The landscape of electronic manufacturing in India has witnessed significant transformations, embodying both promises and challenges. Government initiatives like the “Make in India” campaign aimed to bolster the domestic manufacturing sector, including electronics, have propelled the country into becoming a notable player in the global supply chain. However, the sector grapples with persistent challenges, such as infrastructural gaps, bureaucratic hurdles, and skill shortages. To truly capitalize on the potential of electronic manufacturing, a holistic approach is required, encompassing not only policy reforms but also substantial investments in infrastructure development and skill enhancement. The delicate balance between attracting foreign investments and nurturing indigenous capabilities remains a focal point in shaping the trajectory of electronic manufacturing in India. As technological advancements continue to reshape the industry, policymakers face the critical task of ensuring that the regulatory framework aligns with the dynamic nature of the electronics sector, fostering innovation and sustainable growth.
Context:
Despite India’s schemes to promote clusters, these haven’t really taken off. Also, a deep suspicion of China has put availability of critical components at risk.
Background:
- Electronics is the largest manufactured and traded category globally, valued at over $2 trillion, of which China supplies almost over 50%.
- However, the wage cost in China is rising fast and buyers are looking to diversify and de-risk their supply chains.
- This presents a unique opportunity for India to make a meaningful progress towards the 200 million jobs it needs to create urgently.
Decoding the editorial: India’s electronics market
- The PLI scheme
- Electronics exports crossed $23 billion in FY23.
- It is just over 1% of the global electronics trade.
- Target setting
- The government has already set a short-term exports target of $120 billion.
- But with 20% of the global workforce, taking a fair share of the electronics market will mean an exports target of at least $400bn which is equal to all our merchandise exports put together. This can create over 20 million direct jobs.
Five focus areas for India
Small in not beautiful:
- India has had two schemes for promoting electronics clusters, EMC 1.0 and EMC 2.0, in 2012 and 2020 respectively, but they have met with limited success.
- India currently has almost 400 SEZs across the country to drive exports.
- In comparison, the Shenzhen SEZ in China alone is the same size as all SEZs in India put together and is responsible for twice the exports.
- India must double down on creating mega, global scale electronics clusters in just a couple of locations across the country.
- UP (Noida), Tamil Nadu, and Telangana are already emerging as front runners.
Duties are a double-edged sword:
- High import duties and strict localisation norms have been two of the most overused policy tools to promote local manufacturing.
- These have harmed any drive towards achieving global competitiveness, especially in electronics where supply chains are globally intertwined.
- India is now shifting from being an import-substitution electronics economy to an export-led economy.
- Electronics exports climbed to the sixth-highest spot this year registering a growth of over 50% to reach $23.5 billion.
- Complex duty structure with high and constantly changing rates serve as major barriers to making India an assembly hub for global OEMs.
China can be a frenemy:
- Some of the biggest electronics companies globally today are Chinese including Lenovo, Oppo, Vivo, Huawei, and Xiaomi.
- Many of these have had a difficult time operating in India against the backdrop of border tensions between the two countries.
- This limits a large scale manufacturing investment and also risks issues with availability of critical components.
- China and Taiwan have been on the verge of war for years. However, over 4,000 Taiwanese companies operate in China without any difficulty, including Foxconn, one of the biggest employers in China.
Level the playing field:
- While improving ease of doing business is a long-term project, India needs to move much more radically to capitalise on this window of opportunity in electronics exports.
- GIFT City provides the right model for this problem where the powers of all key departments including RBI, Sebi, and PFRDA have been vested locally to make required modifications to attract target investments.
- The new DESH bill aims to make progress on this to a large extent.
Labour can be treated as adults:
- India’s labour laws may be well-intentioned but they only end up protecting labour from getting formal sector jobs.
- From the new labour codes passed in 2020 to recent moves by governments in Tamil Nadu and Karnataka, provide flexibility in working and overtime hours.
- Flexibility should be provided to manufacturers to utilise the workforce in line with practices in competing countries.
Case study: Vietnam
- In 2008, Vietnam removed local content requirements on FDI.
- This encouraged Samsung to move its manufacturing base from South Korea to Vietnam, and today, 60% of all Samsung smartphones are manufactured in Vietnam.
- Other tech giants like LG, Apple, Nintendo, and several others have also transferred large parts of manufacturing to Vietnam.
- As a result, Vietnam has climbed from the 47th position in global electronics exports ranking in 2001 to the 7th position in 2021.
The window of opportunity for India in electronics manufacturing will not last. Sooner or later, other alternatives will start gaining momentum, like Bangladesh for garments.
Source: Financial Express
Frequently Asked Questions (FAQs)
1. Q: What is the current status of electronic manufacturing in India?
A: India has made significant strides in electronic manufacturing, with initiatives like “Make in India” fostering both domestic and global investments. The sector is witnessing growth, and the country is becoming a prominent player in the global electronics supply chain.
2. Q: What challenges does the electronic manufacturing sector face in India?
A: Challenges include infrastructural gaps, bureaucratic complexities, and a shortage of skilled labor. Addressing these issues is crucial for sustaining and enhancing the growth of electronic manufacturing in the country.
3. Q: How is the Indian government supporting electronic manufacturing?
A: The government has introduced various schemes and incentives, such as Production-Linked Incentive (PLI) schemes, to encourage electronic manufacturing. These initiatives aim to attract foreign investments, promote indigenous production, and boost job creation in the sector.
4. Q: What role does innovation play in the electronic manufacturing landscape in India?
A: Innovation is crucial for the sector’s competitiveness and sustainability. Policymakers are emphasizing the need for a regulatory framework that encourages innovation, ensuring that the industry can adapt to rapid technological changes and emerging trends.
5. Q: How can India strike a balance between attracting foreign investments and nurturing domestic capabilities in electronic manufacturing?
A: Striking this balance requires a nuanced approach, involving policy reforms that attract foreign investments while simultaneously fostering indigenous capabilities. Emphasizing skill development, investing in research and development, and creating an enabling business environment are key components of this strategy.
In case you still have your doubts, contact us on 9811333901.
For UPSC Prelims Resources, Click here
For Daily Updates and Study Material:
Join our Telegram Channel – Edukemy for IAS
- 1. Learn through Videos – here
- 2. Be Exam Ready by Practicing Daily MCQs – here
- 3. Daily Newsletter – Get all your Current Affairs Covered – here
- 4. Mains Answer Writing Practice – here
