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How India Can Attract Electronic Manufacturing Units Moving Out Of China

The global electronics industry is pegged at approximately USD 2 trillion. At present, China accounts for nearly 80 percent of the world’s total electronics production. It is estimated by 2030; China’s private consumer market will reach USD 9.6 trillion and account for 47 percent of its GDP, up from USD 4.4 trillion and 39 percent of GDP.

As the Chinese economy grew impressively over the last 26 years, so did its manpower cost which was its biggest advantage at one point of time. Moreover, China is witnessing a shift of its workforce from factory environments to the services sector. Over the years, electricity cost in China has become 57 percent more expensive than India and natural gas 138 percent more expensive than India. Therefore, it seems likely that a big part of the electronics manufacturing in China will move out to countries, such as India, that are relatively more conducive to manufacturing now.

According to a report by Consumer Electronics and Appliances Manufacturers Association (CEAMA) and Frost & Sullivan, the consumer electronics industry in India is projected to grow at a CAGR of 9.5 percent from 2015 till 2021. India is poised at the threshold of a great opportunity—to take 30-40 percent share of the global production of electronics by leveraging its much strength. We must set an audacious goal of manufacturing 40 percent of the world’s electronics with 40 percent value addition within India to be achieved in the next 10 years. Our current value share of global consumption is less than 3.5 percent. With the projected growth rates of the Indian economy, our contribution to global consumption of electronics in value terms is likely to double to 7 percent by 2026—amounting to a domestic consumption of about USD 200 billion, with 60 percent value of imported components. Even in such a scenario, the total net foreign exchange earnings of India will be about USD 280 billion.

We need to build an ecosystem capable enough to support the entire world manufacturing and for this we will have to incentivize exports for next 5-7 years in a gradually declining manner.

Specific to the Indian mobile handset industry—it has undergone a remarkable change due to the government’s focus on the ‘Make in India’ campaign. Mobile handset manufacturers now look towards establishing the complete mobile manufacturing ecosystem in the country. For this, the phased manufacturing plan will be pivotal which will also make Indian manufacturers less reliant on imports. It will also lead to more investments in component manufacturing from both foreign as well as local players which will go a long way in establishing India’s own mobile manufacturing ecosystem. Post Make in India; the mobile handset industry is now leaping towards ‘Design in India’.

Further, the framework of the Make in India initiative provides the perfect opportunity for stakeholders to transform the skill imparting avenues and trigger knowledge as well as skill development pursuits with the employee communities. For instance, the electronics industry that is labour intensive finds it hard to find skilled workforce. The emerging focus on STEM skills along with vocational training for the labour workforce can certainly work wonders to the PM’s vision of making India a global hub for skilled workforce. – Financial Express

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