The Rise of Indigenous Electronics Manufacturing
India's indigenous electronics manufacturing sector is experiencing a remarkable renaissance, marked by a steady annual expansion and a notable reduction in the importation of crucial components. According to data from the commerce ministry, imports of fully assembled electronics, such as smartphones, have witnessed a 40% decline during the April to January period of the fiscal year 2023-24.
This surge in local production, particularly in the smartphone segment, can be attributed to the government's strategic implementation of the Production-Linked Incentive (PLI) scheme. This transformative initiative has incentivized manufacturers to source components domestically, catalyzing a fundamental shift in the nation's electronics ecosystem.
Reduced Reliance on Imports: A Boon for Self-Reliance
The decline in imports extends beyond fully assembled electronics, with a noticeable reduction in the importation of key components. Plastic parts, including back covers, GSM antennas, and camera lenses for smartphones, have seen a 33% drop in volume and a 26.5% decline in value over the initial 10 months of FY24.
Similarly, imports of mechanical parts, such as vibrator motors and screws, have also experienced a decrease in both volume and value. This trend is further bolstered by the government's decision to lower import duties on components from 15% to 10% in the recent budget, enhancing the competitiveness of domestic manufacturing.
Charger adapters, which account for approximately 2.5% of the total production cost of mobile phones, have witnessed a remarkable 72% reduction in import volume, with a slight 1.3% increase in value from April to January 2024 compared to the previous fiscal year.
Balancing Imports and Localization: Navigating the Value Chain
While the local production of electronics has surged, the importation of higher-value components, such as camera modules, display assemblies, and battery packs, remains prevalent. This highlights the need to further enhance local value addition to bolster export competitiveness and reduce reliance on imported inputs.
Camera module imports have seen a 2.3% increase in volume but a 5.3% decrease in value, whereas battery pack imports have risen by 12% in volume but declined by 13% in value. The revision of the Harmonized System of Nomenclature (HSN) code for display assemblies in 2023 has led to a significant 200% surge in imports, underscoring the ongoing need to strengthen domestic capabilities across the electronics value chain.
Furthermore, semiconductor imports have witnessed an uptick, driven by the surging demand for premium electronic goods and the escalating costs of wafer fabrication. This development underscores the criticality of fostering a robust semiconductor ecosystem within the country, aligning with the government's ambitious plans to establish India as a global hub for electronics manufacturing.
Unleashing India's Export Potential
The expansion of indigenous electronics manufacturing has had a direct impact on India's export prowess. In the initial nine months of the fiscal year, the country's electronics exports have soared by 22.24%, surpassing the $20-billion milestone. This impressive growth is primarily driven by the robust smartphone exports of leading brands such as Apple and Samsung.
Notably, iPhones accounted for a staggering $7 billion in exports in December 2023, representing a remarkable 35% of the total electronics exports. This achievement is a testament to India's growing prominence as a global manufacturing powerhouse, poised to make significant inroads into the international markets.
The PLI Scheme: Catalyzing India's Manufacturing Transformation
The government's Production-Linked Incentive (PLI) scheme has played a pivotal role in fostering the growth of India's indigenous electronics manufacturing. By incentivizing manufacturers to source components locally, the PLI scheme has catalyzed a profound transformation, reducing imports and enhancing export competitiveness.
According to Shri Rajesh Kumar Singh, the Secretary of the Department for Promotion of Industry and Internal Trade (DPIIT), the PLI schemes have led to a substantial 76% increase in Foreign Direct Investment (FDI) in the manufacturing sector during FY 2021-22, amounting to $21.34 billion, compared to the previous fiscal year's $12.09 billion.
Aligning with Prime Minister Narendra Modi's vision of an 'Aatmanirbhar' (self-reliant) India, the PLI schemes encompass 14 strategic sectors, with an incentive allocation of Rs. 1.97 lakh crore (approximately $26 billion). These initiatives have reshaped India's export portfolio, transitioning from traditional goods to high-value products, such as electronics, telecommunication equipment, and processed food items.
Empowering MSMEs and Driving Economic Transformation
The PLI schemes have not only benefited large-scale enterprises but have also significantly impacted Micro, Small, and Medium Enterprises (MSMEs). As of now, 176 MSMEs are among the approved beneficiaries, operating across diverse sectors, including Bulk Drugs, Medical Devices, Pharma, Telecom, White Goods, Food Processing, Textiles, and Drones.
By March 2023, the actual investment realized under the PLI schemes has exceeded Rs. 62,500 crore, leading to an incremental production/sales of over Rs. 6.75 lakh crore and the generation of approximately 325,000 employment opportunities. Furthermore, exports have been augmented by Rs 2.56 lakh crore until FY 2022-23.
The impact of the PLI schemes extends beyond mere numbers, as they have facilitated the relocation of major smartphone companies' suppliers to India, enabling the domestic manufacturing of high-end phones. This shift has notably increased women's employment and localization in the IT Hardware sector, such as Batteries and Laptops, by 20%.
Fostering Localization and Import Substitution
The implementation of the PLI schemes has resulted in a significant increase in value addition within the electronics and smartphone manufacturing sectors, reaching 23% and 20% respectively, from negligible levels in 2014-15. This achievement is particularly remarkable considering the rapid timeframes compared to other countries.
In the Telecom sector, import substitution has reached 60%, rendering India nearly self-sufficient in Antennas, GPON, and CPE. The Drones sector has witnessed a remarkable seven-fold increase in turnover, driven by the PLI scheme and encompassing numerous MSME startups.
Transforming the Pharmaceutical and Food Processing Sectors
The impact of the PLI schemes extends beyond the electronics domain, with notable achievements in the Pharmaceutical and Food Processing sectors as well.
In the Pharma sector, the PLI scheme has led to a substantial reduction in the imports of raw materials, fostering the indigenous manufacturing of unique intermediate materials and bulk drugs, including Penicillin-G. Furthermore, it has facilitated technology transfer in the production of Medical Devices such as CT scans and MRIs.
Under the PLI Scheme for Food Processing, there has been a significant surge in the sourcing of raw materials from India, positively impacting the income of Indian farmers and MSMEs. Additionally, the scheme has led to a substantial increase in the procurement of Millets, from 668 MT in FY 2020-21 to 3,703 MT in FY 2022-23, bolstering the domestic value chain.
Charting a Resilient, Self-Reliant Future
The Government of India's strategic deployment of the Production-Linked Incentive (PLI) schemes has been a transformative catalyst in the nation's quest for a resilient, self-reliant electronics manufacturing ecosystem. By incentivizing local sourcing, fostering FDI, and driving value addition, these initiatives have propelled India's electronics sector towards unprecedented growth and global competitiveness.
As the country continues to witness a surge in indigenous production, a decline in imports, and a remarkable rise in exports, the future of India's electronics manufacturing landscape looks increasingly bright. By leveraging the momentum generated by the PLI schemes, India is poised to cement its position as a global hub for electronics production, contributing to the economic prosperity and technological prowess of the nation.
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