Aiming for the country to become a global hub for electronics manufacturing, the recent report by NITI Aayog analysed India’s position in the global value chain, which is only US$ 25 billion worth exports in the US$ 4.3 trillion market.
According to a Niti Aayog report, Indian electronics exports total US$25 billion annually, representing less than 1% of the US$4.3 trillion global market. This market is largely dominated by China, Taiwan, the USA, South Korea, Vietnam, and Malaysia.
On Thursday, the report “Electronics: Powering India’s Participation in Global Value Chains,” was released, detailing India’s electronics sector, its potential and challenges, and recommending steps to position India as a global electronics manufacturing centre.
However, it also stated that India’s electronics market, comprising only 4% of the global market, remains modest. It focuses mainly on assembly and has limited design and component manufacturing capabilities.
Moreover, due to tariffs, materials, and logistics, India’s assembly and component manufacturing face 10%-18% higher costs than China. China benefits from a local component ecosystem, while high finance costs add 1%-5% to manufacturing costs in India. China, Vietnam, Malaysia, and Taiwan attract electronics firms with tax incentives.
The report has applauded government initiatives like Make in India and Digital India, improved infrastructure and business incentives that have enhanced local manufacturing and attracted foreign investment.
According to the IT Ministry’s data, India’s electronics production was US$ 101 billion in FY23, with US$ 86 billion in finished goods and US$ 15 billion in components. Exports contributed 15% to 18% of domestic value and generated around 1.3 million jobs.
NITI Aayog has predicted that by FY30, production could reach US$ 278 billion, including US$ 253 billion in finished goods and US$ 25 billion in components. Employment would grow to 3.4 million, and exports would hit US$ 111 billion.
The report also laid down certain recommendations for India to achieve its ambition of becoming the third-largest global economy in the future. Besides a target of US$ 500 billion in electronics manufacturing by FY30, his goal includes US$ 350 billion from finished goods and US$ 150 billion from components, potentially creating 5.5 to 6 million jobs, boosting exports to US$ 240 billion, and increasing domestic value addition to over 35%.
India must expand production in established areas like mobile phones and enhance component manufacturing to achieve this. The strategy also includes diversifying into emerging sectors such as wearables, IoT devices, and automotive electronics, aligning with global technology trends.
NITI Aayog emphasised strategic actions in fiscal, financial, regulatory, and infrastructure domains, including R&D incentives, tariff rationalisation, skilling, technology transfers, and infrastructure development to boost the electronics sector.
India’s electronics sector surged to US$ 155 billion in FY23, with production nearly doubling from US$ 48 billion in FY17 to US$ 101 billion. This growth has been largely due to mobile phones comprising 43% of production. The country now produces 99% of smartphones domestically, reducing import reliance.
Global Value Chains (GVCs) are essential in contemporary manufacturing, accounting for 70% of international trade. The report highlighted that electronics are crucial to India’s position, with 75% of its exports linked to GVCs.
