Events & Issues

New Delhi, 27 March 2019

New Electronics Policy

BOOST TO REDUCE IMPORT BILL

By Dhurjati Mukherjee

The march of technology is taking a new turn. With focus now concentrated on electronics, the demand for which has been increasing rapidly in most countries, India is no exception. In tune with oil and gas, a country has to develop its own resources and or manufacturing to bring down its imports.

Keeping this in view, the Modi government recently announced National Policy on Electronics 2019 (NPE2019), which aims to make the country an electronic manufacturing hub by promoting production of strategic electronics items such as artificial intelligence and defence electronics. Obviously, this would boost exports and a target of $400 billion turnover has been fixed by 2025 through cheaper loan financing rates for loans up to Rs 1000 crore as well as easier credit access to companies.     

The policy seeks not only to overcome the shortcoming of previous 2012 policy on electronics but due to the advent of 5G, artificial intelligence and the Internet of Things, India needed a vision document on how to use these digital tools for the growth and development of the country and their applications in areas such as agriculture, defence, health, smart cities and automation.

Today, the domestic electronics hardware manufacturing industry faces several disability factors which makes indigenous manufacturing uncompetitive, the reasons being high cost of power, finance and freight, inadequate infrastructure, lack of supply chain, high transaction cost inverted tariff structure.

Demand of electronic hardware has increased significantly but the value addition continues to be low in the absence of a robust components manufacturing ecosystem in the country. India has entered into Free Trade Agreements (FTA) with Thailand, ASEAN, Korea, Japan, etc., wherein import of electronic hardware from these countries is at preferential duty, lower than normal tariff rate which makes Indian product uncompetitive

The strong domestic electronics manufacturing industry demand for a forward looking framework necessitated the new policy. It further proposes to boost mobile manufacturing in the country to 1 billion units, worth $190 billion (around Rs 13 lakh crore) of which 600 million units, worth $110 billion (around Rs 7 lakh crore) is expected to be exported from the country. Value addition in manufacturing would also be given a thrust in the country so as to become a global sourcing hub. The policy proposes help setting up cluster for the entire value chain and employing over 1 crore people directly or otherwise to achieve a growth rate of 32 per cent.

One can expect that now the Centre’s efforts to promote local manufacturing through the ‘Make in India’ programme may reap dividends with domestic production of electronics, moving ahead of imports, which was achieved for the first time way back in 2016-17. At that time, the government had taken a number of steps to boost manufacturing of electronics, particularly of smart phones, appliances, set-top boxes and televisions. A majority of imports in many of these areas come from China, something India is now trying to counter through fiscal incentives and other measures.

In the past three years, there has been growth in local manufacturing as imports are moderating. The government plans to give a massive push to digital activities and achieve turnover of $1 trillion by 2022. Manufacturing of electronics is seen as a major contributor towards meeting the import-export gap. The policy initiatives of the Modi government have resulted in accelerating local manufacturing in electronics. Meanwhile, the demand is expected to be between $171 billion and $228 billion by 2020, almost double than $86.4 billion in 2016-17. 

However, it needs to be pointed out that though there are immense demands for electronic goods such as mobiles, laptops, pen drives etc., all these are sourced from China and South Korea. Considering the rapid growth of the internal market, it is necessary that, to start with, foreign companies that cater to the domestic market should be forced to open assembling units in the country. This should be a pre-condition for selling their wares in the internal market. 

The application of electronics in various areas has immense possibilities to stand competition in the global market. Moreover, internal manufacturing could be geared up for better efficiency and increased productivity. One may refer here to the newly manufactured Train 18 where induction of new digital technology has made it a semi-high speed train, matching global standards. Such applications of electronics would have to be encouraged in a big way to every nook and corner of the country.

As is well known, electronics industry is the world’s largest and fastest growing industry and is increasingly finding applications in all sectors of the economy. Everywhere electronics is recognised as a meta-resource. The new policy has reiterated the high priority being attached to this sector, not just in hardware manufacturing but being an important pillar of both ‘Make in India’ and ‘Digital India’ programmes of the government. The Electronics System Design and Manufacturing, a programme of Ministry of Electronics & Information Technology Industry is of strategic importance as well. India is a signatory to the Information Technology Agreement (ITA-1) of WTO and FTAs with various countries/ trading blocs such as ASEAN, Korea and Japan. However, it has to be understood that the electronics hardware manufacturing sector faces lack of level playing field vis-à-vis competing nations on account of several disabilities.

In the coming years, with India’s emphasis on sophisticated areas such as space technology, marine sciences, medical electronics, artificial intelligence, automotive electronics, industrial electronics etc, the growth of electronics is imperative. The Policy should be an action plan to initiate research and development in these and related areas and ensure that innovations and opportunities are made available. It is expected that over the years the import bill on electronics would steadily come down.

There is no dearth of scientists and electronic engineers in the country having high skills and these have to be geared in the right direction. Moreover, with hiring costs much lower this should be an added advantage. There is no reason why India cannot be a leading player in the field of electronics, even if it is behind China or South Korea and the United States.---INFA

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