The domestic demand for electronics hardware is being fueled by the relatively high growth rate of the Indian economy, aspirations of the younger generation, and the large middle class in India with increasing disposable income. Thus, there is significant opportunity for stepping up the production of electronics hardware in the country. India has the potential to develop and manufacture electronic hardware for the global markets and gain higher global share besides meeting the country’s future requirement in the converging areas of information, communication and entertainment.
During the period 2013-14 to 2017-18, domestic production of the electronics industry registered a robust CAGR of 21%. The domestic production was valued at US$ 47 billion in 2016-17, with mobile phones accounting for the largest share in production (34.1%), followed by consumer electronics (19.0%), industrial electronics (17.8%) and electronic components (15.1%). The value addition of electronics production is in the range of 5 - 30%, dependent upon the stage of the value chain, with estimates indicating a 25-30% value addition in components manufacturing, and 5-15% at the Semi Knocked Down Kit (SKD) assembly stage.
During 2016-17, India’s export of electronic items increased after a declined for five consecutive years, from US $ 5.7 billion to US$ 6.1 billion. Import of electronic items during the same period were valued at US$ 51.5 billion, witnessing a year-on-year growth of22.9%. During 2017-18, major export destinations for Indian electronic goods were the USA, the UAE, China, Singapore and Germany. In the case of imports, China was the predominant source, accounting for 59.5 % of India’s total imports of electronic goods. Other major source countries were South Korea, Singapore, Malaysia, the USA and Vietnam.
India’s consumption of electronics in 2017-18 has been estimated at almost double of the domestic production. This demand-supply gap is met through imports of these products which now account for 11.1 % of India’s total imports. Imports have been dominated by telecommunication instruments (42.4%) and electronic components (19.8%). These two categories alone account for 6.9% of India’s merchandise imports.
Foreign Direct Investments
The government allows 100% Foreign Direct Investment (FDI) under automatic route, no industrial license requirement, payment of technical know-how fee and royalty for technology transfer under automatic route. Cumulative FDI in the electronics sector amounted to US $ 1.97 billion during the period April 2000 to June 2018, accounting for 0.51 % of the total FDI inflows into the country.
Going forward, rapid urbanization, rising personal disposable income, adoption of high-end technology devices, high technology obsolescence and product innovation, competitive pricing of products, easy financing schemes, expansion of organized retail and distribution networks, and several government initiatives are going to be major drivers for the growth of the electronics industry in India. On the back of these, there exists huge opportunity for the domestic manufacturers. The total production of electronics hardware goods in India is estimated to reach US$ 104 billion by 2020.
The mobile phone industry in India expects that the Government of India's boost to production of battery chargers will result in setting up of 365 factories, thereby generating 800,000 jobs by 2025.
The growing customer base and the increased penetration in consumer durables segment has provided enough scope for the growth of the Indian electronics sector. Also, digitisation of cable would lead to increased broadband penetration in the country and open up new avenues for companies in the electronics industry.