India might, if various other things happen, be able to reach its $400 billion (bn) targeted electronics production by 2020, Manufacturers' Association for Information Technology (Mait) said on Wednesday.
According to the ministry of IT (information technology) and telecom, the Indian market is expected till 2020 to grow at a compound annual rate (CAGR) of 66.1 per cent, to $400 bn from the $31.6 bn in 2015.
But, Mait says, the government needs to take a slew of measures if it wants to achieve that target. For, the sector in India is like “an athlete with its hands tied behind its back and weights tied to legs”.
“Estimated electronics production will (otherwise) reach only $104 bn by 2020. At this rate, the electronics import bill is expected to far exceed the oil import costs by 2020 — given the drop in oil prices, this could happen earlier,” Mait said.
It added the environment in China was far more conducive to electronics manufacturing and India could pick a few points from there. “It has the advantage of economies of scale that make the total cost of manufacturing much lower. (When more units of a good or a service can be produced on a larger scale, yet with less input costs, economies of scale are said to be achieved. This means as a company grows and production units increase, it will have a better chance to decrease its costs. According to theory, economic growth may be achieved when economies of scale are realised.) The Chinese government has made significant investments to develop local supply chains to support major manufacturers. It provides a fully developed eco-system for both components and finished goods. China provides a more favourable environment in terms of ease of doing business compared to India,” Mait said.
Some areas where China scores more, it says, are time and cost for registration of property, cost to import and export due to required documentation, inland transportation and handling, ports and terminal handling, logistics costs, risk profiling, ease of enforcing contracts and resolving of insolvency.
“We have suggested to the government some key policy and market interventions to achieve the vision of 'Net Zero Imports’. India IT hardware manufacturers suffer fiscal disabilities estimated at 6.47 per cent and disability on account of physical infrastructure and business environment estimated at 9.4 perent, aggregating a crippling 15.87 per cent,” said Kunkolienkar.
The industry body is demanding eligibility for a concessional rate of two per cent excise duty without central value added tax (Cenvat) credit and 12.5 per cent with Cenvat.
“To ensure greater value addition in India, the differential duty regime also needs to be extended to major components such as motherboards and power accessories,” the industry body said.
India currently manufactures approximately a third of the domestic market requirement. An estimated 62 per cent of the demand for IT products is met through imports.