Need to sustain momentum in electronics manufacturing: IT Secy

Amid concerns over reduced tax benefits to mobile phone makers under GST, IT Secretary Aruna Sundararajan today said there is a need to build upon the momentum in electronics manufacturing in the country.
"India has missed some of the earlier revolutions, electronics manufacturing is an opportune moment for us. The kind of early momentum that we have already, make sure that is sustained, accelerated and built upon," Sundararajan said after releasing a joint study by Broadband India Forum (BIF) and EY.
"India is a large market and I think that growth of electronics consumption in country is going to grow exponentially, specially with the kind of thrust that we are placing on whole Digital India set of initiatives. But demand is still small, that is what global majors are saying," she said.

As per the study on 'Incentivising Domestic Handset Manufacturing Under GST', adoption of smartphone in India is expected to reach 688 million by 2020 as compared to 238 million in 2015.
"The broadband device today is a smartphone. We need to increase smartphone penetration as India has today less than 30 per cent smartphone penetration. This can only happen through local manufacturing and by further increase of local value addition," BIF President T V Ramachandran said.
Government provides differential duty benefit to indigenous mobile manufacturers.

In 2014-15, government introduced a duty differential structure on mobile handsets, wherein the rate of excise duty was reduced to 1 per cent from 6 per cent subject to the condition of non-availment of CENVAT credit on the inputs and capital goods used in manufacturing of the goods.

Subsequently, in 2015-16, the differential was enhanced to 11.5 per cent by raising the CVD rate to 12.5 per cent.
"It is expected that the incentives available to domestic manufacturers under the current regime would decrease and there is need to continue the incentives under the GST regime to meet the increasing demand through domestic production," EY Partner Bipin Sapra said.
Sundararajan said that globally electronics industry is looking for new destinations.
"We know that with China becoming high cost, specially the wage of labour has gone up there, that is the primary reason why electronics industry is looking at new destinations. We also have to recognise that there is huge competition as well.

"Philippines, Vietnam and other countries are also getting their act together so we will have to focus on building on the advantages that we have," Sundararajan said.
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Sundararajan added that 50 mobile manufacturing units in the country have been set up so far, which include 10 of electronic component makers.