Home / Economy / In electronics trade, India still playing catch-up

In 2010, exports of electronic items by India and Vietnam were at similar levels. Just over a decade later, Vietnam has scripted an impressive feat. Its exports are now nearly nine times that of India, a report released this week by the Indian Council for Research on International Economic Relations (ICRIER) observed. However, despite the recent push for making India a hub for electronic goods, the country still has a long way to go before it leaves a mark on the world map, further analysis of data suggests.

Long way to go
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Long way to go

In the past decade, exports of electronics goods have seen two different trajectories. In the first six years, they were stagnant before seeing a turnaround in 2018-19. In the four years since then (FY19 to FY22), the compound annual growth rate (CAGR) has been 22%, outpacing overall export growth of 8.6% (annual) in the period, shows a Mint analysis. With this, India’s exports in the sector are now worth $16-17 billion annually. However, the ICRIER report shows India’s performance pales when compared with other countries, most prominently Vietnam ($123 billion), China ($925 billion), and Hong Kong ($320 billion), among others.

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It’s important to note that even as exports have increased sharply in the past few years, so have imports. India’s exports, in proportion to total trade, increased to 18% in 2019-20 from a low of 13% in 2015-16, but only to reach the same level it was between 2013-15. It has not improved since then.

ICRIER, however, said that the way to boost electronics goods exports is through a sequential approach of “first globalize, then localize", as has been the case with many countries, including Vietnam.

“Implementing it will require two fundamental changes in the existing policy regime. First, the electronics sector should be able to source inputs from the lowest cost suppliers anywhere in the world until it achieves a global scale…. Second, the priority of the industrial policy should be about creating a competitive domestic ecosystem of ancillary suppliers," the report said.

Recent government policies like the Make in India initiative, the Phased Manufacturing Programme, the National Policy on Electronics, and the Production Linked Incentive Scheme are some of the steps that will help India become a global production and export hub. However, the report noted that a steady increase in customs duties on several products might undermine efforts to boost exports through free trade agreements. Many economists have highlighted that taxes on imports are, in effect, taxes on exports.

Earlier this year, the government released the second vision document on the manufacturing and exports of electronics. According to the document, the government has set the target of achieving $120 billion worth of electronic goods exports by 2025-26. This means exports of electronic goods need to grow at a CAGR of 65% to reach that level, according to Mint analysis. And even if India achieves the required growth rate, its value of exports after four years will still be less than those of Vietnam currently.

“India is a late entrant in the electronic goods segment, while Vietnam gained from the US-China tariff war and a shift of firms from Korea due to high labour cost," said Ajay Sahai, director-general, Federation of Indian Export Organisations.

“Of the $2 trillion worth of trade in electronics, our share is exceptionally low at about 0.7-0.75%. We still have a long way to go, but the mobile phone segment is doing really well and PLI will be a game changer," Sahai added.

According to India Cellular and Electronics Association, mobile phone exports witnessed a growth of 250% in the April-June period. However, electronic goods exports rose 56%, lower than the required rate of 65%, in April-June.

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