Page 30 - CII Artha Magazine 1

the sector has gone up fr

1,90,366 crore (US$27.20
billion) in 2014-15 to ab

5,33,550 crore (US$76.0

billion) in 2019-20, exhi

impressive CAGR of 23 per

cent.

What is notable is that I

emerged as a leading

manufacturer of mobile ph

in recent years. In FY20,

phone manufacturing

accounted for 41 per cent
total production of the s

followed by industrial

electronics (18 per cent)

consumer electronics (16

cent), electronic compone

(15 per cent), strategic

electronics (6 per cent)

computer hardware (4 per

cent).

Similarly, major strides

been made towards

increasing exports of

electronics items. As per

DGCI&S data, India’s expo

computer hardware and

have grown from Rs. 38,26

strategic electronics
crore in 2014-15 to Rs.

(aerospace and defence). Of
he electronics industry,

82,929 crore in 2019-20,

these, three segments namely
considered to be the

notching an impressive CA

communication and broadcast
bedrock of every other

of 16.73 per cent. India

equipment, industrial
manufacturing activity in the
exporters are also gradua

electronics and consumer
country, has the potential to

getting integrated in the

electronics comprise around
hasten our quest of emerging
global value chain.

75 per cent of the overall
as a hub of global

share of the market for
manufacturing, technology

Besides, the sector is sh

electronics industry.
and innovation. A flourishing

remarkable growth in

electronics industry, through

demand. In fact, demand f

its ability to create value and

electronics hardware in I

jobs, can also contribute

is anticipated to perk up

significantly to bringing

US$127 billion in 2019 to

dynamism to our

reach US$300 billion by

development journey. What is
2025-26. This surge in de

also significant is that its

is huge which brings a bi

applications are being
opportunity for the indus

increasingly utilized by almost

However, unless there is

Responding to the impetus
all segments of the economy.
huge ramp up in domestic

provided by the government’s

capacity, it is likely th

‘Make in India’, Atmanirbhar
The electronics industry is

incremental demand would

Bharat, Digital India and Smart
classified into six broad

met through a rise in imp

City initiatives, the electronics
segments viz. communication

It also needs to be noted

industry has made noteworthy
and broadcast equipment
the country specializes i

progress in terms of production
(including mobile phones),
tech content and most

and growth in the last five years.
consumer electronics,

high-tech components are

This is borne out from the fact
industrial electronics,
Sector in Focus Introduction electronic components, that the value of product
B. Deepening the supported CAS (conditional 1. Horizontal expansion of manufacturing footprint. invested in such an assembly. providing higher PLI benefits
Component Value Chain access system) for set top manufactured categories Manufacturing of a However, a similar calculation than the present 5-6 per cent Making India
across the entire boxes. to all electronic sub majority of electronic and for a multi layered PCB for for components, while also
ecosystem sectors – consumer, mechanical components, mobile phones reveals an widening the eligibility criteria
Similarly, a global innovation appliances, industrial, piece- parts and their raw investment to turnover ratio so that it is possible to
The domestic electronics challenge for designing of medical, smart energy, materials within India is of 1: 1.5 (at best). Hence, at achieve scale in this sector.
industry is characterised by semiconductors and chip sets automotive, EVs, drones, now considered zero import duty on PCBs, No doubt, several compo- Atmanirbhar
the current schemes are
“essential”. Inadequate
and robotics. Within these
lack of a component for educational tablets for the groups, demand for several availability of components inadequate and have hence nents have access to capex
ecosystem which leads to its masses could be encouraged. emerging product lines eg. locally results in the not tipped the decision for incentive under the SPECS
dependence on imports. High wearables & hearables is following: large scale investments in scheme. This 25 per cent
dependency on imported Besides, the next focus should currently fully dependent (a) severely limits the India yet. along with the 5 per cent PLI
inputs raises cost and impedes be on maximizing domestic trading, and will lead to on imports. innovation potential makes a reasonable case for in Electronics trends, seizing the
competitiveness. A right mix value addition and promoting manufacturing, ensuring In fact, the 5-6 per cent PLI domestic manufacturing and GOVERNMENT opportunity of Designing in
of policy realignment coupled Design in India, besides Make higher value addition, and Tariff calibration within (b) renders the industry incentive provided to has resulted in expansion of POLICIES FOCUSSED India and Making in India, and
with new targets is required. in India. For this, the hopefully, leading to design-led the supply chain can uncompetitive due to components, which is a capacities by existing compo- TOWARDS MAKING learn from mistakes of the
long lead times &

