Electronics Industry reported at USD 1.75 Trillion is the largest and fastest growing manufacturing industry in the world. It is expected to reach USD 2.4 Trillion by 2020. The demand in the Indian market was USD 45 Billion in 2008-09 and is expected to reach USD 400 Billion by 2020.
Domestic demand is expected to be driven by growth in income levels leading to higher off-take of electronics products, automation demands of corporate sector and the government s focus on e-governance. The domestic production in 2008-09 was about USD 20 Billion. However, the actual value-addition in the domestically produced electronic product is very low, ranging between 5 to 10 percent in most cases. At the current rate of growth, the domestic production can cater to a demand of USD 100 Billion in 2020 as against a demand of USD 400 Billion and the rest would have to be met by imports. This aggregates to a demand supply gap of nearly USD 300 Billion by 2020.
Unless the situation is corrected, it is likely that by 2020, the electronics import may far exceed oil imports. This fact goes unnoticed because electronics, as a meta resource forms a significant part of all machines and equipment imported, which are classified in their final sectoral forms, for example, automobiles,aviation, health equipment, media and broadcasting, defence armaments, etc. It is also pertinent to note that Indian electronics hardware production constitutes only around 1.31% of the global production.
On the other hand, the share of global electronic equipment production of the largest contributing nation has increased from 17% in 2004 to 33% in 2009. Conversely, the country s imports are expected to rise from 50% to 75% even as demand is rocketing.
2. India is a recognised global player in software and software services sector.
It lags behind in electronics hardware manufacturing capabilities, though it is increasingly becoming a destination for chip design and embedded software. The vision is to transform India into a global hub for electronics system design and manufacturing (ESDM) so as to meet the growing domestic and global demand. There are many challenges to advance the same infrastructure gap, tax structure, supply chain and logistics, inflexible labour laws, limited R&D focus, inadequate funding and limited value addition. Recognising the importance and potential of the Electronics Sector, several economies in the Asia-Pacific region have repositioned themselves through infrastructural investments and proactive policies to emerge as a global power-house in this field.
3. Electronics is characterized by high velocity of technological change. Consequently the life cycle of products is declining. As a result, the value of design and development in the product has increased quite significantly. Given India s growing strength in chip design and embedded software, the increasing importance of design in product development has potential to make India a favoured destination for ESDM.
4. ESDM is of strategic importance as well. Not only in internal security and defence, the pervasive deployment of electronics in civilian domains such as telecom, power,railways, civil aviation, etc. can have serious consequences of disruption of service. This renders tremendous strategic importance to the sector. We cannot be totally dependent
on imported electronic components and products for such a sector.
5. The electronic components, which are basis of an electronic product, are low volume-low weight, cheap and easy to transport across the globe. Moreover, under Information Technology Agreement-1 (ITA-1) of the World Trade Organization, which came into force in 1997, a large number of electronic components and products are bound with zero tariffs making trade unrestricted across international borders. Also, the electronics manufacturing is characterized by high volume and low margins. All these have resulted in the electronics hardware industry being globally integrated with few large global players catering to a large part of the world.
6. India is one of the fastest growing markets of electronics in the world. There is potential to develop the ESDM sector to meet our domestic demand as well as to use the capabilities so created to successfully exports ESDM products from the country. The National Policy on Electronics aims to address the issue with the explicit goal of transforming India into a premier ESDM Hub.
To create a globally competitive electronics design and manufacturing industry to meet the country’s needs and serve the international market.
1. To promote indigenous manufacturing in the entire value-chain of ESDM for economic development.
2. To develop capacities for manufacture of strategic electronics within the country.
3. To promote a vibrant and sustainable ecosystem of R&D, design and engineering
and innovation in Electronics.
4. To develop high-quality electronic products at affordable prices for inclusive adoption
and deployment to improve productivity, efficiency and ease of operations in other
5. To promote environmentally friendly global best practices in the use and disposal of
1. To create an eco-system for a globally competitive ESDM sector in the country to achieve a turnover of about USD 400 Billion by 2020 involving investment of about USD 100 Billion and employment to around 28 Million people at various levels.
2. To build on the emerging chip design and embedded software industry to achieve global leadership in VLSI, chip design and other frontier technical areas and to achieve turnover of USD 55 Billion by 2020.
3. To increase the export in ESDM sector from USD 5.5 Billion to USD 80 Billion by 2020.
4. To significantly enhance availability of skilled manpower in the ESDM sector. Special focus for augmenting post graduate education and to produce about 2500 PhDs annually by 2020.
5. To create an institutional mechanism for developing and mandating standards and certification for electronic products and services to strengthen Quality Assessment infrastructure nationwide.
6. To develop an appropriate security ecosystem in ESDM for its strategic use.
7. To create long-term partnerships between EDSM industry and strategic sectors like Defence, Space, and Atomic Energy etc.
