[Editorial] A Big Push to Electronics Export from India

India's Electronics Export

What the editorial is about?

Roadmap for India’s transformation into a $300 billion electronics manufacturing powerhouse by 2026.

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Context:

The Ministry of Electronics and IT (MeitY) in collaboration with the India Cellular & Electronics Association (ICEA) has released a five-year roadmap and vision document titled “USD300 billion Sustainable Electronics Manufacturing & Exports by 2026”.

According to the estimates based on this document, India is likely to attain USD300 billion in electronics production by 2026, which is lower than the USD400 billion target set by the National Policy on Electronics (NPE) 2019.

What aspects of this document are of great interest?

Goal setting

  • The document has been built in co-operation with the India Cellular and Electronics Association, which presents an excellent example of government-industry effort[s] in goal-setting.

Targets

  • It specifically targets production for exports and not just domestic consumption.

Key takeaways:

Targets

  • The targets being set for the medium term are ambitious.
  • Currently, the value of electronics manufacturing in India is estimated by the government to be around $75 billion, and so the road map hopes for a quadrupling of production in five years.

Basis

  • The scale of the ambition in this document is clear from the fact that, if India exported $120 billion in electronics today, that would place it as the fifth-largest exporter of ICT goods, behind China, Korea, Taiwan, and Singapore.

Export as the engine of growth

  • It hopes for electronics exports to increase from $10.6 billion in 2020-21 to $120 billion by 2026.
  • The domestic market is also supposed to almost triple in that time, but it is clear from the numbers that the engine of growth is supposed to be exported.
  • This is certainly a welcome acceptance of reality.

An export-focused strategy

Progress of ‘Make in India Programme’

  • “Make in India” programme has been a “make for India” programme rather than how it was initially described in 2014, as “make for the world”.
  • The complacent assumption that India’s domestic market was large enough to spur sustained growth has been badly undermined by multiple years of weak demand.
  • Thus, an export-focused strategy might be seen as being a welcome shift in how the government is approaching crucial manufacturing sectors.

The Growth of Electronics Manufacturing

  • As per the document, the reduced target still aims for a 400% increase from the current level.
  • Mobile manufacturing, which is expected to exceed USD100 billion in annual production – up from USD30 billion now – is likely to account for approximately 40% of this ambitious growth.

Products that can Lead

The key products expected to lead India’s growth in electronics manufacturing includes

  • Mobile phones
  • PCBA (Printed Circuit Board Assembly)
  • Consumer electronics (TV and audio)
  • IT hardware (laptops, tablets)
  • Industrial electronics
  • Strategic electronics
  • Auto electronics
  • Electronic components
  • LED lighting
  • Wearables and hearables
  • Telecom equipment

Major Concerns:

  • The industry is facing a number of obstacles, both
    • Qualitative (non-tariff, infrastructure-related)
    • Quantitative (tariff, free trade agreements, etc.)

Way Forward

  • If these targets are to be met. It is not just the final producer that matters, it is vital that the government views the production ecosystem as a whole.
    • it is also component producers and further subcontractors.
  • The primary focus must be building of scale through incentives and removal of cost disabilities for achieving the target of USD300 billion in electronics manufacturing by 2025-26.
  • Low and stable tariffs are also essential. By industry estimates, tariffs in India create a cost disability of about 20 per cent as compared to China, and 10 per cent as compared to Vietnam.

In Brief:

“Stable trade policy, less bureaucratic implementation of the rules-of-origin requirement, and extending benefits to ecosystem partners are prerequisites for this vision to succeed.”

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