India’s ₹22,919 crore electronics scheme lacks ambition: Here’s how to pack a real punch
India’s Electronic Component Manufacturing Scheme aims for a bigger slice of the global manufacturing pie and has attracted a swarm of applicants, but it suffers from major design flaws. In this field, we need to think ahead and invest in the future.
India’s new Electronic Component Manufacturing Scheme, with an outlay of ₹22,919 crore for incentives linked to production, investment and job creation in the field of making electronic components, has taken off with a bang.
Subsidy-seeking proposals have piled up at the ministry of electronics and information technology that add up to almost double the plan’s target of ₹59,000 crore in investment.
If all goes well, we can expect local supply chains to materialize for the tiny bits that go into mobile phones, which form a significant part of our exports, thereby raising domestic value addition in a sector we hope will emerge as a global factory, no matter which way trade winds blow.
So, is India better placed now to play catch-up in electronics? Unfortunately, that need not follow.
The Centre’s scheme is based on a static view of this industry and of global manufacturing. It does not take into account the results of R&D, nor does it promote the generation of indigenous intellectual property (IP). Moreover, the scheme links its capital as well as turnover subsidy to employment targets, which makes this policy seem all but oblivious to today’s furious pace of automation in advanced precision manufacturing.
China deploys well over a third of the world’s industrial robots and is racing ahead in AI capability that can harness new advances in robotics to churn out stuff without labour bills. Indian component-makers will have to compete with parts rolling out of Chinese factories that operate round the clock without a break.
Should Indian policy turn capital-labour ratios so rigid in an intensely competitive sector governed by fast-changing technology? Advances in new areas such as reticular chemistry, for example, are yielding new materials that can transform displays and sensors in ways not imagined before. Other breakthroughs could spring from R&D labs anywhere around the globe.
Given the constantly evolving level of tech sophistication in electronics production, should we merely seek to onshore extant methods? A more fruitful path would be to promote novelty that can grant us a global edge over others.
In other words, scarce fiscal resources may be better spent on pushing the tech frontier, rather than the import substitution of operations that may go obsolete. This calls for India to invest in R&D, either directly in state-run companies or in startups driven by clever teams bent on leading the evolution of electronic assemblies and sub-assemblies.
In any case, national security calls for a deep and wide R&D thrust in electronics. Drone warfare is fast evolving, as seen in the Ukraine-Russia conflict. Drones will get ever more versatile as AI takes their cockpit and we need domestic drones in India’s armoury.
Alas, we still depend on imported drone-control units. Local technology must close this gap quickly. We also need to shield our power grids, abuzz with new electronics for grid stability as they go about linking unstable supplies of clean energy. It is vital that these components are made at home and our grids cannot be hijacked by hostile actors. Indeed, we need leaps of sophistication in the design and manufacture of tiny parts that might soon play a big role in India’s strategic autonomy.
Instead of investing public money in factories that make parts under IP rights held abroad, we should aim to develop the tech capability that would enable India Inc to go beyond me-too operations and innovate at the cutting edge. This industry needs a vision that helps craft a strategy for us to leap ahead.
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