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Indian Electronics Industry Has Miles To Go Before It Can Be On The Fast Track!

The Indian government has announced the National Electronics Policy 2019, with a clear intent to ensure that Indian electronics manufacturing be a USD 400 billion industry by 2025. The move is to become a global hub for ESDM. The policy underlines clear support mechanisms like interest subvention for manufacturers, credit guarantees, cost-effective loans, fresh manufacturing clusters, and the creation of a sovereign patent fund. Promoting ease-of-doing business, international brands are being encouraged to set up a manufacturing base, along with their supply chain partners.

However, the recent imposition of import duty on LCD/LED panels at 7.5 percent and on open cells at 5 percent, prompted Samsung to shut down its TV plant in Chennai, switching to Vietnam at zero levies under the FTA route, for its supplies (ditto for ACs). No doubt, with government pressure this later prompted the brand to explore sourcing from Dixon and Foxconn; and an infusion of Rs. 150 crore each for OEM supplies by SPPL and Dixon.

After having attracted FDI inflows of over Rs. 95,000 crore in the past four fiscal years in online retail, in a populist move to protect traders while establishing their linkage with e-commerce companies, the proposed e-commerce policy is perceived by senior economists as regressive. A policy which deters India from joining international negotiations and does away with the global moratorium on taxing the cross-border transfer of electronic goods does not augur well for the international standing of the country.

The United Nations expectation that India will be among the select countries that are going to benefit greatly from the current trade war and her exports may grow by 3.5 percent seem to be getting derailed, with the recent US stance of terminating preferential treatment to Indian exports under GSP (the IT industry may be next in line), and India likely to retaliate on selected goods imported from the US.

If we are to hob-nob with the big boys, the powers that be will need to exhibit more prudence than envisioned today!

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