know-how available with manufacturing, not only for ensure a large shift higher logistic costs zero-duty import item, may nent manufacturers. However, INDIA SELF-RELIANT past. There were a large
by itself, not trigger new
it has not yet seen a major
towards domestic
number of SMEs in
The government has, no doubt Government owned R&D India, but for the world. manufacturing. domestic manufacturing, influx of new investments in IN ELECTRONICS electronics before the
Hence, it is indeed, a glass half
announced the PLI scheme for laboratories should be made full. (c) exposes us to risks of especially as components have components. Manufacturers Information Technology
flight of assembly units

components. However, the 5-6 freely accessible to industry, 2. Scale – Global in case of a major a lower investment to abroad don’t find adequate I n the middle of the global origin tech captains steering Agreement (ITA) of WTO
per cent incentive on outsourced R&D needs to be The last three years have competitiveness, especially policy change turnover ratio of 1:1 as reason to make the shift as pandemic, India generated global tech companies. National Policy on Electronics came into effect resulting in
incremental sales, envisaged incentivized on the lines of hence, not surprising to changed the world in a (near) zero import compared to that of mobiles their components continue to considerable interest with its So, we have the ability, and (2019), Production Linked the closure of many SMEs.
unicorn boom. The
under the scheme, is not In-house R&D, Technology witness an erosion of irreversibly. For instance, an duty scenario requires (d) makes the industry (1:6). Hence, to reap find markets in India at zero unprecedented performance government policies too are Incentive (PLI) Scheme for With zero duty kicking in,
vulnerable to

