The new scheme proposed by the Centre should incentivise creation of a local components ecosystem and create sops for companies to offer high skilled jobs in manufacturing.

Finance Minister Nirmala Sitharaman’s proposal to launch a new scheme to promote the manufacturing of mobile phones, semiconductors, and other electronic devices should be translated into reality quickly.

The focus on developing India as a manufacturing hub for exports in addition to the growing domestic opportunity is timed well — the global electronics ecosystem has been looking beyond China due to various reasons, including rising labour costs and the risks associated with a possible trade war with the US. The challenge lies in getting the policy right. Since 2012, successive governments at the Centre have been trying to make India a global hub for electronics equipment, but have achieved limited success.

At least six schemes have already been introduced over the past few years, such as the Merchandise Exports from India Scheme, the Special Economic Zones Scheme and the Modified Special Incentive Package Scheme. As a result of these schemes, the number of mobile handset and accessories factories in the country has gone up from just two in 2014 to 268 units in 2019.

Almost 95 per cent of mobile phones sold in the country are being produced domestically. The value of electronic equipment manufactured in the country has increased to ₹4.58 lakh crore in 2018-19 from ₹1.90 lakh crore in 2014-15. While this sounds great, what is of concern is that the local value addition is only around 7-8 per cent, as most of the critical components are imported.

As much as 93 per cent of revenues generated from selling locally assembled phones go back to China, from where components for the product originated. With the demand for electronics hardware expected to rise rapidly to about $400 billion by 2023-24, India cannot afford to bear a huge foreign exchange outgo on the import of electronics.

Business News in India

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