Electronics: Powering India’s Participation in Global Value Chains

Context

NITI Aayog released the report titled “Electronics: Powering India’s Participation in Global Value Chains”.

About

• GVCs are global production sharing, where the full range of activities i.e., design, production, marketing, distribution and support to the final consumer, etc. are divided among multiple firms and workers across geographic spaces, to bring a product from conception to end-use and beyond.
• The global electronics marketplace is estimated at US$ 4.3 trillion. 
• The electronics GVC is problematic, with a select institution of nations like China, Taiwan, America, South Korea, Vietnam, Japan, Mexico, and Malaysia.
• China is the world’s biggest electronics manufacturer, accounting for almost 60% of global electronics manufacturing. 

Potential of India’s electronics sector

• India’s electronics sector reached USD 155 billion in FY23. 
• The electronics manufacturing almost doubled from USD 48 billion in FY17 to USD a hundred and one billion in FY23, driven primarily by mobile phones which constitute 43% of total electronics production.
• This comprises USD 86 billion in completed items production and USD 15 billion in additives manufacturing.
• The country’s electronics export is anticipated to attain $120 Bn with the aid of FY26.
• During May 2024, digital goods exports were recorded at $2.97 Bn as compared to $2.41 Bn in the course of May 2023, registering a growth of 22.97%.

Government Interventions

• Scheme for putting in Semiconductor Fabs in India presents an economic guide to eligible applicants for setting up of Semiconductor Fabs that’s geared toward attracting massive investments for putting in semiconductor wafer fabrication centers inside the country.
• Initiatives like Make in India and Digital India, advanced infrastructure and ease of doing business, supported by numerous incentives, have stimulated domestic production and attracted overseas investments.
• Design Linked Incentive (DLI) Scheme gives monetary incentives, design infrastructure support across diverse degrees of development and deployment of semiconductor design for Integrated Circuits (ICs), Chipsets, Systems & IP Cores and semiconductor connected design. 
• In India 100% FDI is authorized underneath the automatic direction. In the case of defense electronics, FDI as much as 49% is permitted through computerized direction and the last 49% demands government approval.

Challenges in electronics sector 

• Market Competition: The global electronics marketplace is dominated by countries like China, Taiwan, USA, South Korea, Vietnam and Malaysia. 
  • India currently exports about USD 25 billion annually, representing much less than 1% of the global share.
• Technical Skills: There is a lack of adequately educated technical employees for advanced production strategies.
• Capital Intensive enterprise: Electronic manufacturing is a complicated and technology-intensive sector with large capital investments, high risk, lengthy gestation and payback durations, requiring considerable and sustained investments.
• Import dependency: Heavy reliance on imports for key components, in particular semiconductors, makes the industry liable to international supply chain disruptions.
  • India’s electronics enterprise is focussed frequently on assembly, with restrained competencies in design and factor manufacturing.

Way Ahead

• India has set a goal to reap 500 billion USD in electronics production in value terms via 2030.
• To enhance competitiveness, India desires to localize high-tech additives, give a boost to layout competencies through R&D investments, and forge strategic partnerships with global technology leaders.
• There is a need for  selling additives and capital goods manufacturing, incentivising R&D and Design, tariff explanation, skilling initiatives, facilitation of generation transfers, and infrastructure development to foster a robust electronics manufacturing environment in India.

Conclusion

• India possesses a huge capacity to establish itself as an international hub in electronics manufacturing. 
• By capitalizing on emerging opportunities, improving cost chain integration, and overcoming current demanding situations, India can rework its electronics region into a cornerstone of financial boom and task advent.

Source: The Hindu

UPSC Mains Practice Question

Q. Discuss the significance and challenges of developing a semiconductor and display manufacturing ecosystem in India. (150 Words)

Download as PDF