BENGALURU: Despite the Centre’s push for the Make in India initiative, the electronic hardware industry in India is still largely driven by imports and suffers from various disabilities, a report by the Manufacturers’ Association of Information Technology (MAIT) released recently said.
The report suggested that India lacks a clear exports-driven electronic hardware manufacturing strategy, which has put a lot of onus on other sectors to give a fillip to the economy.
The country has set a target for its manufacturing sector to contribute 25 per cent of the GDP by 2025 as a part of the government’s goal of achieving a $5 trillion economy. Today, 50 per cent of the manufacturing GDP is from the auto sector, creating the need to de-risk India’s growth strategy by developing other sectors, the report said.
For India to build an electronic manufacturing ecosystem that is globally competitive and exports-driven, the government needs to rework on its policy structures so that the big brands in the electronics hardware industry are able to set up manufacturing bases in the country, it added.
India introduced two frameworks in the last decade: the Modified Special Incentive Package Scheme (M-SIPS) in 2012 and Merchandise Exports from India Scheme (MEIS) in 2015. M-SIPS was discontinued on December 31, 2018, putting India at a disadvantage vis-a-vis other economies. In addition, MEIS was recently challenged at the WTO, and in all probability will be deemed to be inconsistent with WTO rules.
Hence, India should introduce an alternative policy that can attract the major brands to shift their bases from manufacturing hubs like China, Vietnam and South Korea to India, the MAIT report suggested.
There is also a need to introduce fiscal incentives or tax cuts for the domestic electronic hardware manufacturers, such as removal of embedded taxes at different stages of the value chain and exports.
It suggests a rebate on state and central taxes and levies, a tax holiday to the electronics manufacturing industry for the initial five years, following which a corporate tax of 15 per cent should be levied, as well as production-based incentives on products that are meant for domestic consumption and are exported from India.
Mobile phone/charger exports grow
India’s share in the global mobile phone market is just 0.32 per cent, and exports grew to $1.61 billion in 2018-2019 from $0.21 billion in 2017-2018. However, for India to catch up with its domestic demand of mobile phone production worth $80 billion by 2025, it needs to invest heavily in an export-led manufacturing strategy. The export disability of the mobile phone sector arises on account of the high production costs due to the lack of infrastructure, lack of a component ecosystem, and fiscal constraints, the MAIT report said.
PC/ laptop manufacturing costlier in India
Despite major brands setting up their manufacturing bases in India, the personal computer/laptop market in India is largely dependent on imports due to various concerns such as lack of incentives on domestic production and exports. India’s PC penetration is only 15.53 PCs per 1,000 people, vis-a-vis 784 per1,000 for USA and China at 40.88 per 1,000. For spurring demand for PCs in the country, there should be thrust on strengthening the manufacturing bases in India. Currently, the Indian market size for PCs is $5.5 billion, the bulk of which is catered to by imports, despite India having a domestic capacity of 6 million units.
“With a global PC market worth $237 billion as of 2019, with approximately 392.6 million units being shipped worldwide (including tablets), the goal for India should be to aim for 20 per cent of the global market,” the report said.