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India: US$300 Billion Production of Electronics by 2026

Image credit: Press Information Bureau

The Minister of State for Electronics and Information Technology (MeitY), Rajeev Chandrasekhar, recently launched a report that explores how India can achieve its electronics production target of US $300 billion and exports of US $120 billion by 2025-26. The report is titled, ‘Globalise to Localise: Exporting at Scale and Deepening the Ecosystem are Vital to Higher Domestic Value Addition’. It was prepared by the India Council for Research on International Economic Relations (ICRIER), in collaboration with the India Cellular and Electronics Association (ICEA).

Speaking about the report, the Minister noted that to achieve its targets, the government has emphasised strengthening the country’s domestic manufacturing ecosystem to make it more resilient to supply chain disruptions. The aim is to emerge as a reliable and trusted partner in global value chains.

The report postulates that the country must export aggressively to reach the scale in electronics manufacturing. “In addition to domestic production, and supplies and domestic consumption, the exports are [an] important way to get the scales of the other economies that are competing with us,” the Minister said. Exports will create a network effect of creating the supply chain interests, and supply chain investments that in turn will increase value addition in the Indian electronics segment.

Electronics in India have come a long way since 2014, during which the country was increasingly dependent on not only petroleum imports but electronics imports. Now, the country has a US$ 76 billion manufacturing economy with exports worth US$ 16 billion. According to ICEA, the early results of the Production Linked Incentive (PLI) Scheme are beginning to show. Electronics as a sector is the 6th largest export from India this year. Mobile phones constitute the single largest component of electronics exports from the country. They are expected to contribute nearly 50% of the total electronics exports by next year.

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. The report, therefore, recommends a sequential approach that can put India’s exports on 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.

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.

Earlier, OpenGov Asia reported that the domestic production of electronic goods increased substantially from US$ 37 billion in 2015-16 to US$ 74.7 billion in 2020-21, growing at a compound annual growth rate (CAGR) of 17.9%. Policies that have supported this growth include the PLI Scheme, the Scheme for the Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and the Modified Electronics Manufacturing Cluster (EMC 2.0).

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