Is Indian Electronics Industry going to Reach $75 Billion Mark? A Re-Look

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This report has been received with a lot of optimism in the industrial and technology-media sectors in India. However, a closer look at the Assocham-EY Report tells a different story.

The Assocham-Ey have studied the growth of electronic products in India and have estimated that by 2017 it should grow at a CAGR of 10.1% to reach US$ 75 billion by 2017, from US$ 61.8 billion in 2015. the Assocham-EY give high importance to the Indian government’s focus on extending the production and spread of electronics in the rural and semi urban areas, along with a stress on increasing the efficiency in infrastructure, locomotive and energy generation. This also coincides the rising labor cost in China to $ 3.52 for average manufacturing hour, as compared to $ 0.92 in India.

Problems in Achieving the Target

This report has been received with a lot of optimism in the industrial and technology-media sectors in India. However, a closer look at the Assocham-EY Report tells a different story. The study highlights the relatively lower income level of the population living in the rural and semi-urban areas. Further, international standards of quality regulations are not being met by the electronics produced for these regions of India. Another problem is the problem in transportation, storage and packing that fall short of the expectations of the international market. Besides, most of these areas have little, erratic or no electric supply, especially for the usage in the industries. It is true that the government is planning to overcome these shortcomings, but there remains a wide gap between aspirations, plans and achievements in the face of realities of the rural and semi-urban India.

Crashing Exports

india-exports-of-electronic-goods

Apart from the above reservations mentioned, a very significant aspect that the Assocham-EY report doesn’t mention are the trade figures of Indian export of electronic goods. A look at the export figures as given by the Reserve bank of India for the period of July 2015to July 2016 shows that the Indian electronics industry has been facing a severe decline in exports. This is especially important because without having a strong leveraging power to export in the global market, just increasing the production of electronic goods is of not much value. It is likely to lead to more complications of wastage of resources, failing businesses and decline in revenue generated from foreign trade.

According to the Reserve Bank of India, July 2016 was the month when exports of electronics from India was among the lowest in last one year, which was a dismal year of export of electronics in any case. The export figure for July 2016 was 32.37 Billion Rupees, as compared to 45.467 Billion Rupees in March 2016. In July 2015 it was 36.54 Billion Rupees. The year of maximum export of electronic goods in last ten years was 2011, when the figure touched approximately 59 Billion Rupees.

What Needs to be Done

Looking at the above discussion, it is obvious that the problems related to electronics industry have to be tackled at several fronts. A backward planning system would give the best results in this regard.

First, India needs to generate enough electricity for the public usage and for the industry to function in rural and semi urban areas. It’s obvious that tradition modes of generating electricity won’t be useful. Hence, India needs to explore the alternative modes of power generation such as geothermal and solar electricity. Besides, instead of blindly copying the traditional technology that consumes a lot of electricity, it would be in India’s favour if it innovates in the field of energy saving devices and devices that run on solar electricity. Some attempt has been made in this direction by some Indian entrepreneurs, but this sector needs to be promoted by the Indian government on a large scale. Once this technology is advanced and in place, producing electronics in rural and semi-urban areas will be a more realistic dream. It would be prudent to attract industrial investment from large industrial houses from India and abroad to achieve a complete energy self-sufficiency.

Second, the Indian government needs to improve the transport, safety, storage and delivery system that is consonant with the Indian conditions of climate and environment. Again, borrowing from the West will not solve these problems because the Indian environment is very different.

Finally, the government needs to negotiate aggressively with the governments of other countries and the international trading bodies to increase Indian electronics export on a beneficial basis in the global market. Indian industrial sector has a major role to play in this regard, by helping the Indian government and pressurising the stakeholders in the global market to allow the export of Indian electronics on a more facilitated scale. Without all these efforts, the expectation of Assocham-Ey will remain a dream.

By Archana Verma

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