enough to achieve scale in this Acquisition Fund be created manufacturing value add in alternative to the factory of global scale. Make in India geopolitical constraints maximum returns, the import duty. has been a showcase of sorts moving us towards the electronics sector, the many local brands got killed,
sector and accordingly would for liberal assistance in filing most sectors. In electronics, the world, China, is being for the world, in several that may be imposed government should consider for its appetite for adventure, atmanirbharta (self-reliance). SPECS Scheme, Electronics as they couldn't compete with
Manufacturing Clusters (EMC
the pricing offered by China.
cases, could also be
discourage manufacturers patents and a Guarantee Fund for instance, a sector that was assiduously sought for triggered by aggregation of by the government of talent for new tech and an Since electronics is a meta 2.0) Scheme, and several So, a lot of work needs to be
prematurely subject to zero
mitigation of geopolitical,
from indigenizing production. be created to help R&D import duties (ITA -1 since economic and social risks. A local demand, the country housing entrepreneurial mindset. resource for all verticals, the other interventions designed done to bring SMEs back
Hence, the government should houses to raise working 2005), manufacturing was critical component of Chinese development of these supply chains. Way forward India’s contribution as the government’s aim to hit to promote indigenous onto the mainstage.
review the scheme by capital. mostly replaced by trading. competitiveness has been the customized products Weaponization of such Tactical short-term digital shop of the world, US$250 billion (domestic manufacturing.
electronics manufacturing) by
thanks to its software
expanding the incentive from robust supply chain that has based on indigenous supplies is now a It is hence clear that procurement from the engineering talent, is well 2025-26 (from about US$70 When we start designing in
deepening our value
the present 5-6 per cent and D. Other Suggestions It is in this context that a 23 been established in almost all designs and manufacturing reality chains from assembly to lowest cost source must known. We have been the billion in 2021) comes at an It’s also a fact that despite our India, we will see more of
widen the eligibility criteria. A lectronics manufacturing competitiveness, which accrue per cent CAGR in electronics manufacturing sectors. Any not just for India but for Components are typically manufacturing will require be replaced with strategic leading IT sourcing opportune moment when huge talent advantage and depth, more components will
government push, we are still
be available in India, though
revamped PLI would facilitate Similarly, the government in India has grown at 23 essentially from higher is laudable. In the least, this destination that aspires to be emerging economies investment, technology and more of what we have vendor development, destination across the world, there is fresh zeal to get out lagging on the depth of some may still be imported.
around the world. An
scale economies from should also look at other per cent CAGR over the last effective costs of energy, signals a turning point from seen as an alternative to educational tablet, an skill intensive. This journey witnessed in the last few entailing clear cost and accounting for 55 per cent of the Covid storm. manufacturing through design Some components like
domestic production and also options such as leveraging five years. However, despite logistics and finance, have where manufacturing could China has to emulate this integrated set top box, a will hence need more than years – government’s technology roadmaps with market share of the and domestic value addition. passives etc are already
integrated supply chain.
take-off. Could this be the
domestic vendors.
encourage SMEs to strengthen upcoming FTAs (UK & the its impressive performance, been well acknowledged. It is inflection point that we have Electronics, even more so. low- cost limited feature the steps already taken to focus on developing the US$200-250 billion global The government is keen on When we talk of new and available for use. When we
providing an enabling
services sourcing business in
the supply chain and reduce EU) towards enhancing India has not made its mark also well known that all been waiting for? smart phone, a battery establish assembly in the industry, clarity in bringing Our success in automotive 2019-20. environment, with the Make emerging technologies, we start making in India, we will
in appropriate policies,
our dependence on imports. exports, incentivizing as a globally competitive these disabilities Opportunity through powered modem are country. courage to take tough manufacturing is a great in India talk of a new era in mobility, be defining the components
have directly
manufacturing destination so
manufacture of products not far. In fact, despite our impacted Changing geo-political Atmanirbhar initiative examples of such Assembly of mobile phones decisions and most of all, a example of the sustainable Global captive centres in India program, communications, connectivity which would be used in the
country. And when we define
and discovery, like EVs and
C. Encouraging Design-led currently produced in India, four-decade old experience in domestic value trends – capitalise on products. We have a during the last 3 years, and belief in the industry. competitive advantages are transforming into test drones, space tech, backhaul the components we need, we
Manufacturing facilitating EoDB, among manufacturing, a reasonable addition within supply chain gaps This is our opportunity. While successful example in the the beginning of large-scale that accrue from a beds for global innovations. in telecom, interesting will create a market for our
others. number of large companies the country at we aim at “atmanirbharta” aggregation of LED bulbs exports last year is indeed a But governments alone do strategic local supply chain Google first launched its devices, wireless ear buds, future semiconductor plants.
done by EESL, which was
development.
Most of the growth has
For ensuring that the industry engaged in core the sectoral however come from (self-reliance) in electronics, instrumental in laudable achievement. A 20 not make the industry. It is payment product—Google neckbands, speakers, pocket
we will also achieve the scale
Pay in India—before taking it
remains competitive (by To conclude, a robust policy manufacturing, a large SME level. It is, assembly, with low and depth required to “Make establishing a large EMS per cent import duty and a the industry that does. In to the world. Global MNCs projectors, digital and
this case, the brand
facilitating domestic IP environment would help the supply chain and an enviable value addition in in India, for the world”. A capacity for LEDs. This 4-6 per cent PLI on incremen- owners, the finished goods such as Oppo, OnePlus, immersive tech, metaverse SKILLING THE
that can be used for skilling
creation), even after the PLI & country to realise the huge labour arbitrage, our products that good start with assembly of capacity now needs local tal sales has triggered assemblers, the GOVERNMENT AND Mondelez, Intel etc have and education, and so on. WORKFORCE IS
other benefits expire, a push opportunity awaiting India to manufacturing growth has are not at zero several products has been components. Only then assembly. Mobile phone component users would INDUSTRY opened new R&D centres in CENTRAL TO BECOME
stagnated at around 16 per
to R&D is most essential. For emerge as a global hub for cent of GDP at present. import duty. made. We should now aim for will it make for a assembly typically has an do well to step up and TOGETHER NEED India in recent years. Parag So, the US$250 billion aim SELF-RELIANT IN
investment: turnover ratio of
this, the government should electronics and meet the Assembly is achieving three critical sustainable manufacturing 1:6. This means that an nurture a relatively TO STRENGTHEN Agrawal, CEO of Twitter, now must embrace these ELECTRONICS
THE VALUE CHAIN
explore innovative solutions targets envisioned in the NPE The reasons for lower certainly a big objectives: and export story. average 5 per cent PLI (on nascent domestic joins the growing list of Indian new mega
for the sector such as a model 2019. manufacturing step up from 3. Most importantly, we need turnover) is a 30 per cent component industry.
based on the Government led a deepening of our incentive on the amount
domestic manufacturers Dr. Ajai Chowdhry, Founder, HCL & Chairman – EPIC Foundation
29 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 30
QUARTERLY JOURNAL OF ECONOMICS
QUARTERLY JOURNAL OF ECONOMICS
DECEMBER 2021 DECEMBER 2021