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Electronics Sector in India – Issues and Suggestions

Electronics3

Electronics sector has become an agent of change in segments like lighting, automotive, communications, etc. India’s electronic system design and manufacturing (ESDM) sector continues to be a critical force for growth, innovation and disruption, across multiple segments.

-> India electronics industry is worth $140 billion in 2017 and is projected to grow to $400 billion by 2022, according to data shared by ELCINA in an ET Telecom webinar.

In 1992, India and China were at par vis-à-vis Electronic production. However, in last 25 years, this gap has widened substantially. Today China is one of the largest producer and exporter of Electronic products.

 

Concerns:

-> Inverted tax structure for electronic goods. Due to a limited base of local component suppliers, manufacturers are dependent on importing parts.

-> The positive custom duties on the components used in electronic products make it expensive for domestic manufacturers to compete with foreign competitors who can access the components at lower prices.

-> Foreign direct investment (FDI) in electronics is less than 1% of the total FDI inflow because of onerous labour laws, delays in land-acquisition and the uncertain tax regime.

-> R&D in electronic manufacturing is lacking in Indian industries. Poor innovation and also the raw materials are not largely available in India.

-> The numerous forms, fees, inspections and the associated time discourage domestic producers from exporting and keep them out of the international supply chain.

 

Suggestions:

-> Improve ease of doing business environment – Single window clearance, fast dispute settlement, removal of land acquisition problems etc.

-> Setting up of Special Economic Zones (SEZs) for electronic manufacturing industries and providing incentives in the form of tax holidays to encouraged productions can be provided.

-> Increase the country’s general competitiveness in the export market instead of pursuing sectoral policies. India’s share in the global electronics market was just 1.6% of the market in 2015.

-> Bring the duties on components down to the level of the product. Some parts might be used for multiple products that may have different duties, but it’s important to rule in favour of simple rules and apply the rate-cut regardless of use.

-> Ease labour laws and ensure certainty in tax regime.

-> Government can collaborate with foreign party for providing necessary R&D in electronics sector to the Indian companies.

-> Targeted initiatives launched by the government like Modified Special Incentive Package Scheme (M-SIPS), electronic manufacturing cluster etc have provided much needed impetus to local manufacturing but to make it self sustainable more support must be provided.

 

Conclusion:

Electronics manufacturing is highly dynamic and rapidly emerging sector. It has potential to add huge value to economic growth as well as employment generation. Threats of Artificial Intelligence based manufacturing is already looming over the world and opportunity presented by China’s rising labour cost, necessitates India to take Electronics Manufacturing as priority.

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YDSEdu is an online blog for all students who are preparing for competitive exams. Here in this blog we analyse most important issues relevant for examination.

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