Introduction
India, considered a popular manufacturing hub, has grown its domestic electronics production from US$ 29 billion in 2014-15 to US$ 101 billion in 2022-23. The electronics sector of India contributes around 3.4% of the country's Gross Domestic Product (GDP). The government committed nearly US$ 17 billion over the next six years across four PLI Schemes: Semiconductor and Design, Smartphones, IT Hardware and Components.
Recently, the Ministry of Electronics & Information Technology released the second volume of the Vision document on Electronics Manufacturing in India, which stated that the electronics manufacturing industry will grow from the current US$ 75 billion in 2020-21 to US$ 300 billion by 2025-26. The major products that are expected to drive growth in India's electronics manufacturing are mobile phones, IT hardware (laptops, tablets), consumer electronics (TV and audio), industrial electronics, auto electronics, electronic components, LED lighting, strategic electronics, printed circuit board assembly (PCBA), wearables and hearables, and telecom equipment. India became the second-largest mobile phone manufacturing country after China, with cumulative shipments of locally produced handsets crossing two billion during 2014-2022.
The IT sector in India is one of the largest contributors with a 9% contribution to GDP. The industry is around US$ 194 billion and is expected to surpass US$ 300-350 billion by 2025. The Economic Survey 2023 revealed a 15.5% revenue growth for the IT-BPM sector in FY22, as against a 2.1% growth in the previous fiscal year. India's IT industries and companies are majorly located in the southern regions such as Bangalore, Hyderabad, Chennai, Visakhapatnam, Trivandrum, Mysore, Mangalore, Kochi, etc. The country's major information technology hubs are Mumbai, Pune, Delhi, etc.
Export Trend
India is among the largest IT and BPM services exporting countries and accounts for about 56% of the global outsourcing market. As per the data provided by the National Association of Software and Service Companies (NASSCOM), the total amount of IT exports from India in FY22 stood at US$ 178 billion and has been estimated at US$ 194 billion for FY23. India’s exports of software services (excluding exports through commercial presence) were estimated to have increased by 17.2% to US$ 156.7 billion during FY22. BPO services accounted for nearly 84% of exports of information technology (IT) enabled services in FY22. Business process management (BPM) exports were estimated at US$ 42.1 billion, growing 8.7% over the previous year. This growth in BPM was mainly driven by automation-led services in finance & accounts and human resources, increased adoption of robotic process automation (RPA) and analytics. BPM is also witnessing an accelerated shift to platform solutions.
Over the last few years, engineering research and development (ER&D) services have recorded one of the fastest export growth driven by the increasing adoption of software-led products and cloudification of equipment and devices. Exports for the ER&D sector were estimated at US$ 41 billion in 2022-23. Software products witnessed 7.8% growth to reach US$ 7.3 billion, mainly driven by the rise in demand for collaborative applications, application platforms, security software, system & service management software, and content workflow & management applications.
The exports of electronic goods increased by 50.52% in FY23 to reach US$ 23.57 billion as compared to US$ 15.66 billion in FY22. Mobile phones, IT hardware (laptops, tablets), consumer electronics (TV and audio), industrial electronics and auto electronics are key export products in this sector. As per the Ministry of Electronics & IT vision, India's electronics industry exports are expected to increase to US$ 120 billion by 2026.
Major Export Destinations
The top five destinations for Indian electronic goods exports were: the USA, UAE, China, Netherlands, and Germany. The USA was the largest importer of India's electronic exports followed by the UAE, accounting for 18% and 17% of the overall exports, respectively. For mobile phones exports from India, South Asia, Africa, and the Middle East are key importing markets.
For the IT-ITeS services of India, the top three export destinations of India were the USA, the UK, and the EU. The country also exports these services to Asia Pacific regions, Latin America, and Middle East Asia and sees new opportunities emerging to expand services to continental Europe, Japan, China, and Africa.
As per Reserve Bank of India (RBI) statistics, software services exports to the USA and Canada combined grew by 15.7% from US$ 75.1 billion in 2020-21 to US$ 86.9 billion in 2021-22, accounting for the largest share at 55.5% of the overall exports. This was followed by Europe, with exports valued at US$ 48.6 billion in 2021-22. The UK was the largest importer of Indian software services within the EU region, accounting for 48% of exports to the EU. Asia region exports of Indian software services were valued at US$ 10.2 billion, with a major share of East Asia exports valued at US$ 9 billion.
Government Initiatives
With the growing need for electronic goods, the Ministry of Electronics and Information Technology (MeitY) has implemented several production-linked incentives (PLI) to improve electronics production in India. The government has launched schemes such as the Manufacturing of Electronic Components and Semiconductors (SPECS), Modified Electronic Manufacturing Clusters (EMC 2.0), etc., to promote the country's electronic goods industry.
To further develop and increase the market share of the Indian BPO industry, the Government of India has implemented schemes such as the Northeast BPO Promotion Scheme (NEBPC) and the India BPO Promotion Scheme (IBPS).
Software Technology Parks of India (STPI) Scheme
An autonomous society under the Ministry of Electronics and Information Technology is implementing the STPI scheme, which is a 100% export-oriented scheme for developing and exporting computer software, including exporting professional services using communication links or physical media.
Apart from the above-mentioned specific schemes, the Government of India has taken several measures to offset infrastructural inefficiencies and associated costs to provide exporters with a level playing field. Some of these can be mentioned below.
Remission of Duties and taxes on Exported Products (RoDTEP)
Under this scheme, goods and products exporters are granted freely transferable duty credit scrips on realized FOB value of exports in free foreign exchange at a specified rate. Such duty credit scrips can be used to pay basic customs duties for importing inputs or goods.
Duty Exemption & Remission Schemes
These schemes enable duty-free import of inputs for export production with export obligation. These schemes consist of the Advance Authorization Scheme, Duty-Free Import Authorization (DFIA) Scheme, Interest Equalization Scheme (IES), Zero duty EPCG Scheme, Post Export EPCG Duty Credit Scrip Scheme, etc.
Government Body
Ministry of Electronics and Information Technology (MeitY)
Founded in 1991, MeitY is the apex body governing India's electronics and information technology industry. The functions of the ministry are promoting e-governance and India's role in internet governance, tending to policy matters, interacting about IT-related matters with international bodies and promoting the industry in India through various schemes and initiatives.
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