How domestic electronic component manufacturing can help reduce imports, boost private sector investments in India

The electronics manufacturing industry is continuing its growth juggernaut and its historic journey to capture its share in the global market.

Electronic goods production in India has more than doubled from $30 billion in 2014-15 to $75 billion in 2019-20.

With adequate support from the government to boost electronics manufacturing and increase exports, it is expected to rise to $250 billion by 2025.

With an objective to become a manufacturing hub of the world, the government has taken several steps to boost electronics manufacturing in India and simultaneously reduce import dependence, bring foreign direct investment and increase exports.

Visionary policies like the ‘Make in India’ program, National Policy on Electronics (2019), various PLI Schemes, SPECS (for incentive on capital expenditure), EMC 2.0, RoDTEP clubbed with incentives offered by different states have all but rolled out the red carpet for the world’s manufacturers to create in India.

The world’s fastest-growing industry, Electronics System Design and Manufacturing (ESDM) continues to transform lives, businesses, and economies across the globe.

Having such massive growth targets in domestic manufacturing of electronic goods will lead to a gradual shift of GVCs to India, low dependence on imports for CBUs, higher exports, infusion of FDI, growth of GDP and employment generation.

India’s strong reform to improve the infrastructure will lift India substantially in the Ease of Doing Business Index and bring even more investment in the country.

The focus on the mobile handset and components industry has thus far had a significant positive impact on the economy. With this continued focus, it is expected that if India continues in this direction, then the sector has the possibility to contribute as much as $250 billion to GDP in the next 5-7 years.

It is expected that by 2025-26, 10 million additional jobs (direct as well as indirect) would have been created especially among young women who are well suited to the assembly type of operation in electronics manufacturing.

The impact of increased jobs will also have a bearing on taxes. It is estimated that electronics components manufacturing will contribute direct and indirect taxes to the tune of $150 billion.

Most importantly, their manufacturing will take the entire forex burden off the country. A vibrant component ecosystem fosters skills in design and innovation as a spill-over effect tapping local talent to move up the value chain on the lines of Taiwan and Japan.

While import substitution is not the goal, it is a huge advantage with many benefits. The aim behind pushing domestic electronics manufacturing is to have a greater share of the global economy – with export dominance as the main objective.

In the current era, electronics manufacturing is as strategic as a nation’s gold deposits, if not more. The electronics design and manufacturing ecosystem aims to safeguard the nation’s interests not only by reducing imports but also by helping develop resilience in the value chain.

With a strategic intent and highly calibrated approach from both the government and the industry, the Indian economy can see a massive reduction in its trade deficit but also kickstart a long-awaited boost of fresh private sector investments.

Perhaps this can be the start of the implementation of the ‘Atmanirbhar Bharat’ campaign envisaged by the government.

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