The Electronic Industry is globally considered to be one of the fastest growing industries. Especially, the Electronic Products Industry in India is predicted to grow at 10.1% annually to be worth $75 billion by 2017. The consumer market for electronic goods is expected to reach $20.6 billion by 2020. To encourage domestic manufacturing of electronic products in India, the Government has launched various projects and special schemes with a better tax regime and incentives for producers. What are the new schemes and policies introduced by the Indian policy makers to foster the Indian Electronic Industry and bring in more FDI?
India being the largest consumer market with changing lifestyles and higher disposable incomes is attracting more foreign companies to develop and expand their business in India. The Government’s ‘Make In India’ initiative and other attractive policies for investors have led to a recent all-time FDI high of $18.36 billion in 2016. India is on the verge of becoming the hub for hi-tech manufacturing of electronic equipment and global players in the Electronic Industry, such as GE, Siemens, HTC, Toshiba and Boeing are either already manufacturing in India or are likely to set-up manufacturing plants. One sector growing tremendously in India in comparison to developed countries and other developing markets is the smartphones sector with a growth rate of 15% in the second quarter of 2016-17. Government’s support through various schemes for manufacturers has already encouraged 25 mobile phone manufacturers to start manufacturing in India and set-up 37 new manufacturing units for mobile phones – creating 37,500 new jobs. As a matter of fact the Indian mobile phone industry manufactured more than 110 million units worth $8.1 billion in India in the period of 2015-16. This is expected to rise by 74% to $14.1 billion in 2016-17.
According to a report by Deloitte Touche Tohmatsu India Pvt. Ltd, the demand for electronics in India is expected to reach $400 billion by 2020; however the domestic manufacture is projected to be only $104 billion by then. If India doesn’t increase domestic production, the Electronics import in India will surpass the fuel import bill by 2020. The Government had also introduced the Electronic Manufacturing Cluster (EMC) scheme in many areas of the country to attract more investors to manufacture electronic goods.The EMC Scheme gives grant-in-aid assistance for setting up Greenfield and Brownfield manufacturing across the country. Another scheme by the Government to attract investments in the Electronic Industry is the Modified Special Incentive Package Scheme (MSIPS). This scheme provides a 20% subsidy on the capital expenditure in Special Economic Zones (SEZs) and 25% in non-SEZs. The Ministry of Electronics and Information Technology (MeitY) has also made the online application and registration submission very easy under the EMC Scheme and MSIPS Scheme.
Over the past 2.5 year, applications in the Electronic System Design & Manufacturing (ESDM) sector worth $22.5 billion were cleared by the Government. In the coming 4 years, the investment in this sector is estimated to reach around $30 billion with the help of policies and schemes at the Central and State levels. It is also believed that introduction of GST will make a positive impact on the ESDM sector by providing a tax uniformity across India.
To accelerate PM Modi’s dream project ‘Make In India’, the National Institution for Transforming India (NITI Aayog) has developed a new policy draft with an aim to attract investment and increase exports by encouraging more global electronics manufacturers to start manufacturing in India. The policy suggests a 10 years tax exempt for companies who are willing to invest over $1 billion in electronics manufacturing or who will generate 20,000 jobs in India. NITI Aayog also suggests that the country needs to implement such free-trade agreements, especially in sectors like Electronics where India is currently a big importer. Some other projects initiated by the Government that will create a huge demand for electronic products in the coming years is the National Knowledge Network (NKN) – aims to develop a strong Indian network providing secure and reliable connectivity to facilitate flow of information and knowledge, as well as the National Optical Fibre Network (NOFN) – with its goal to ensure a nationwide connection and provide access to service providers like telecom, content providers, e-healthcare providers, etc. to service every corner of the country. Such projects are focused on fulfilling the Indian Government’s ambition of a ‘Digital India’.
With a market size of 1.25 billion people, over 1 billion mobile phone users, around 400 million internet users and an accelerating digital economy,India will perceive an enormous overall growth for electronic products. The projects and schemes initiated by the Indian Government have certainly given a boost to the pace of development in this particular sector. The IEEMA’s (Indian Electrical and Electronics Manufacturers Association) vision for 2022 is to make India the home for producing electrical equipment and aims at an output of $100 billion by balancing exports and imports.
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