At present, India imports 65 % of electronic equipment, computer hardware and other electronic items. The economy is doing well in Information and Technology (IT) services, but lags far behind in manufacturing of Electronic Goods, from IT hardware to other electronic items. The total import of Electronic Goods grew over 15 % over the previous fiscal year. The comparison of total production with import of Electronic Goods suggests that the indigenous production of Electronic items is not sufficient to meet the domestic demand.
The Centre has recently set a target of increasing domestic production and reducing the import of Electronic Goods to 50 % by the financial year 2016-17 from the present level of 65 %. This increased domestic production has been envisaged to yield an additional investment of USD 15 billion, generate additional jobs to the tune of 27.8 million and increase the sector’s contribution to GDP to 10 %.
Further, the Ministry of Communications and Information Technology (MCIT) has proposed a slew of measures to spur local manufacturing of Electronic Goods, including imposing a 10 % basic custom duty (BCD) on populated printed circuit boards (PCBs) of telecom goods and some medical electronic devices. As part of its recommendations for the upcoming Union Budget, the Ministry has also suggested removal of duties on inputs used by export-oriented units for making Electronic Goods for defence and space organisations.
According to senior Ministry officials, a 10 % BCD on populated PCBs is aimed at encouraging local production of the component, which is used in mobile phones and computers, among other telecom connectivity equipment. The Ministry now aims to attempt the same feat with other Electronic Items.
Electronic Goods are the second-most valued category of imports after petroleum products. India’s demand for Electronic Goods is projected to rise to USD 400 billion by 2020, which may well surpass its oil import expenses, if the situation remains unchanged.
India has great potential to become the next global hub for electronic manufacturing to address the needs of both local as well as the global markets in the information and communications technology (ICT) segment. According to experts, therefore policy amendments with respect to fair, predictable and rational taxation practices have to be implemented.
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