Context: The Prime Minister recently brought up the importance of local manufacturing and consumption of locally produced goods, stating that Indians needed to become “vocal for local”.
In light of the above context import dependency of India’s industries needs to be analyzed.
Sectors heavily dependent on imports
Sectors partially dependent on imports
Sectors that have minimal dependence on imports
1.Electrical and Electronics industry
- The equipment such as smartphones and computers are a key part of India’s import bill.
- The value addition in India’s electronics industry is limited to mostly assembly
- The country depends on imports to access most of the primary and critical components used to make them, including printed circuit boards (PCBs).
- As an example around 88 percent of the components used by the mobile handsets, industry are imported from countries like China
- Over 60 percent of the country’s medical devices are imported as well.
- Cells and modules used by the country’s solar power industry are the products heavily imported into the country.
- It is capable of making finished formulations, and also has domestic manufacturers of several key ingredients used, to make them.
- But the industry also imports some key ingredients for antibiotics and vitamins currently not manufactured in India.
- India is currently trying to encourage domestic firms to make these key ingredients, known as fermentation-based APIs.
- India imported around Rs 249 billion worth of key ingredients, including fermentation-based ingredients, in FY19, and this accounted for approximately 40 percent of the overall domestic consumption.
2.Some Medical devices
- Devices like ventilators also rely on imports of several crucial components like solenoid valves and pressure sensors
- Some auto manufacturers depend on imports for various components.
- On the other hand, India’s electric vehicles industry is dependent, “to a large extent” on Chinese imports for chemicals used to make cathodes and battery cells.
4.Dyes and dyestuff industry
- Local dyestuff units in the country are also heavily dependent on imports of several raw materials.
- The specialty chemicals for textiles like denim are also imported in India.
- India is not as dependent on imports for some textile components like yarn.
- India’s share in textiles worldwide has been going up.
2. Other products
- India currently does have the capacity to domestically make products like hot water bottles, mercury thermometers, hypodermic needles, wheelchairs, and patient monitoring display units.
Issues with scaling up production in import-dependent sectors of India
- Unavailability of stable sources of clean water and electricity
- The manufacture of some of the key products that India imports such as semiconductors, displays, and other very capital intensive electrical equipment may not be possible soon as manufacturing these requires large, stable sources of clean water and electricity.
- Policy Uncertainty and associated capital crunch
- Devices such as semiconductors, displays, and other very capital intensive electrical equipment also need a high degree of policy certainty as these require high upfront investments.
- Higher costs in inputs
- The Indian industry faces much higher costs in inputs such as electricity and much higher logistics costs than Chinese firms.
- This is also true for fermentation-based APIs, as China began receiving infrastructure and logistic support to produce and sell them at cheaper rates.
- Technology crunch
- Technology transfer is required for more advanced and critical medical devices so that the production capacity can be scaled up.
- Skilling gap with respect to human resource management
- In most of the sectors, Industry- Academia link is not synchronised.
- A key issue holding back manufacturing in the country is the lack of flexibility in labor laws, high costs and low availability of land, and the high cost of electricity.
- India needs to work on making the industry efficient first. For this it is necessary to have policies to ensure these industries actually grow.
- New industrial policy is the need of the hour along with an innovation policy.
- Specific needs of particular industries has to be analyzed so that their infrastructure can be made more efficient