormitories for large scale manufacturing

       4. Deemed approval on regulatory filings and compliances

       5. Improving the PLI scheme and other policy measures

• Segment specific inputs for PLI revitalization
• Encourage design ecosystem in India
• Investment roadshows across key destinations
• Hosting a global conference on electronics
• Greater access to markets through FTAs

To summarise, there has been a major shift in approach that goes beyond the goal of import substitution to "Make in India for the Rest of the World." As previously stated, this new vision aims to alter India's manufacturing capabilities by focusing on competitiveness, scale, and exports.

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