24 April 2019
Make in India and Digital India Prospects Grow Stronger, Government Targets Increased Manufacturing of Electronics 
 
Electronic Manufacturing in India: Current Outlook

India is one of the fastest developing economies in the world, but it lacks the edge of a competitive electronic sector. Despite a higher reliance on imports, India’s electronics sector has witnessed rapid growth in recent years. Also, technological innovations, like the rollout of 4G/ LTE (long term evaluation) networks and IoT have accelerated the adoption of electronic products in the country. It is even expected that the Consumer Electronics and Appliances market in India will become the fifth largest in the world by 2025.

India is witnessing significant changes in its policies, mainly related to the regulatory and business conditions. The government introduced reforms to improve India’s ‘Ease of Doing Business’ rankings by introducing initiatives such as ‘Digital India’ and ‘Make in India’ to bolster domestic manufacturing. Updated national policy for electronics (NPE) 2019, was recently released and is likely to bring about further policy changes for the industry. India’s growth story is set for a significant push in the electronics market, as the changing policies and regulatory norms will create a conducive business environment.

The NPE 2019, policy predicts that the demand for electronics in India will rise significantly over the coming years. To reduce foreign exchange outflow due to the import of electronics, it is critical to promote domestic manufacturing in this industry. Therefore, the Government has identified electronics and hardware manufacturing as a focus sector.

A rise in demand has provided impetus to the Electronics System Design and Manufacturing (ESDM) sector. For example, the production of Mobile phones, LCD/ LED TVs, and LED products in the country has increased significantly over the last few years. In 2014, India had only two mobile-making units, while by 2017 end, the number of units reached 123, with foreign players also entering the market. Also, the Phased Manufacturing Programme (PMP) for mobile handsets and related subassembly component manufacturing has created a robust manufacturing ecosystem in the country.
 
             
The vast demand for communication and broadband equipment (including mobile handsets and their accessories) has given a boost to this industry and is expected to further augment the demand for electronic components and products. It is estimated that the production of mobile phones for FY 2018 was valued USD 20.4 billion1 (INR 1,320 billion).
  • The production of consumer electronics which include home appliances such as Refrigerators, Washing Machines, Air Conditioners, Microwaves, etc., was valued USD 11.3 billion1 (INR 735.2 billion) in FY 2018, driven by their increasing affordability due to a price reduction and income growth, ease in financing and mandatory digitization of the broadcast sector.
  • The production of industrial electronics such as UPS systems, Supervisory Control and Data Acquisition (SCADA), and Programmable Logic Controller (PLC) exceeded USD 10.7 billion1 (INR 690 billion) in 2018. This is due to rising investment in automotive and engineering electricals with modernization, automation, and robotics driving the demand. Solar Photovoltaic and allied equipment deployment also adds to the demand for industrial electronics to achieve the 100 GW target by 2022.
  • Electronic component production (including semiconductors, capacitors, resistors, picture-tubes, x-ray tubes, cathode ray tubes, etc.) touched USD 9 billion1 (INR 583.5 billion) in 2018 driven by the growth in end-user industries like automotive electronics, IT products, solar energy, electronic devices for the healthcare sector, LED, telecom, and consumer electronics.
  • The production of strategic electronics (which comprises of satellite-based communication, navigation and surveillance systems, sonar, under-water electronic systems, radar, and infra-red based detection and ranging systems) is estimated to have grown to USD USD 3.6 billion1 (INR 235.6 billion) in 2018. The increase in the budgetary allocation to the defence sector along with a rise in IT penetration and cybersecurity are the key growth drivers for this segment. Additionally, the modernization drive adopted by the government to replace obsolete defence hardware has supported the growth for strategic electronics.
The Government of India has prioritized the electronics sector under the “Make in India” program. Several policy initiatives (like NPE 2019) promote domestic manufacturing to boost job creation and skill enhancement, promote investment, foster innovation, protect intellectual property, and to build a best-in-class manufacturing infrastructure. Thus, various steps are being undertaken to create a business-friendly financial and economic environment. This is expected to result in strategic expansion for both Indian and global manufacturers.

National Policy on Electronics 2019: Policy Features, Objective, and Scope

The Union Cabinet recently approved the National Electronics Policy 2019 (NPE 2019) to increase the domestic production of electronics and propel the growth of the ESDM industry. The NPE 2019 is in continuation of the National Policy of Electronics 2012 (NPE 2012), an earlier policy that built the foundation for a competitive Indian ESDM value chain.

NPE 2019 aims to encourage inland manufacturing and export in the ESDM value-chain to achieve economic development and a turnover of USD 400 billion by 2025. The policy is expected to generate employment for 10 million by 2025. The policy aims to increase the domestic mobile production to one billion units by 2025, valued at USD 190 billion (approximately INR 13,000 billion). NPE also aims to increase exports to 60% of the domestic production (around 600 million units worth USD 110 billion or INR 7,000 billion) by 2025. The objective of this policy is to develop the manufacturing of strategic electronics in the country which are critical to various strategic industries, and to support the electronics value-chain, thereby enhancing the national cybersecurity profile.

Key Features under National Policy on Electronics (NPE) 2019:
  1. Domestic manufacturing and export promotion in the entire value-chain of ESDM in India to create a globally competitive ecosystem.
  2. Structured incentives to support the manufacturing of core electronic components.
  3. Special incentive packages for mega projects which are extremely high-tech and entail huge investments, such as semiconductor facilities display fabrication.
  4. Schemes and incentives for the setup of new manufacturing units or expansion of existing units.
  5. Promotion of increased R&D and innovation across all sub-sectors of electronics, such as 5G, loT/Sensors, Artificial Intelligence (Al), Machine Learning, Virtual Reality (VR), Drones, Robotics, Nano-based devices, etc.
  6. Incentives and support to increase the availability of a skilled workforce, including re-skilling.
  7. Development of Fabless Chip Design Industry, Medical Electronic Devices Industry, Automotive Electronics Industry, and Power Electronics for Mobility and Strategic Electronics Industry.
  8. Creation of Special Sovereign Patent Fund (SPF) to promote the development and acquisition of intellectual property rights or patents in the electronics sector to make them available to Indian entrepreneurs at a relatively low cost.
The NPE 2019 is likely to provide several opportunities for long-term growth in the ESDM sector in India after implementation. The formulation of several initiatives is expected to stimulate the flow of investment and technology, leading to higher value addition to domestic electronic products. An increase in electronic hardware production and export is expected. This would generate significant employment opportunities for students and the unemployed population in electronics manufacturing and service support.
 
Notes:
  1. Source: Ministry of Electronics and Information Technology (MeitY)
    The conversion rate for FY 18 is taken as 64.8 (as per RBI)
 
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