NEW DELHI: India is at the cusp of a manufacturing renaissance and a number of trade and industrial policies at home and the growing fragility of supply chains abroad, have meant that the global electronic firms are looking to India to diversify their manufacturing base and spread the source of their exports, an industry report said.
A report by ICRIER titled ‘Globalise to Localise: Exporting at Scale and Deepening the Ecosystem are Vital to Higher Domestic Value Addition’ explores how India can achieve electronics production target of $300 billion and exports of $120 by 2025-26.
“Our Make in India programme has catalysed an otherwise weak manufacturing economy and given its new momentum, opportunities, and expansion. Consequently, India today is the world’s second-largest manufacturer of mobile phones – with a clear focus on exports first followed by domestic value addition,” said Rajeev Chandrasekhar, Minister of State for Electronics and Information Technology, Skill Development and Entrepreneurship, speaking at the launch of the ICRIER report.
The report examines the empirical relationship between exports and the share of domestic value addition in successful exporting nations. It finds that the two variables are negatively correlated in the short-run, but exhibit positive correlation in the medium-term.
“Our study finds that China and Vietnam have adopted the mantra of ‘first globalise, then localize’, which means in the initial years they were determined to achieve global scale in exports, and then shifted their emphasis to greater use of local contents,” said Deepak Mishra, Director of ICRIER and the lead author of the report.
The report, therefore, recommends a sequential approach that can put India’s exports in the same trajectory as China and Vietnam. The immediate goal should be to export at scale to global markets (globalise), and the subsequent objective should be to increase the share of local content (localise). The report suggests several steps and policies needed for deepening the broader electronics ecosystem within India. Additionally, policies such as Gati Shakti will also help increase India’s competitiveness.
Echoing the findings of the report, Pankaj Mohindroo, Chairman of ICEA said “We have resurrected this industry after near total collapse in 2014. As a first step, we used PMP to build a $36 billion mobile industry. We are now pushing for global exports via PLI and a total production of $300 billion. With exports as our key focus, we are working on policies that will increase domestic value addition over the next few years. The world is looking to us for delivering on our potential.”
According to ICEA, early results of the PLI Scheme are beginning to show. India’s electronics exports crossed $16 billion in FY 2021-22. Electronics as a sector has jumped to the 6th largest export from India this year. Mobile phones constitute the single largest component of electronics exports from India. They are expected to contribute nearly 50 per cent of the total electronics exports by next year.
The report points to an urgent need for India to create a competitive domestic ecosystem of ancillary suppliers through technology upgradation programmes, holding sourcing fairs and introducing supporting industry development programmes. In fact, the time may be ripe for a time-bound PLI scheme for electronic modules, components and ancillaries. (ANI)
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