Recalling the journey of the manufacturing sector from setting up the first textile unit to where we are today, manufacturing industries across the globe have pioneered historic breakthroughs through inventions and innovations transforming human lives.

Among the various segments of manufacturing, the electronic manufacturing, a major growth sector globally, has attracted the attention of analysts and experts, more so in recent times. The size of the global electronics industry was estimated at $2.9 trillion in 2020, equivalent to the size of the Indian economy. Fast forward to 2023, the transition from physical to digital infrastructure has aided in expanding the electronics market.

So have requisite measures been taken to encourage this sector in India. Electronic manufacturing has a long gestation period for achieving considerable outcomes in terms of sizeable value addition.

To address this challenge, several Asian countries have adopted a “phased approach” to develop domestic capabilities in the electronics-manufacturing sector starting with the assembly of components.

Focus on export promotion concomitant with the development of the domestic industry is an established policy prescription. China and Vietnam are cases in point. China took 25 years to build the $1.6-trillion electronics industry with the value addition still around 49 per cent even in two decades. China adopted a similar strategy as India — scaling exports and gradually increasing value addition over time.

On the other hand, Vietnam took 15 years to build its $140-billion electronics industry, and its current value addition is still at 18 per cent despite being called the biggest beneficiary of the China+1 strategy. In comparison to its Asian peers, India has achieved the fastest growth in scale and value addition. The growth of electronics manufacturing in India has improved multiple-fold with its global share having grown from 1.3 per cent in 2012 to 3.75 per cent in FY 2021-22.

Govt measures

The government has been working towards building an ‘ecosystem’ to position India as a global hub for Electronics System Design and Manufacturing (ESDM). Over the years, several targeted measures have been implemented to strengthen domestic electronics manufacturing including tariff and non-tariff measures, the PMP, infrastructure development through schemes such as the Electronics Manufacturing Clusters Scheme, capex-based subsidies via Modified Special Incentive Package Scheme (M-SIPS) among others.

Given that electronics is the world’s largest traded commodity, the shifts in the geopolitical alignments are complementing the government’s efforts in treating this as an opportunity for India to make a mark in this sector.

Owing to the government’s ‘Atamanirbhar’ vision, India has progressed from importing 74 per cent of mobile phones in 2015 to a position where presently 99.2 per cent of mobile handsets used are made in India and the exports have surpassed $11 billion by FY23.

At this point, it is worthwhile to mention the two major policy interventions made by the government under which strategic implementation of the PMP was carried out. In 2017, the government policy gave impetus to the “Assembly, Programming, Testing & Packaging” (APTP) process followed by the PLI Scheme for LSEM in 2021 to promote export-led growth.

Due to these initiatives, the impact on value addition in electronics and smartphone manufacturing has increased to 23 per cent and 20 per cent from nil in 2014-15. Moreover, it has also led to the transformation of the mobile phone industry from being entirely import-dependent to being a generator of employment in the country including women’s employment, an increase in incomes, tax collection due to the GST, opening up new markets for exports across continents, and sprouting of green shoots in the component ecosystem.

Exports surge

In addition, recent reports have estimated that the targets under the PLI scheme may drive Apple to shift at least 18 per cent of its global iPhone production to India by FY25 (7 per cent in FY23, negligible pre-PLI). An assessment of electronics trade between 2021 and 2023 suggests that mobile phone exports increased from $3.1 billion in 2021 to $11.1 billion in 2023 (an increase of $8 billion).

While electronics imports have increased by $8.3 billion, the trade deficit has remained stable suggesting imports’ conversion into exports. This aggressive rise in electronics exports led by mobile phone exports in the last two years is largely due to the PLI Scheme for LSEM.

The scheme also encouraged the domestic production of specific electronic components. In FY23 the beneficiaries accounting for 20 per cent of the market share contributed to 82 per cent of mobile exports. The PLI Scheme for LSEM, thus, is fostering export-led manufacturing capabilities in the country.

So far, the electronic manufacturing journey of India has covered many milestones and celebrated many successes. For a large economy like India with significant domestic consumption, it is perhaps advisable to keep the primary focus on export promotion and gradually increasing value addition.

In addition, considering the global headwinds, focused reforms propelling initiatives to address concerns in areas of priority will enable the manufacturing sector in general and electronic manufacturing, in particular, to maintain its growth momentum in the times to come.

Sustained and consistent efforts towards implementing supportive policies will pave the way for India to become a hub of electronic goods manufacturing, bringing to fruition the vision of making the electronics industry worth $300 billion by FY26.

The writer is Joint Director, Economic Division, DEA, Ministry of Finance. Views are personal