'India can make $300-bn electronics by 2026'

Context: India is likely to achieve electronics production of $300 billion by 2026 according to a vision document released by the Ministry of Electronics and IT (MeitY).
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• The projection is lower than the target of $400 billion by 2025 set as per the National Policy on Electronics (NPE) 2019 due to the ‘unforeseen and unprecedented’ challenges brought by the pandemic.
• However, the reduced target still aims for a 400% increase from the current level and electronics manufacturing had grown from $37.1 billion in 2015-16 to $67.3 billion in 2020-21 even as COVID-19- related disruptions impacted the growth trajectory in 2020-21.
• India's domestic mobile sales are in line with industry estimates and likely to grow faster in the coming few years due to increasing digital lifestyle and Covid-related disruptions.
• This fresh outlook is aimed at transforming India's manufacturing prowess by focusing on competitiveness, scale and exports.

Key Challenge

• There are various challenges being faced by the industry across qualitative (non-tariff, infrastructure-related) and quantitative (tariff, free trade agreements etc.) aspects and need to be addressed.

Key Recommendations 

• The vision recommends that for achieving the target of $300 billion in electronics manufacturing by 2025-26, the primary focus must be building of scale through incentives and removal of cost disabilities.
• It also called for ‘swift changes’ in respect of existing policies within the next 1,000 days, including stability in import tariffs, decrease in import tariffs for components with no manufacturing base in India, development of skill sets and encouraging major foreign manufacturers to set up components ecosystems in India. 

Electronic sector in India 

• The electronics industry is the world’s largest and fastest-growing industry and is increasingly finding applications in all sectors of the economy. 
• India is one of the leading contenders for alternate solutions for global electronics companies. 

Key Potential

• The electronics sector has the potential to become one of the top exports of India in the next 3-5 years. 
• Electronics exports may account for significant contributions to the Indian economy in terms of foreign exchange earnings and employment generation.
• India witnessed a substantial spike in demand for electronic products in the last few years; this is mainly attributed to India’s position as the second-largest mobile phone manufacturer worldwide and surge in internet penetration rate. 

Market Size

• In FY22 (until October 2021), imports of electronics goods stood at US$ 28.59 billion, whereas exports stood at US$ 7.89 billion.
• The electronics manufacturing industry had grown from $37.1 billion in 2015-16 to $67.3 billion in 2020-21. 
• According to the Department for Promotion of Industry and Internal Trade, from April 2000 to June 2021, Foreign Direct Investment (FDI) equity inflows stood at US$ 3,176.29 million.

Government Initiatives

• The Government of India attaches high priority to electronics hardware manufacturing and it is one of the important pillars of both the “Make in India” and “Digital India” programme
• PLI scheme for large scale electronics manufacturing launched by the Ministry of Electronics and Information Technology (MeitY) in April 2020 has been extended from the existing five years band (FY21-FY25) to six years (FY21-FY26).
• On November 11, 2020, the Union Cabinet approved the production-linked incentive (PLI) scheme in 10 key sectors (including electronics and white goods) to boost India’s manufacturing capabilities, exports and promote the ‘Atmanirbhar Bharat’ initiative.
• In September 2021, India started discussions with Taiwan to alleviate the global semiconductor chip shortage.  

As per Union Budget 2021-22, the Ministry of Electronics and Information Technology (MeitY) has been allocated Rs. 9,720.66 crore (US$ 1.33 billion). 

• The National Policy on Electronics 2019(NPE 2019) envisions positioning India as a global hub for Electronics System Design and Manufacturing (ESDM), by encouraging and driving capabilities in the country for developing core components, including chipsets, and creating an enabling environment for the industry to compete globally.

Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS): It helps offset the disability for domestic manufacturing of electronic components and semiconductors to strengthen the electronics manufacturing ecosystem in the country.

• It provides a financial incentive of 25% on capital expenditure for the identified list of electronic goods that comprise downstream value chain of electronic products, i.e., electronic components, semiconductor/ display fabrication units, ATMP units, specialized sub-assemblies and capital goods for the manufacture of aforesaid goods, all of which involve high value-added manufacturing.  

Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme: The EMC 2.0 Scheme provides financial assistance for the setting up of both EMC projects and Common Facility Centres (CFCs) across the country. The Scheme is open for receipt of applications for 3 years from the date of notification. A further period of 5 years is available for disbursement of funds to the approved projects.