News & Analysis

Can India Aim to be a Global Electronics Hub

Industry wants the government to soften FDI rules and rationalize tariff as part of steps that are needed to achieve this lofty goal

Prime Minister Narendra Modi had set the ‘Make-in-India’ agenda during the post-pandemic phase. Thereafter, the government came out with the PLI scheme, the results of which have been quite robust outcomes. Having achieved some success, the government has set its sights on making India a global electronics hub. 

Towards this end, the industry believes that some softening of the foreign direct investment rules, especially from India’s neighbors, could go a long way. Their argument is that many global companies are now looking at adding manufacturing facilities in a new country besides China. We have seen such a shift in Apple’s production capabilities over the past few months. 


Get back on even terms with China

In fact, to be more specific, the industry wants to ease the restrictions that the government had placed on FDI inflows from China post the Galwan skirmish in the summer of 2020. Of course, readers may recall that the Department of Promotion of Industry and Industry Trade had actually talked about curbing opportunistic takeovers of domestic companies post the pandemic. 

In a joint study conducted by CII and NCAER, the authors say that such a move applied to all sectors without exception and now needs to be amended so that big companies get the required clarity to be able to shift their manufacturing ecosystem to India. They say India remains an attractive destination among other Asian countries for businesses seeking an alternative to China or even those wanting to hedge their bets beyond one manufacturing base. 

Supply chain diversification has been a favored topic for discussion post the Covid-19 pandemic where many global companies faced serious disruptions due to the entire production being centered around one country – in this case China. A major challenge came in the form of microprocessor shortages that messed up product deliveries – from smartphones to laptops. 


Improving India’s export competitiveness

In fact, this is one FDI shift that India would need to take in quick time, especially in the light of the political shifts in China, which brought back Xi Jinping with renewed vigor. This is a critical matter when it comes to buildinging India’s export competitiveness in electronics by FY 2026. Readers would recall that India targeted domestic electronics sales of $300 billion with an export component of $120 billion by the year. 

The study also said imports that became expensive due to tariff hikes as well as the firming up of the US dollar would have an adverse impact on the competitiveness of Indian manufacturers in the global market. It is critical that the government takes up a rational approach towards reducing some of these tariffs with prompt payment of overdue export subsidies. 

Since India’s aim is to create a global hub, the only way it would do so will be to host the value chain for products – be it mobiles, computers, laptops, smartphone accessories to the more advanced electronic items catering to a range of industries starting from logistics to healthcare and entertainment. 

“Invite tier I-III companies, including those leading in global value chains, to manufacture in India in order to create our own manufacturing ecosystem and scale up the volume of production for both domestic and export markets,” says the study adding that in addition, single-window clearance and a dispute resolution mechanism would also be critical. 

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