By Archishman Chakraborty, Symbiosis Law School, Pune.

It has been oft repeated with a sigh of cynicism in recurring debates, as to what impedes development in India, as that the heart of the problem lies in the fact that there is no heart at all – a lethargic absence of political will. The current Indian Govt. has taken no time to take an otherwise shabby state of affairs to heel. The country witnessed a number of strong reformative measures being taken so as to boost investment and growth in the economy. On the 5th of August, 2014, it was reported that the Prime Minister had directed the Department of Electronics and Information Technology (DeitY) to ensure that the net import-export balance for the sector be brought down to zero (Net Zero Import) by the year 2020, in persuasion of  the Digital India Programme, an initiative that has taken the Prime Minister all the way to Menlo Park and beyond with a vision of E-governance, to transform the entire ecosystem of public services in India through the use of information technology.  

The Digital India programme – The imminent exigency

Digital India programme aims to renovate India into a digitally empowered society and a knowledge economy focussing in entirety on the multifarious uses of technology for Governance purposes. While some have questioned the feasibility of such a directive, others have opined that announcements of far-reaching policies as a sine-qua-non, for meeting the target. This comes on revelation of some estimates that suggest that the import bill of  Electronics shall surpass that of Oil by 2020, unless incentivised. A key aspect of the Digital India initiative has been the focus on Electronic System Design & Manufacturing. The National Policy on Electronics, 2012 puts the valuation of the Electronic Industry at USD 1.75 trillion and expects it to touch USD 2.4 Trillion by 2020 – the largest and fastest growing manufacturing industry in the world. While the demand in the Indian market has been USD 45 Billion in 2008-09, it is expected to reach the figures of around USD 400 Billion by 2020. The main drivers of domestic demand in this case has been estimated to be growth in income levels, automation demands of Corporate sectors and the Government’s focus on E-governance. However it was noticed that the actual value addition in the domestically produced electronic product being substantially low, the domestic industry can cater to only a demand of about USD 100 Billion by 2020, as opposed to USD 400 Billion and hence necessitating the rest to be imported.

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National Policy on Electronics, 2012 – Securing the future

The National Policy on Electronics (hereinafter referred to as NPE 2012), 2012 envisages making India a global hub for electronics system design and manufacturing (hereinafter referred to as ESDM) so as to cater to the rising domestic and global demand. The paper recognises a number of challenges that serve as bottlenecks in that process including infrastructure gap, tax structure, supply chain and logistics to name a few.

The National Telecom Policy 2012 (hereinafter referred to as NTP, 2012) functions in concurrence with NPE, 2012 and provides for creating a design and manufacturing ecosystem for telecom equipment. One of the most important foci of the NPE is to realize a revenue of about USD 400 Billion by 2020 involving investment of about USD 100 Billion and employment  in the order of 28 million by 2020, including inter-alia attaining an income of USD 55 Billion from chip design and embedded software industry, and  USD 80 Billion worth of exports in the sector. Also, the policy solicits establishment of over 200 Electronic Manufacturing Clusters. These high-end units, supposed to act as anchors for development of a components industry around them, are expected to start operations only by 2017.

Another important idea of the policy is to notably upgrade high-end human resource creation to 2500 PhDs annually by 2020 in the sector. Some of the measures undertaken by the Govt. include providing attractive financial investment in electronics manufacturing and preferential treatment to domestically manufactured electronic goods in all Government procurement along with those electronic goods considered strategically important for security purposes. The financial incentives are available not only for new units but also for units relocating from abroad. Electronics, apart from covering electronic hardware products relating to IT and office automation, telecom, consumer electronics, electronic components, also  covers a wide range of products relating to verticals like solar photovoltaic, automotive electronics, medical electronics, avionics, LED etc. The scheme for Electronics Manufacturing Cluster provides 50% of the cost of upgrading infrastructure and logistics as grant in aid from Government, thus also addressing the issue of infrastructure-gap. The DeitY is also on course to review the Modified Special Incentives Scheme (MSIS), under which manufacturers of electronics get a capital subsidy from the government of 20-25 per cent. The policy’s three-year term has received proposals close to Rs 80,000 crore so far.

Concluding Comments

The Indian Electronic Industry is still at an infant stage and India needs to create an investment case for itself. The Government’s  vision of reducing the import burden by taking forward the idea of Net Zero import of electronics hardware would be key in reducing the fiscal burden on the exchequer. However there remains a number of areas which might need special attention to successfully attract investment, and the Govt. needs to substantially improve the business environment in the country to bring the idea to fruition.

Mr. Ajit Shankar has noted that it is pertinent that the entire ecosystem gears up and be conducive for the benefit of the industry. While observing, that the electronic manufacturing sector is undergoing some major reforms under the current Govt, Mr. Shankar stated that the focus needs to be on adding value to our products so as to attract investors and availability to critical information that can be used for making an informed decision. The target of Net Zero import if realised, has manifold benefits in store. Besides lifting the import burden, it will bring much needed technical know-how to the country and will generate millions of domestic jobs. With sufficient R&D investment, we can target another day when we can see India as a technological powerhouse.

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