India’s electronics ecosystem is improving as more and more local producers enter this domain. But how can they catch up with multinational behemoths that have economies of scale to expand around the globe? G.S. Sharma, director, Shri Ram Marketing, shares his thoughts on this with Baishakhi Dutta of Electronics Bazaar.
EB: What shortcomings in the ecosystem made you set up your own business?
After completing three master’s degrees in science, technology and business administration from different institutes and universities, I started my career with Uptron, one of the pioneers in the manufacture of electronic products and components in our country. I found that we depended a lot on Taiwan, Korea, Japan and various European countries for different electronic and electrical components and products. We did not have many quality component manufacturers or anyone making high tech components to meet the industry’s requirements. Most of the components were being imported from different parts of the world. As a regional sales manager at Uptron, I anticipated high growth in the Indian electronics manufacturing sector, and decided to begin importing and distributing various quality products and components.
EB: How do you view the current ecosystem in the Indian electronics industry?
In India, multinational companies have been the dominant players. We don’t have many Indian organisations playing a leading role in electronic hardware – unlike the software ecosystem, where we lead. We had a strong electronics ecosystem before liberalisation. After liberalisation, multinational companies entered India because they had the economies of scale owing to their mass production capabilities. Indian companies could not compete and most of them either closed down or became minor players. These companies included BPL, Videocon, Onida, Uptron, Weston, and many more.
Earlier, there was a restriction on foreign equity participation and foreign companies could not hold more than 25-40 per cent equity in an Indian company. But post liberalisation, they were allowed to set up fully owned businesses in the country. In this process, all these multinational companies established their own manufacturing and marketing systems, and Indian companies could not compete. Even in the mobile space, the situation is the same with Chinese companies taking the lead in manufacturing. India does not have a strong or well-established ecosystem for electronics manufacturing. Moreover, none of the big business houses are interested in entering this area because the opportunities are not very lucrative to them due to tough competition from countries like China, Korea and Taiwan.
EB: What part has the government played in allowing such a scenario to evolve?
After the liberalisation of the economy, our government opened the doors for multinational companies, which started importing finished products and components, hence killing our manufacturing base—Indian firms could not compete with them on price, quality and customer care. Our earlier governments never encouraged electronic hardware production. In recent years, our government has realised the importance of making in India and stopped the import of finished electronic products, particularly consumer durables. The Make in India efforts have forced multinational firms and other Indian business houses to manufacture in India. In the case of electronic components, we are still dependent on imports and, surprisingly, we don’t have a single factory to manufacture SMD components in our country.
Recently, the government has hiked the import duty on various consumer durables in order to encourage local production. Our major weakness is the lack of investments in the manufacture of components. The government has to do a lot to frame a strong and investor-friendly policy to boost component manufacturing in our country through various measures such as tax exemptions, duty-free capital goods, easy financing, etc, and make India self-reliant.
EB: Given the sorry state of India’s electronics ecosystem currently, what corrective measures do you suggest?
India’s import of electronic products and components is increasing every year, resulting in us depending on countries like China, Korea, Japan, Taiwan, and those in Europe. Soon our country’s import bill will supersede our oil imports, if the current trend continues. In spite of having a vast technical talent pool, India is unable to become a major player in electronics manufacturing. The need of the hour is to take corrective measures by making funds available, by creating electronics-related special zones in different parts of the country, and ensuring easy financing for capital goods.