8. To become a global leader in creating Intellectual Property (IP) in the ESDM sector by increasing fund flow for R&D, seed capital and venture capital for start-ups in the ESDM and nanoelectronics sectors.
9. To develop core competencies in sectors like automotive, avionics, industrial, medical, solar, Information and Broadcasting etc through use of ESDM in these sectors.
10. To use technology to develop electronic products catering to domestic needs and conditions at affordable price points.
11. To expedite adoption of best practices in e-waste management
12. To create specialized governance structures within Government to cater to specific needs of the ESDM sector including high velocity of technological and business model changes.
13. To facilitate loans for setting up ESDM units in identified areas
1. Creating eco-system for globally competitive ESDM sector
1.1 To provide attractive fiscal incentives across the value chain of the ESDM sector through a Modified Special Incentive Package Scheme (M-SIPS) to eliminate the disability costs in manufacturing on account of infrastructure gaps relating to power, transportation etc. and to mitigate the relatively high cost of finance etc.
1.2 To facilitate setting up of Semiconductor Wafer Fab facilities and its eco-system for design and fabrication of chips and chip components.
1.3 To provide Preferential Market Access for domestically manufactured electronic products including mobile devices, SIM cards with enhanced features, etc. with special emphasis on Indian products for which IPR reside in India to address strategic and security concerns of the Government consistent with international obligations in procurement.
1.4 To provide incentives for setting up of over 200 Electronic Manufacturing To provide assistance to setting up of Greenfield EMCs and upgradation of Brownfield EMCs
a. EMCs to use Information Technology Investment Region (ITIR) infrastructure wherever available.
b. The benefits of National Manufacturing Policy and National Investment and Manufacturing Zones (NIMZs) to be available for EMCs.
1.5 To establish a stable tax regime (both at the Central and State level) conducive to attract global investments and to encourage electronics sector through appropriate fiscal incentives and taxation mechanisms.
a. To provide for a 10 year stable tax regime for ESDM sector.
b. To create an Inter-ministerial Working Group to clarify technical issues relating to electronic products.
c. To declare mobile phones specifically and other electronics products for
data communication as goods of special importance under the Central Sales Tax Act.
1.6 To aggressively market India as an investment destination for ESDM among leading Nation and Companies.
1.7 The loans for procuring computers and related peripherals including software by individuals and small businesses to be included in priority sector lending.
2. Promotion of Exports
2.1 To focus on exports to generate volumes and economies of scale by providing requisite incentives and by streamlining procedures and logistics to facilitate import of components/sub-systems and export of products.
a. To extend special focus under the Focus Products Scheme to an expanded list of items under the ESDM sector including Electronics Manufacturing Services industry.
b. DTA sales of ITA-1/zero duty electronics products to be treated as physical exports and extended all the benefit of export schemes.
c. Create incentives for relocation to India of electronic hardware manufacturing units facing cost pressures in developed countries.
d. To globally market and showcase chip design, product design and embedded software industry capabilities.
e. To promote export of electronics products in emerging regions like Africa,South America, and Asia among others.
3. Human Resource Development
3.1 To work closely with Private Sector, Universities and other Institutions of learning and to design programmes to ensure that adequate trained and skilled manpower is available to the industry.
a. To facilitate enhancement of the number of graduates and other skilled manpower by suitably increasing capacities in colleges/ITIs and Polytechnics through public and private sector investments.
b. To support creation of capacities within academic institutions to enhance the production of adequate number of PhDs and post-graduates for supporting the growth of chip design and embedded software and board/hardware
design industry in the country.
c. To encourage setting up of skill-oriented courses and training programmes for electronic designs along with hands-on laboratories enabling graduates from other disciplines to migrate to ESDM.
d. Creation of a specialized Institute for semiconductor design;
e. Extending Special Manpower Development Programme for Very Large Scale Integration (VLSI) chip design to include larger number of colleges and students leveraging the National Knowledge Network;
f. To create an institutional mechanism for the faculty development in various ESDM related subjects.
g. To collaborate with national and international institutions for development of new skills and courseware on latest manufacturing technologies and products in ESDM sector.
4. Developing and mandating standards
4.1 To curb inflow of sub-standard and unsafe electronic products by mandating technical and safety standards.
a. To develop Indian standards to meet specific Indian conditions including climatic, power supply and handling conditions etc., by suitably reviewing existing standards.
b. To mandate technical standards in the interest of public health and safety
c. Set up an institutional mechanism within Department of Information Technology for mandating compliance to standards for electronics products.
d. To develop a National Policy Framework for enforcement and use of Standards and Quality Management Processes.
e. Strengthening the lab infrastructure for testing of electronic products and encouraging development of conformity assessment infrastructure by private
f. Creating awareness amongst consumers against sub-standard and spurious electronic products.
