Dolat Capital: Electronic System Design And Manufacturing Sector - A New Growth Area
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Dolat Capital Report
In India, electronics production has grown rapidly from Rs 1.9 trillion in 2014-2015 to reach Rs 4.58 trillion in 2018-2019 at a compound annual growth rate of around 25%.
However, there has been no direct benefit for the domestic economy due to high reliance on imports at approximately 60%. Imports from countries like China and Vietnam are cheaper not only due to scale but also due to lower finance costs, logistics etc.
As per industry estimates, the disadvantage is approximately 8-11% across various products. This is even higher in mobiles as approximately 80% of the smartphones manufactured in India are actually completely knocked-down units coming into the country and getting assembled.
To address this, the government has come with a total incentive cap of Rs 500 billion ($6.7 billion) targeting production of Rs 8 trillion ($107 billion), export at Rs 5.8 trillion ($77 billion) and generating employment for more than 1 million people by 2025.
To overcome the cost disadvantage, the government has rolled out various policies including the production-linked incentive scheme where the incentive of 4%-6% is applicable in the first five years, so that Indian manufacturing moves closer to a level playing field with global peers.
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