Updated: 24 Nov 2020, 10:11 AM IST
It is hard to imagine someone who doesn’t own a mobile phone in India. Life without one seems impossible to comprehend in today’s day and age. In fact, India has the second largest mobile subscriber base in the world. This is primarily due to availability of affordable phones, and low data charges. This growth led to a “robust rise in the import of telecom instruments, with its share in electronic goods imports registering a 10 percentage point increase between 2011-18,” according to the Reserve Bank of India. The import of electronic import has surged recently and is now second in the import basket, after oil and before gold.
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As most of these electronic goods are imported from China, our domestic Electronic System Design and Manufacturing (ESDM) sector has not got the desired attention and is lacking in many areas. ESDM as a sector includes hardware components relating to a host of sectors, e.g., consumer electronics, information technology and medical electronics, among others. The mega industry’s scope also encompasses critical industrial domains such as design-related activities such as product designing, chip designing, and very large-scale integration (VLSI).
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It is surprising that India hasn’t been focusing on manufacturing of these products. In the electronic sector, India heavily depends on China. The major imports include consumer electronics, industrial electronics, computer and IT hardware, mobile phone, etc. India imported Rs 3.59 lakh crore worth of electronic goods from the world during April-February 2019-20. Out of this, imports from China stood at Rs 1.42 lakh crore or 40% of total imports, notes a report by the World Trade Center (WTC) Mumbai. The segment’s reliance on Chinese imports became apparent as the pandemic and the resultant lockdowns snapped crucial supply chains.
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Cashing on the Anti-China sentiment
Anti-China sentiments have been growing stronger the world over since the pandemic began and this can be the ideal time for India to step in. The buzzword for many European and US buyers is the policy around ABC (anything-but-China). This is helping Indian electronics component makers and finished goods companies to find out new buyers. But India needs to do much more to capitalize on this sentiment.
According to experts like Nitin Kunkolienker, President, MAIT, electronics manufacturing is a global supply chain, with every subsector, irrespective of the country, having dependencies on China, primarily for passive components like resistors, inductors, capacitors and transformers. India can take on the design and testing manufacturing with the right policy and schemes from the government. India needs to set up an entire ecosystem of electronic manufacturing. This is similar to the auto industry, where large Original Equipment Manufacturers (OEMs) depend on scores of component manufacturers for different parts.
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Many reasons have so far contributed to this sorry state of affairs. Any ESDM-based manufacturing is a capital intensive venture with a long gestation period and a lack of liquidity has been the key handicap limiting any self-reliance bid by manufacturers. MSMEs that form a sizable chunk of the electronics sector have limited resources and rarely keep many suppliers or alternative sources. But now, with the Atmanirbhar India call things are looking up. The government is encouraging manufacturers to produce locally. The recently announced Rs 2-lakh crore Production Linked Incentive (PLI) scheme is also expected to be a shot in the arm for the sector.
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