India’s electronics industry: What are the driving factors behind the growth of this market?

  • The unleash of PLI schemes to 10 important sectors with an incentive of        Rs. 1.46 trillion have massively benefitted electric components and mobile components.
  • India’s production of electronics equipment has reached Rs. 4.58 lakh crore in FY19 and is increasing at a CAGR of 25 percent in the past four years.

The Indian economy and GDP is speculated to appear strongly towards the end of 2021, which was massively crippled due to the pandemic. The electronics industry, especially the consumer electronics domain would play a dominant role in revving the financial strains due to its escalating demand, adoption, and more foreign investments rather than the industrial electronics, which is still in the nascent stage. Recent policies and initiatives such as PLI, ‘Vocal for Local’, and ‘AatmanirbharBhaarat’ would further drive the electronics industry and would boost the optimism of making India a self-reliant electronics manufacturing unit. India now stands as one of the largest consumer electronics markets in the Asia Pacific region. 

In this context, let’s find out some of the unique and imperative factors driving the growth of India’s electronics industry:

Solid Manufacturing

India is now rapidly evolving as the global hub for electronics manufacturing due to decreased corporate tax, high-end incentives for manufacturing firms, and most importantly low labour charge. The government’s current initiatives have been vastly supported by incentive schemes and business-friendly reforms that will help magnetize foreign manufacturing firms to commence their units in India. Of late, the major manufacturing alliances of Apple such as Pegatron, Foxconn, and Wistron along with Samsung have invested around US$143 billion to fulfil the ‘Make-in-India’ plan. In fact, the unleash of PLI schemes to 10 important sectors with an incentive of Rs. 1.46 trillion have massively benefitted electric components and mobile components. During the budget session, finance minister Nirmala Sitharaman announced that a hike in customs duty in the import of electronic components will also perk-up India’s electronic manufacturing cluster.

Domestic Electronics Slippage

Although India’s own electronics manufacturing unit is reviving, the total production during FY 2018-19 was estimated at Rs. 4,58,006 crore (about USD 70 billion). On the other hand, international production was valued at Rs. 136 lakh crore and hence, India is only producing a margin of 3.3 percent worldwide electronics production. India’s own electronics hardware manufacturing faces a stiff challenge against the rival countries because of a couple of severe hindrances that make this industry uncompetitive. Some of the important aspects behind this trade deficiency are adequate infrastructure, domestic supply chain and logistics, high cost of finance, inadequate availability of quality power, inadequate components, limited design capabilities, and inadequacies in skill development. adequate infrastructure, domestic supply chain and logistics, high cost of finance, inadequate availability of quality power, inadequate components, limited design capabilities, and inadequacies in skill development. But, with the government’s quick action, the nation’s production of electronics equipment has reached Rs. 4.58 lakh crore in FY19 and is increasing at a CAGR of 25 percent in the past four years.  

FDI and Labour Reforms

The government has permitted 100 per cent FDI in almost all the sectors including electronics. The FDI policy of 2020 has few restrictions also like neighbouring countries such as China that share land borders will not be able to get the benefits. Another aspect which will take the industry to new heights is India’s contentious labour reforms. Companies have more flexibility in hiring and firing labourers, the burden of compliance is lessened, and the labour unions will have to give a sixty days strike notice. These decisions have made it easier for manufacturers to set-up their units. India has the cheapest labour charge in entire Asia, which starts at Rs. 176 per day and is around Rs. 4,576 per month. The wage varies on geographical areas and other criteria. 

These reforms will drive the growth of this sector by two folds towards the end of 2025. As per research firm IBEF, Indian appliance electronics sector US$ 10.9 billion in 2019 and is expected to double to US$ 21.2 billion by the end of 2025. The Television sector has already witnessed the largest share of an estimated US$ 11.26 billion and is likely to reach US$ 13.66 billion towards the end of 2021. The growth depends on how swiftly the industry recovers after the pandemic.

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