Introduction :- 

The ESDM sector in India consists of the following six segments –Semiconductor design and manufacturing; Electronic components manufacturing; Information technology (IT) systems and hardware; Telecom products and equipment; Consumer electronics; and Strategic electronics. India allows 100 percent FDI through the automatic route in the ESDM sector. The Indian Government attaches high priority to electronics hardware manufacturing and it is one of the important pillars of both “Make in India” and “Digital India” programmes of Government of India.

Besides the economic imperative, focus on electronics hardware manufacturing up to the Chip level is required due to the growing security concerns. Indian electronics hardware production has increased from INR 1,90,366 crore in 2014-15 to an estimated INR 3,87,525 crore (~USD 59 Billion) in 2017-18, registering a Compound Annual Growth Rate (CAGR) of 26.7%, as against a growth rate of 5.5% in 2014-15. According to an ASSOCHAM report, electronic imports by India may touch $300bn by 2020.

With an aim to create a $400-billion electronics manufacturing industry by 2025, the Ministry of Electronics and Information Technology (MeitY) has come out with the draft ‘National Policy on Electronics 2018’ (NPE 2018).

Need for National Policy on Electronics :-

• The electronics hardware manufacturing sector faces lack of level playing field vis-à-vis competing nations on account of several disabilities which render domestic electronics hardware manufacturing uncompetitive.
• These inter-alia includes lack of adequate infrastructure, supply chain and logistics; high cost of finance; inadequate availability of quality power; inadequate components manufacturing base; limited focus on R&D by the industry and high degree of market access, leading to limited value addition.
• With the demand for electronics hardware expected to rise rapidly to about USD 400 Billion by 2023-24, India cannot afford to bear a huge foreign exchange outgo on import of electronics alone. Therefore, promoting domestic electronics hardware manufacturing, with high value addition is of critical importance.
• Implementation of the Schemes/ Programmes under the aegis of NPE 2012 has successfully consolidated the foundations for a competitive Indian ESDM value chain. The Government now seeks to build on that foundation to propel the growth of ESDM industry in the country.

Electronics Manufacturing Clusters (EMC):

In order to overcome disadvantages due to infrastructure, EMC was launched which encouraged entities, including State Government entities, to provide good quality infrastructure and logistics within a cluster.

• Modified Special Incentive Package scheme (M-SIPS): In order to compensate for disadvantages in domestic manufacturing, M-SIPS was launched which provides for capital subsidy of 25% for Electronics Industry located in non-SEZ area and 20% for those in SEZ areas.
• Preferential Market Access: It is a scheme guaranteeing preference for locally manufactured products during procurement (minimum 30%) for government projects.
• Electronics Development Fund (EDF): In order to promote startups and innovation and also to achieve an ambitious target of ‘Net Zero Imports’ by 2020, EDF was launched which is a fund of funds which invests in Venture funds, which in turn invests in ventures.
• Phased Manufacturing Programme (PMP): PMP for mobile handsets and related sub-assemblies/ components manufacturing has been implemented with the objective of progressively increasing the domestic value addition for establishment of a robust Cellular mobile handsets manufacturing eco-system in the country.
• The Merchandise Export from India Scheme (MEIS): MEIS offers export incentives of up to a maximum of five percent on locally manufactured products like refrigerating equipment compressors, fully automatic washing machines, and color television sets.

Highlights of draft of the National Electronics Policy, 2018 :-

• Mobile Handsets: The policy targets production of one billion mobile handsets by 2025, valued at $190 billion including export of 600 million mobile handsets valued at $110 billion and improving ease of doing business for ESDM industry.
• Electronic Manufacturing Clusters: 20 Greenfield EMCs and three brownfield EMC projects have been sanctioned with the project outlay of $550 million including $225 million from the government. It aims to facilitate cost effective loans for EMC.
• Sub sector of Electronics: The policy proposes to push development of core competencies in all the sub-sectors of electronics including electronic components and semiconductors, defence electronics, automotive electronics, industrial electronics, strategic electronics and fabless chip design.
• Tax Benefits: The draft proposes suitable direct tax benefits, including inter-alia investment-linked deduction under Income Tax Act for electronics manufacturing sector.
• Support: It proposes to provide support to skilled manpower in ESDM sector, export led growth, policy support and special package of incentives for highly capital intensive projects.
• Startup ecosystem: The policy aims to also push the startup ecosystem in emerging technology areas such as 5G, Internet of Things, artificial intelligence and machine learning, and their applications in areas such as defence, agriculture, health, smart cities and automation.
• Modified Special Incentive Package Scheme: It also proposes replacing the M-SIPS (Modified Special Incentive Package Scheme) with schemes that are easier to implement such as interest subsidy and credit default guarantee, etc., in order to encourage new units and expansion of existing units in electronics manufacturing sector.