New electronics policy to have renewed focus on creating Indian brands, products
Summary
- Broad contours of the policy include identifying ‘priority products’ to be consumed by the Indian and global market, along with their supply chains going down to the level of components and semiconductors.
Creating Indian brands with ‘priority’ products for the local as well as global markets is likely to be a key focus area of the upcoming national policy on electronics. The aim is to identify and push products with high value addition and design capabilities within the country.
According to several people aware of the stakeholder consultations being led by the ministry of electronics and information technology (Meity), the priority products would be identified along with their supply chains, including components and semiconductors.
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Two of the people cited above said on condition of anonymity that a fund of funds is being proposed along with an intellectual property (IPR) pool to facilitate creation of such brands and products. One of them added that some industry associations have pegged the funding required for the plan to be about ₹1 trillion.
Local value addition
A senior government official said the policy’s broad mandate will be in line with increasing local value addition to 35-40%, getting global value chains to India, and making India an export hub for electronics and components to global markets.
It would also include the larger goal of meeting the needs of the $500-billion domestic market for electronics by 2030 articulated by the prime minister earlier this month, the official added.
The products would span multiple categories including smartphones, home appliances, consumer electronics, hearables, wearables, among other consumer electronics categories. Products such as smart meters and optical converters, which are likely to have a massive consumption in India as the government upgrades the infrastructure of utilities, may also be included.
“There’s a lot of focus on creating Indian brands and products within electronics, which is one of three legs of the new policy, the other two being electronics components manufacturing and semiconductors," a senior industry executive who is directly involved in the policy making said, asking not to be named as the discussions were still going on.
PLI replacing SPECS
The executive added that component manufacturing will require incentives of ₹50,000 crore, which could include a production-linked incentive (PLI) scheme and a design-linked incentive (DLI) scheme, besides the next round of incentives for semiconductors.
The PLI for electronics components would replace the Scheme for Promotion of Manufacturing Electronic Components and Semiconductors (SPECS) that expired on 31 March 2024, after a year’s extension. The SPECS scheme attracted 42 applications with proposed investment of ₹11,690 crore. The committed incentive from the government comes to ₹1,612 crore. As of February 2024, the government had disbursed ₹378.37 crore to the applicants.
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“After establishing a giant manufacturing ecosystem relentlessly, China is now focusing on establishing global brands. Barring Hero and Bajaj in motorcycles, India has not much to claim in this sphere," said Pankaj Mohindroo, chairman of Indian Cellular Electronics Association. The association is one of the industry bodies consulting with the government on the electronics policy.
Government think tank Niti Aayog said in a report in July that robust policy support, including fiscal incentives and non-fiscal interventions, were needed for India to aim for $500 billion in electronics manufacturing by value by FY30, which would comprise $350 billion from finished goods manufacturing and $150 billion from components manufacturing.
Paltry exports
While India’s electronics sector had grown rapidly to reach $155 billion in FY23, with production doubling from $48 billion in FY17 to $101 billion in FY23, the growth was driven primarily by mobile phones, constituting 43% of total electronics production. India’s exports of $25 billion make up only 1% of global share.
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“To enhance competitiveness, India needs to localize high-tech components, strengthen design capabilities through R&D investments, and forge strategic partnerships with global technology leaders," Niti Aayog pointed out in its report, emphasising on increased local electronics manufacturing.
“With higher value addition, the profits will be ploughed back into the country and create value and economic gain, as opposed to what the Chinese phone brands have done in the past several years," said an industry executive who did not want to be named.