Electronics Industry is warmly welcoming the New Modi led Government and expects the new government to put delayed projects on the fast response, push for investments and focus on manufacturing along with other developmental goals.
India is considered as one of the fastest growing markets for electronics sector. The demand is projected to reach USD 400 Billion by 2020. Government of India (GoI) has launched the National Policy on Electronics 2012 (NPE 12) with the vision to make India a globally competitive destination for Electronics System Design and Manufacturing (ESDM). Besides, India has large young talent, low wage costs and Government of India.
The previous UPA government had approved setting up of two semiconductor water fabrication (FAB) manufacturing facilities, to promote manufacturing of electronics, including handsets in India. The Congress-led UPA government estimated that by 2020 India will be importing electronics product worth $400 billion, which it wanted to reduce.
Manufacturing Sector to be on Priority
The Manufacturing sector has to be the priority of the new government. Even though the economy grew at a higher rate in FY14 as compared to the previous year, manufacturing output declined from 1.1 per cent in FY13 to 0.2 per cent in FY14, thus indicating slower manufacturing growth vis-a-vis the overall economy.
Even though the previous government announced a National Manufacturing Policy with the objective of enhancing the share of manufacturing in GDP to 25 per cent by setting up National Investment & Manufacturing Zones (NIMZs), so far the efforts have failed to bring in major investments. Issues like lack of scale, raw material shortages, poor infrastructure and logistics, as well as rigid labour laws have kept India’s manufacturing sector from reaching its potential.
Sectors like Textile and Electronics need special attention from the new government. Being the largest producer of cotton in the world, coupled with low-cost labour and a large domestic market, India has a clear advantage in this sector. However, stringent labour laws, rigid tax structures and lack of scale have been the vice of this sector. A modern national textile policy would provide a roadmap in doing away with the fragmented structure of the sector.
Due to lack of domestic base and inverted duty structures, much of India’s demand for electronics is currently met by imports. This is quite worrisome as India’s demand for electronic products is forecast to reach $400 billion by 2020. Though the government has recently approved two semiconductor wafer projects costing a total of Rs 63,410 crore, the new government should tune up our semiconductor policy so that the local electronics industry gets the maximum benefits.
India is the fourth largest steel producer in the world, but the growth in this sector has remained low due to the low domestic demand. A revival in infrastructure investment can spur the demand for both, steel and cement, and in return see projex revival in both the sectors.
Timely implementation of the proposed industrial corridors will certainly provide the much needed infrastructure support to the manufacturing sector and help it increase its share in the overall economy.
Vision for Handset Manufacturing
Handset manufacturers in India want the new government to rationalise local tax structures and reduce import duty on devices under Rs2,000 from existing 7% to 1%, on an immediate basis. In the long term, most device makers want the new government to implement a semiconductor policy that can help in creating a much-needed ecosystem for local manufacturing of handsets.
As part of this policy, creation of manufacturing hubs near ports where companies can get tax holidays and other fiscal benefits, on the same lines as a special economic zone, will attract vendors to invest in building fab units.
India’s smartphone market has nearly tripled to 44 million devices shipped in 2013, compared to 16.2 million shipped over 2012, as per IDC. In the three-month period ended March 2014 alone, 14.5 million smartphones were shipped into India, of which Samsung, Micromax and Nokia had cornered 67% share, according to CyberMedia Research.
India’s smartphone market is expected to boom in 2014 as entry level smartphones may be available for as low as Rs2,500, which may further propel the transition from feature phones to smartphones. The market has become extremely attractive for multinational companies including Apple, Sony and Motorola whose sales have risen in a short span of time.
Solar Mission
With a very promising vision for solar… the new Prime Minister, Narendra Modi, has kicked off his first term in office by announcing that every home in the power-starved nation will be able to run at least one light bulb by 2019 – powered by solar.
More than 300 million people in India are estimated to be existing off the electricity grid, with national demand for power anticipated to double to 2020. According to the World Bank, blackouts reduce the country’s GDP by 1.5 per cent annually. In 2012, a blackout plunged 700 million into darkness for two days.
Certainly the news has been welcomed by India’s burgeoning clean energy industry – not to mention the LED lighting industry – especially considering Modi has considerable form in the renewables space, and particularly with solar. It is also a blow to the coal industry which presumed it was the only power source capable of delivering electricity, despite India’s notorious infrastructure problems.
In his previous role as the Chief Minister of Gujarat, Modi pioneered India’s first incentives for large-scale solar power in 2009, fostering the creation of over 900MW of solar capacity – more than a third of the total capacity in the entire country. Wind power is also on the rise in the central western state.
Modi also oversaw Gujarat’s Narmada canal project – a first of its kind for India, in which SunEdison installed a solar array on top of the canal – and initiated a ‘rent-your-roof’ program, where households could lease their rooftops to companies like SunEdison for solar installations.
Contributing to IT start-ups
The Indian IT sector contributes around 8 percent to the country’s GDP and has got huge potential to grow, but lags behind in the absence of proper policies and regulatory framework. The Narendra Modi government can contribute too much to Indian IT.
The central government is working on a proposal to incubate product companies in the electronics sector. Titled Electropreneur Park, it is being anchored by Software Technology Parks of India (STPI), which played a big role in incentivising and nurturing the information technology (IT) services sector in its initial years.
An incubation centre for electronics start-ups is planned for the National Capital Region, with a target of nurturing 10 companies every year over the next five years. The proposal, made by STPI in collaboration with Delhi University and India Electronics and Semiconductor Association, is close to being approved by the department of electronics and information technology, say officials.
“The (incubation) centre aims at providing budding entrepreneurs with tools that are generally very expensive,” said one official, requesting not to be named.
The Centre will not only provide the infrastructure but enable access to domain experts, mentors, shared consultants and services. It will also help innovators seek funding from foreign investors, venture capitalists and angel investors, added the official.
STPI has proposed another incubation centre for companies in fab-less (fabrication-less) design or semi-conductor chip design in Bangalore. However, the NCR centre is closer to being approved, said another official.
MISSION ELECTROPRENEUR
* Incubation centre for electronics start-ups in National Capital Region
* Centre to give infra support, access to domain experts, mentors, shared consultants and services
* Help for funding
* STPI has proposed a centre in fab-less design or semi-conductor chip design in Bangalore
* India may need $400 billion worth of electronics by 2020
