Increasing the Competitiveness of India's Electronic Exports

The electronic sector in India has emerged as a key driver of the country's economic growth, significantly contributing to its manufacturing and export capabilities. The sector witnessed substantial investments and technological advancements driven by supportive government policies aligned with its "Make in India" initiative. Consequently, India is fast becoming a hub for electronic manufacturing, attracting domestic and international players. The sector encompasses a wide range of products, from consumer electronics to industrial equipment, showcasing diversity and potential for innovation. As India continues to strengthen its position in the global electronics market, the sector plays a pivotal role in the nation's journey toward economic development and technological prowess. In this blog, we discuss the steps that are being taken to increase the competitiveness of India’s Electronic Exports

The electronic industry holds paramount importance in India, where manufacturers based in the country presently cater to the global demand for electronic components. Leveraging India's skilled workforce, technological expertise, demographic advantages, and supportive government policies, these manufacturers are prompted to establish comprehensive component ecosystems within the nation.

Source: Meity Annual report 2022-23

India experienced notable expansion within the electronics manufacturing sector in recent years, marked by the setup of several new manufacturing units from global leaders in the country. These enterprises serve as catalysts for the advancement of the electronics manufacturing industry in India, assuming a pivotal role in influencing the technological trajectory of the nation.

Over the last decade, India emerged as a global hub for electronics companies seeking to establish manufacturing operations

Source: Company Reports

Source: Meity Annual report 2022-23

India's Vision for Exports and Electronics Manufacturing

India's Short-Term Vision: The initial short-term strategy is to focus on incentivizing scale within the next 1,000 days (2025–26). Scaling up during this period can establish India as a significant contributor to value addition in subsequent phases. Following the initial 1,000 days, the focus may shift toward incentivizing value addition as a priority.

India's Long-Term Vision

• Make in India for the world.
• Make India the number one exporter and manufacturer of electronics.
• Become a substantial player in the global value chain.
• Build a comprehensive ecosystem of more than US$ 1 trillion in the next decade for mobile phones, consumer electronics and IT hardware.
   

Source: National Import-Export Record for Yearly Analysis of Trade

Tamil Nadu leads as the primary exporter of electronic goods in India, accounting for 32%, followed by Uttar Pradesh contributing 17%, and another 15% from Karnataka.

Key factors attributed to this achievement include the state's status as a mobile phone manufacturing hub, the presence of dedicated Special Economic Zones (SEZs), and a highly skilled workforce. Noteworthy electronic majors, such as Foxconn and Pegatron, established a significant presence in Tamil Nadu. Following Tamil Nadu, other leading states in the electronic goods sector include Uttar Pradesh, Karnataka, and Maharashtra.

Prominent enterprises establishing manufacturing facilities in India

Growth drivers for India

• Relaxation in FDI norms: The relaxation in FDI norms, coupled with the burgeoning growth in the electronics sector, has created an environment conducive to heightened foreign investment. These policy adjustments are geared toward fostering innovation, facilitating technology transfer, and stimulating job creation within the electronic manufacturing industry. The flexible FDI regulations serve as a magnet for global investors, positioning India as a favorable destination for expanding and establishing electronic manufacturing operations. This strategic initiative significantly contributes to the objectives of the Make in India campaign, elevating the nation's standing in the global electronics market.
• Highly skilled workforce/low labor cost: The electronic sector's growth is propelled by a skilled workforce and cost-effective labor, fostering an environment conducive to expansion. This synergy of high expertise and operational efficiency not only attracts investments but also positions the industry competitively. The strategic alignment of skilled professionals and cost advantages underscores the sector's appeal to businesses and investors, fostering innovation and sustained success in electronic manufacturing.
• Make in India efforts: The electronic sector assumes a central role in advancing the objectives of the Make in India initiative, substantially contributing to the nation's self-sufficiency in manufacturing. Emphasizing indigenous production, the sector not only propels economic growth but also nurtures innovation and technological progress. This dedication to domestic manufacturing reinforces India's standing as a formidable player in the global electronics industry, aligning with the government's strategic vision for self-reliance and sustainable development.

Government Schemes to Boost Manufacturing and Exports

The Government of India aspires to position the country as a significant manufacturing and design hub, aiming to enhance and diversify its electronic manufacturing capabilities. To promote the electronics hardware manufacturing sector, the government has implemented strategic measures such as the following:

Formulation of the National Policy on Electronics (NPE) 2019. Crafted by the Ministry of Electronics and Information Technology (MeitY), this policy envisions India as the global epicenter for Electronic System Design and Manufacturing (ESDM). It seeks to foster the development of essential components within the country, while facilitating an environment that enables the industry to compete effectively on the global stage.

Production linked Incentive (PLI Scheme): PLI scheme was notified on 1st April 2020, it is designed to incentivize and stimulate domestic manufacturing, particularly in the mobile phone manufacturing sector and specified electronic components, encompassing assembly, testing, marking, and packaging (ATMP) units. Its overarching goal is to significantly enhance the electronics manufacturing landscape and position India as a global player in the sector. In the first phase of the PLI scheme, approval was granted to prominent companies, including Wistron Infocom Manufacturing (India) Private Limited and Foxconn Hon Hai Technology India Mega Development Private Limited. Moving into the second phase, the scheme extended its support to notable entities, namely TDK India Private Limited and Epitome Components Private Limited.

Under this scheme, eligible companies engaging in the covered target segments will receive a 4%–6% incentive on incremental sales (over the base year) of goods manufactured in India. This incentive will be applicable for five years following the base year.

The implementation of the scheme will be overseen by a Nodal Agency, functioning as a Project Management Agency (PMA). This agency will play a crucial role in offering secretarial, managerial, and implementation support, as well as undertaking other responsibilities assigned by the Ministry of Electronics and Information Technology (MeitY) as needed.

Foxconn Hon Hai Technology India Mega Development Pvt. Ltd, a global company, has secured approval under the 'Mobile Phones' category (Invoice Value Rs 15,000 and above) for incentives in mobile manufacturing. This approval is for the period between August 1, 2021, and March 31, 2022, considering the company's incremental investments and sales performance. The sanctioned incentive amount is US$ 4.29 billion (Rs. 357.17 crore).

Outlook

The Ministry of Electronics and Information Technology, in collaboration with ICEA, unveiled a comprehensive 5-year roadmap and Vision Document for the electronics sector. The document, titled "US$ 300 billion Sustainable Electronics Manufacturing & Exports by 2026," outlines strategic plans and initiatives to propel the growth of the electronics manufacturing and export industry. The competitiveness of electronics manufacturing on a global scale necessitates large-scale operations. Additionally, the labor-intensive nature of various processes in electronics manufacturing underscores the need for an ample workforce, emphasizing the importance of establishing plug-and-play facilities equipped with dormitories featuring optimal amenities. To expedite the operationalization of electronics manufacturing units and minimize turnaround time, the government's imperative is to construct dormitories following a plug-and-play simulation model. These challenges present opportunities for countries, such as India, serving as a foundation for achieving the ambitious goal of a US$ 5 trillion economy. With the potential to emerge as a leading player in electronics exports, India is committed to positioning itself as a global hub for exports. The government's dedication to this objective aligns with the overarching goal of establishing India among the foremost contributors to global electronics exports.