Open Forum

New Delhi, 28 June 2023

Indigenisation Of Products

TECH TRANSFER TO CUT IMPORT BILL

By Dhurjati Mukherjee 

In recent months, the Centre has given a greater thrust to indigenisation of products to boost up manufacturing. Though rather late in the day, this thrust was perhaps needed and should help not just in import substitution but open up new avenues of manufacturing. Pre and post US visit of Prime Minister Modi, there has been a significant change in the scenario with new tie-ups and other possibilities opening, specially in the defence, IT and electronics sectors as also collaboration in various fields of research. 

It needs to be noted that a huge country like India has a very big import bill pertaining to electronics, defence etc, and experts are of the opinion that most of the items imported can be manufactured in the country as well. This realisation could greatly help the Indian economy. 

Recently, the Defence Ministry approved another list that progressively bans import of 929 sub-systems, components, spares and line replacement units (LRUs) of military equipment and platforms by defence PSUs to promote self-reliance. The new ‘positive indigenisation list’ for the defence PSUs is in continuation of the first three such lists, which contained a total of 1238 items, announced in December 2021, March 2022 and August 2022. The 928 items in the fourth list with import substitution value of Rs 715 crore will only be procured from the Indian industry after the timelines indicated in the cost that ranges from December 2024 to December 2028. Of the 1238 items, 310 items have been indigenised so far, according to military sources. 

It is understood that to promote ‘Atmanir bharta’ (self-reliance) in defence and minimise imports by the PSUs, the Defence Ministry “approved the indigenisation lists of strategically important LRUs/sub-systems/spares and components, including high-end materials and spares, with an import substitution value worth ₹715 crore,” a statement said. The latest list seeks to promote the local production of several parts of Sukhoi-30 and Jaguar fighter jets, Hindustan Turbo Trainer-40 (HTT-40) planes, magazine fire-fighting systems on board warships, and gas turbine generators. It is expected that the defence PSUs will undertake indigenisation of the listed items through different routes through the capabilities of MSMEs and private Indian industry. 

Though the value of India’s domestic production crossed the Rs 1 lakh crore mark for the first time in 2022-23, which is 12 percent higher than the preceding financial year, there is need to substantially increase the value to around Rs 2 lakh crore within the next two years or so.  

It’s pertinent to note the recent observation of Amitabh Kant, former Niti Aayog CEO and India’s G20 Sherpa who rightly maintained: “A country bigger than 24 countries of Europe can’t grow on services alone. India needs to grow manufacturing to create jobs. Agriculture must grow to improve productivity. Urbanisation can be the biggest driver of India’s growth story, and this is linked to the creation of quality infrastructure”. 

In a conversation at the meeting the Union Finance Minister, Nirmala Sitharaman stated that the country’s private sector was ready to step up, demonstrated by the rush of investment in sunrise sectors, though no figures were given. She added the private sector was expanding in businesses like semiconductors, renewable energy, rare earth elements etc. but these investments, as is generally felt, were quite minimal compared to present-day requirements.  

Meanwhile, as the IT hardware business passes through recession in Europe and the US, India is likely to emerge as the engine that will power growth of products such as laptops, computers and servers with the market expected to grow over 2.5 times in the next three years and cross $25 billion in size, stated Rajeev Chandrasekhar, Minister of State for IT and electronics, adding that the PLI scheme for IT hardware will see global companies consider manufacturing in India. The IT hardware closed at around $10 billion last fiscal, and a growth of 17-18 percent is forecast. Moreover, with digitisation of government as well as education, healthcare and enterprise picking up, the market is expected to hit around $25 billion in 2025-26. 

India’s technology industry is witnessing the setting up of GCCs (global capability centres), which are shared services arms of MNCs. More than 150 MNCs have set up these in the past two years though most are in Bengaluru and some in NCR and Mumbai. Besides, Rakuten’s India operations have been expanding rapidly and developing products and doing their marketing and sales here. 

Coming on the heels of Modi’s US visit, the most significant development as reported, is American computer chip maker, Micron announcing the setting up of India’s first semiconductor plant in Gujarat, which comprises $825 million (around Rs 6700 crore) from the company and the rest from the government in two phases. According to Micron, phased construction of the new assembly in the state is expected to begin this year and the first jet engine is expected to roll out in three years, involving 80 percent transfer of technology. Significantly, the plant is expected to create 5000 new direct jobs and 15,000 community jobs over the next several years. Meanwhile, the MoU between General Electric (GE) and Hindustan Aeronautics (HAL) will translate into the actual contract within a few months. 

Not just Micron but another important development is the announcement of Applied Materials for a $400 million investment to build a collaborative engineering centre in Bengaluru, focused on developing and commercialisation of technologies for semiconductor manufacturing equipment. This Centre is expected to support over 500 new advanced engineering jobs along with potentially another 2500 jobs in the manufacturing ecosystem, according to the company’s CEO. Both these announcements are crucial to the development of the semiconductor industry as India as it is one of the world’s top electronics and automobile producers and an equally big consumer. 

However, while these are no doubt crucial, the decision of the US to set up GE-FE414 factory in India is indeed a game-changer. It is significant that the US sharing this very important technology signals it’s betting big on India. India must take advantage of this to diversify its defence structures away from Russia. Added to this, Amazon committed to invest $15 billion, which includes plans to put $12.7 billion into cloud infrastructure while Google also announced investing $10 billion to open ‘global fintech operations centre’ in GIFT City, Gujarat. Moreover, 35 innovative joint research collaborations in emerging technologies will be launched, funded by the US National Science Foundation and India’s Dept. of Science & Technology in computer and information science and engineering, cyber physical systems, and secure and trustworthy cyberspace. 

This thrust in technology transfer and manufacturing through collaborations is indeed a welcome trend as it would help create a lot of job opportunities and the steady reduction of the import bill should go a long way in boosting the economy.---INFA 

(Copyright, India News & Feature Alliance)