electronics-industry-of-india

CONTEXT

According to a vision document released by Ministry of Electronics and IT (MeitY) in association with the India Cellular & Electronics Association (ICEA), India is likely to achieve electronics production of $300 billion by 2026, lower than the target of $400 billion by 2025 set as per the National Policy on Electronics (NPE) 2019.

FACTS

  • According to the Vision Document, India’s electronics manufacturing sector currently stands at between $67billion and $74 billion, which means it needs to quadruple in the next four years.
  • India’s share in the global electronic systems manufacturing industry has grown from 1.3% in 2012 to 3.6% in 2019.
  • India is expected to have a digital economy of $1 tn by 2025.

GROWTH OF THE ELECTRONICS SECTOR

  • Technology transitions such as the rollout of 5G networks and IoT are driving the accelerated adoption of electronics products.
    • Initiatives such as ‘Digital India’ and ‘Smart City’ projects have raised the demand for IoT in the electronics devices market and will undoubtedly usher in a new era for electronic products.
  • There is a greater emphasis on diversification and building regional hubs in the context of the prevailing geopolitical situation as well as pandemic pressures on electronics supply chains.
    • India's initiative to build an end-to-end semiconductor manufacturing value chain in India from fab to box offers an unparalleled opportunity to establish India as a global electronics manufacturing hub.

Steps taken by the Government 

  • Various schemes: The government of India has taken several steps to boost electronics manufacturing in India, reduce import dependence and increase exports:
    • The Make in India program,Production Linked Incentive Scheme for the electronics sector, the Modified Special Incentives Scheme, Electronics Manufacturing Clusters (EMC) Scheme,  and several other measures are designed to provide incentives for domestic manufacturing, localisation of electronics manufacturing, inviting foreign direct investment, boosting exports.
    • Production Linked Incentive scheme: it has been described as a game-changer by the industry. It provides for a 4% to 6% incentive to eligible companies on incremental sales (over base year i.e. 2019-20) of manufactured goods including mobile phones and specified electronic components for five years.
  • The National Policy on Electronics (NPE, 2019): it aims to make India a global hub of electronic system design and manufacturing (ESDM).

CHALLENGES

  • Cyber security products: India does not have much presence in the indigenous manufacturing of cyber security products.
    • Cybersecurity is essential for telecom, computers and networks.
    • The cybersecurity industry should be given high priority in the overall development of the indigenous electronics industry.
  • Integration into global value chains: The global electronics trade is dominated by global value chains.
    • India needs to find a way of integration into global value chains to increase production and exports.
    • The challenge before India is to make a quick transition to the manufacturing of high technology electronics items.
  • Investment in R&D: high investment in the R&D sector is an absolute must to meet the future needs in the electronics sector.
    • Indian manufacturers must be able to make original products and create demand for them.
  • Self-reliance in advanced electronics: India needs to achieve self-reliance in advanced electronics sectors like China.
    • Unfortunately, even after having substantial capabilities in Chip design, we have no chip manufacturing capabilities.Every electronics product requires a chip of some sort

WAY FORWARD

  • Incentives and removal of cost disabilities: the primary focus must be building of scale through incentives and removal of cost disabilities for achieving the target of $300 billion in electronics manufacturing by 2025-26.
  • Targeting manufacturing products with high potential: the vision document has suggested the government to encourage manufacturing products that have high potential other than mobile phones and IT hardware, which are covered by existing production-linked incentive schemes.
    • The high potential segments include wearables, LED lighting, and electronics components in electric vehicles.
  • Changes in existing policies: there is a need for swift changes in respect of existing policies within the next 1,000 days, including:
    • stability in import tariffs
    • decrease in import tariffs for components with no manufacturing base in India
    • development of skill sets
    • encouraging major foreign manufacturers to set up components ecosystems in India

The emergence of new technologies like artificial intelligence, machine learning, Internet of things will create demand for new products. Now is the right time for India to step up its electronics hardware manufacturing capabilities and pair them with software progress to emerge as one of the world’s powerhouses in the electronics area. India cannot afford to miss the bus this time.

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