India’s rising electronics market - Key reasons

India’s rising electronics market - Key reasons

Updated on 3 September, 2019

Daily Updates
indias-rising-electronics-market-key-reasons

Electronics market - The value of domestic manufacturing/assembly of mobile phones has jumped nearly eightfold from $3.1 billion in FY15 to $24.3 billion in FY19.

  • Between April and February 2019 (up to which latest segment-wise data are available), exports of telecom instruments (including mobile phones) jumped a massive 129% year-on-year to $2.4 billion — the highest since FY14.
  • It is largely due to the focus on "Make in India" and "Digital India" programmes.
electronics trade The reasons behind rising electronics market:
  • Strong domestic demand:
  • India has become the second-biggest smartphone market in terms of active unique smartphone users, crossing 220 million users, surpassing the US market
  • India has become the 2nd largest producer of mobile phones, replacing Vietnam.
  • Though the smartphone penetration of the total potential population is still below 30 per cent.
  • US-China trade war:
  • The dispute between the United States and China has led to higher tariffs on goods worth billions of dollars and disrupted global supply chains.
  • It is prompting companies to look at other investment avenues to escape higher tariffs.
  • India is luring mobile phone makers that are leaving China, fearing the US sanctions.
  • India may have to match Vietnam in providing a better industrial environment to find success.
  • Nations such as Vietnam have emerged as top destinations given the faster clearances and stable policies they offer.
National Policy on Electronics 2019:
  • National Electronics Policy 2018, aiming for a turnover of $400 billion in domestic electronics manufacturing by 2025, along with promoting ease-of-doing-business for the entire electronic system design and manufacturing or ESDM sector, and encouraging industry-led research and development and innovation in all sub-sectors of electronics.
Electronics Manufacturing Clusters scheme
  • Electronic Manufacturing Clusters Scheme which provides 50% of the cost for development of infrastructure and common facilities in Greenfield clusters (the undeveloped or underdeveloped area from an electronic manufacturing point of view) and 75% of the cost for Brownfield clusters.
  • The Electronics Manufacturing Clusters (EMC) scheme, which was also launched in 2012, encouraged entities, including state governments, to provide good quality infrastructure within a cluster.
  • Under the scheme, 50 per cent of the project cost for Greenfield Electronics Manufacturing Clusters and 75 per cent for Brownfield Electronics Manufacturing Clusters is given as a grant.
  • A well-developed cluster can give a unit located in it a cost advantage of 5 to 8% because of various reasons such as increased supply chain responsiveness, consolidation of suppliers, decreased time-to-market, superior access to talent and lower logistics costs.
The introduction of the Phased Manufacturing Programme encouraging import substitution:
  • For promoting indigenous manufacturing of Cellular Mobile Handsets and sub-assemblies/ components/ accessories thereof, a Phased Manufacturing Programme (PMP) is under implementation.
  • At present, India imports basic chipset for mobile handsets but there has been a spurt in the production of other mobile components.
  • With PMP, the share of locally-procured components in the manufacturing of feature phones will go up from about 15 to 37 per cent and for smartphones from about 10 to 26 per cent, leading to the setting up of a “robust indigenous mobile manufacturing ecosystem in India.”
  • The scheme would promote domestic production of mobile phones by providing tax relief and other incentives on components and accessories used for the devices.
Electronics market/Manufacturing Clusters (EMC) scheme:
  • EMC provides support for the creation of world-class infrastructure for attracting investments in the Electronics Systems Design and Manufacturing (ESDM) Sector.
  • 100% FDI permitted for the manufacture of mobile handsets and their subassemblies, parts,
  • Modified Special Incentive Package Scheme (MSIPS):
  • The M-SIPS provides capital subsidy of 25 per cent for the electronics industry located in non-SEZ (Special Economic Zone) areas and 20 per cent for those in SEZ areas.
  • The export incentive of 4% of the value of export under the Merchandise Export from India Scheme (MEIS) 
  • Benefits available to the units under SEZ Act, 2005 & SEZ Rules, 2006
  • One hundred twenty-seven units are manufacturing mobile handsets in the country and all of them are operating from the Domestic Tariff Area (DTA).
  • They get duty free import and domestic procurement of goods for development, operation and maintenance of SEZ units, 100% Income Tax exemption on export income for SEZ units etc.
  • Electronics Development Fund by Canbank Venture Capital Funds Ltd. (CVCFL), a 100% subsidiary of Canara Bank. it is the anchor investor of EDF.
  • Securing the cyberspace
  • Cyber Swachhta Kendra (Botnet Cleaning and Malware Analysis Centre) for detection of systems infected by malware/ botnets in the country.
  • Setting up of National Cyber Coordination Centre (NCCC) to generate necessary situational awareness of existing and potential cybersecurity threats and enable timely information sharing for proactive, preventive and protective actions by individual entities.
Also read: Chemical Industries – Plastic Industries In India


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