Budget 2016: Tweak policy to boost electronics industry growth

The govt & the industry have drawn a vision to boost domestic manufacturing of electronic products to $400 bn

Hoping to get an equal attention as the software industry does from the government, the electronics industry wants the budget 2016-17 to tweak its hardware policy to spur growth and make more in India.

"We expect the finance minister to address the policy challenges that are holding back high value added electronics manufacturing and restricting fresh investments by new firms, domestic as well as foreign," Electronic Industries Association of India (Elcina) Secretary General Rajoo Goel told IANS ahead of the Union Budget on Monday.

As the apex body of electronics hardware sector and IT manufacturers, the 50-year-old Elcina supports value chain for consumer electronics, telecom and computers or IT correlating their interest with that of equipment, material and machinery producers for expansion of manufacturing.

In the budget wish-list submitted to Finance Minister Arun Jaitley, the association said the policy should have a bottom-up approach in place of the present top-down approach to ensure investments in the value chain are strengthened and MSMEs supported with inputs for manufacturing available at globally competitive rates.

"Root cause of the problem is the high cost (12-14 percent) of finance that the budget should address, as the present system does not facilitate, causing cost disadvantage for manufacturers, most of whom do not have access to global funds," said Goel.

In the top-down approach, raw materials and components are imported while finished equipment is assembled.

Exhorting Jaitley to ensure the industry moves up the value chain, Goel said the problem of inverted duties on dual use inputs and high input taxes like special additional duty was compounded by the cascading impact of central sales tax (CST).

"We have recommended to remove CST on electronics and to create a special fund to provide finances to our manufacturing and R&D in the industry at global rates," he said.

Noting that the Information Technology Agreement under the World Trade Organisation had brought 217 tariff lines of ICT products and inputs to zero customs duty, Goel lamented that the free trade agreements with many countries had made manufacturing in the country uncompetitive, as they were strong and low-cost in electronics.

"Though 100 percent foreign direct investment is allowed in making electronics, with full ownership and profit repatriation, they are not flowing in high value added and capital intensive products due to technology obsolescence in our industry and high finance cost vis-vis competing nations in Asia," he contended.

The government and the industry have drawn a vision to boost domestic manufacturing of electronic products to $400 billion and zero imports by 2020 from around $75 billion in 2015.

"As most foreign investors find it challenging to set up manufacturing units due to infrastructural bottlenecks, local rules and regulations, logistics, procedures and the number of clearances required, the budget should pave way for single window clearances and facilitation to attract more FDI," Goel added.