The Ministry of Electronics and Information Technology (MeitY) should come up with a phased manufacturing plan to encourage manufacturing of electronic components other than mobile phones, suggested a recent ASSOCHAM-NECTI joint study.
“As domestic value addition has increased for mobile phones, similar plans are needed to encourage manufacturing of components which are the core ingredients in the overall increase of domestic value addition,” noted the study titled ‘Electricals & electronics manufacturing in India,’ jointly conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) and NEC Technologies India Pvt. Ltd.
Noting that India lags in component manufacturing, which is the most fundamental block in electronic devices, the report stated that country should focus on reducing component imports and increasing local value addition to become a manufacturing hub.
Though the union government is driving reform in IT and electronics manufacturing sector through initiatives like ‘Make in India’ and creating favourable policies to enable an investor-friendly environment, component ecosystem has not taken foothold due to unfavourable scale factor in establishing commercial viability.
“Limited fresh investments are coming into the country, due to which existing plants are running at a sub-optimal capacity,” highlighted the ASSOCHAM-NECTI report.
Considering that India holds a very small share in the global electronics market, the manufacturers should aim to capture a larger piece of global market by focusing more towards exports.
Further, the report said that there is a huge opportunity for manufacturers and foreign companies to invest in India’s electrical and electronics manufacturing to achieve government’s target of $400 bn electronics market.
“Even though value of electronics imports increased at a compounded annual growth rate (CAGR) of 7.88 per cent during FY15-FY17, there has been a steady increase in the rate of manufacturing which stood at a CAGR of 23.28 per cent over the same period. The exports have remained constant at $6 bn.”
It also highlighted significant increase in value of imports for electronics such as computer hardware as the value of computer hardware imports increased from $6.89 billion (bn) in FY17 to $7.41 bn in FY18 clocking an year-on-year increase of 7.5 per cent.
Thus, the report suggested that government should increase export incentives for sectors like computer hardware and peripherals, and light emitted diode (LED) to make India’s manufacturing globally competitive and facilitate domestic component ecosystem growth.