electronics manufacturing: A $300 billion electronics manufacturing powerhouse: has the budget done enough?

In a bid to boost domestic manufacturing of high-growth electronic items, Finance Minister Nirmala Sitharaman on Tuesday announced tariff concessions on transformer parts of mobile phone chargers, camera lens of mobile camera module and some other items. “Electronics manufacturing has grown rapidly. Customs duty rates are calibrated to provide a graduated rate structure to facilitate domestic manufacturing of wearable devices, hearing aids and electronic smart meters,” the minister said in her budget speech.

Industry officials see it as a move that could boost the manufacturing of less complex electronics in the country. Sudhir Sathiyamoorthy, CEO of Bengaluru-based Resonate, says it makes sense to manufacture such electronics here as they attract high order volumes. “It is important to manufacture products like hearing aids, wearables, adapters and others in India to build the ecosystem,” he says.

For a sector that aspires to become a $300 billion electronics manufacturing powerhouse by 2026, the measures seemed to be in line with such ambitions.

Amrit Manwani, CMD, Sahasra Electronics says there are many growth opportunities for electronics manufacturing in India. “It’s definitely a booming industry. We need to see the details of what this means on streamlining tasks or components as well as smart meters. With the Gati Shakti initiative, we hope that it will reduce the logistics costs and all the other handicaps encountered in the electronics sector. In addition to this and the announcements of the SEZ in the budget, exports of electronic goods and components are expected to increase,” he adds.

The sector has also been boosted by the Production Linked Incentive (PLI) schemes, first notified in April 2020, which extended a 4% to 6% incentive on incremental sales (compared to the reference year) of goods belonging to target segments manufactured in India for a period of five years to eligible companies.

The government had previously expressed optimism that initiatives like PLI would help make India a competitive electronics manufacturing destination and provide a boost to Atmanirbhar Bharat.

Echoing similar sentiments, Nitin Kunkolienker, president of the Association of Manufacturers of Information Technology (MAIT), said the launch of a phased manufacturing program for hearing aids, wearables and smart meters in the budget is a continuation of India’s electronic atmanirbhar strategy. “This will build national capacity to respond to an $80 billion global market by 2025,” he said.

The government’s emphasis on improving multimodal connectivity and strengthening Indian logistics is a positive step to increase the country’s competitiveness and ensure a sustainable electronic manufacturing system in India. “We are looking forward to two out-of-India transshipment hubs and exclusive air cargo airports to support electronics manufacturing,” he adds.

Exports of electronic goods increased by 49% from April to December 2021 to $11 billion from $7.4 billion a year ago. The government’s Rs 76,000 crore push in December last year for the development of a sustainable semiconductor and display ecosystem in the country is also expected to boost the next wave of growth in the sector. “The program will usher in a new era in electronics manufacturing by offering a globally competitive incentive package to semiconductor and display manufacturing and design companies. This will pave the way for India’s technological leadership in these areas of strategic importance and economic empowerment,” a statement from GDP said. He had highlighted how the program would foster greater domestic value addition in electronics manufacturing and contribute significantly to achieving a $1 trillion digital economy and $5 trillion GDP by 2025.

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