5. Cyber security
5.1 To create a complete secure cyber eco-system in the country, careful and due attention is required for creation of well defined technology and systems, use of appropriate technology and more importantly development of appropriate products & solutions. The priorities for action will be suitable design and development of indigenous appropriate products through frontier technology/product oriented research, testing & validation of security of products meeting the protection profile requirements needed to secure the ICT infrastructure and cyber space of the country.
6. Strategic Electronics
6.1 To promote manufacturing capacities for sourcing ESDM in strategic sectors -Defence, Atomic Energy, Space, etc.
a. To create long-term partnerships between domestic ESDM industry with strategic sectors for sourcing electronic products domestically.
b. Defence offset obligations for electronic procurements to be met through ESDM products.
7. Creating eco-system for vibrant innovation and R&D in ESDM sector including nanoelectronics
7.1 To create an Electronic Development Fund to promote Innovation and IP and R&D, commercialization of products, etc. in the ESDM, nanoelectronics and IT sectors by providing appropriate funding/incentives to Industry/Academic/R&D institutions.
a. To facilitate IP development by Indian industry, academic and R&D institutions.
b. To set up a Fund of Funds to create need based Daughter Funds for various innovation and manufacturing stages. All Funds to be professionally managed.
c. To given special thrust to innovation and R&D for Green Technologies, Convergence and Broadband technologies.
d. To promote entrepreneurship in ESDM sector in active collaboration with Industry, Industry Associations and Academia by ensuring availability of Angel Funds and Venture Capital Funds.
e. To set up VLSI specific Incubation Centres in four different cities in the country in association with Software Technology Parks of India (STPI)/Academic Institutions/Industry.
f. To design and develop India Microprocessor for diverse specific/strategic applications.
8. Electronics in Other Sectors
8.1 Automotive Electronics: To develop a Centre of Excellence for the development of Microcontroller Units (MCUs), Micro-electro-mechanical systems (MEMS) and other advanced electronic devices to enable India to consolidate
India s position as one of the global auto hubs.
8.2 Avionics: To support the growth of aviation industry by facilitating the development of research and development and outsourcing of engineering design and related software for avionics and Maintenance, Repair and
Overhauling of avionics in the country.
8.3 LED: To encourage the usage of LED lighting solutions especially in rural markets through innovative products like solar LED lamps, public places like street lighting, traffic lights etc. to promote the manufacture of LED and LED
8.4 Industrial Electronics: To develop a Centre of Excellence for innovation in Industrial Electronics with focus on making affordable standardized products which help India to maintain its growth in industrial segments in which it has core competence, including textiles, food processing, steel, engineering and electrical gods like motors, compressors, inverters, etc.
8.5 Medical Electronics: To consolidate the design and development of affordable medical electronic device industry and to develop downstream manufacturing activities through sector specific cluster.
8.6 Solar Photovoltaics: To build manufacturing capacity of solar photo-voltaics to support the generation of 20 GW of solar power by 2020.
8.7 Information and Broadcasting: To create an eco-system for manufacture of set-top boxes and other broadcast equipment in the country as part of the digitalization of the broadcast network of the country.
9. Handling e-waste
9.1 To facilitate environment friendly e-waste handling policies
a. To create a mechanism with industry to streamline the implementation of e-waste (Management and Handling) Rules, 2011 including restrictions on usage of hazardous substances as per global best-practices.
b. To help streamline procedures to prevent e-waste dumping in the country.
c. To facilitate implementation of Extended Producers Responsibility under the e-waste (Management and Handling) Rules, 2011 for electronic hardware manufacturers as well as recyclers.
d. To promote development of e-waste recycling industry for domestically produced e-waste.
e. To create a specific thrust within Electronic Development Fund for the development of IPR and electronics products in green technologies.
10. Governance Structures
10.1 To set up a National Electronics Mission with industry participation to evolve programmes in pursuit of the laid down policies and also to create Institutional mechanisms to advance the implementation of various programmes aimed at achieving the objectives enumerated in this policy and to promote India as an Electronics Hardware Manufacturing Hub and suitably market “Brand India” in Electronics.
10.2The Department of Information Technology to be renamed as Department of Electronics and Information Technology (DeitY)
ELCINA welcomes the draft policy as it outlines the much needed impetus required for electronics manufacturing to act as an enabler of economic growth and prosperity. The document specifies the vision to transform India into a global hub for electronics systems design and manufacturing (ESDM), so as to meet the growing domestic and global demand. The announcement of a Modified SIPS (Special Incentive Package Scheme) is welcome, as M-SIPS will aim to eliminate most of the disability factors that plague the industry. The emphasis on creating a pool of trained manpower, developing and maintaining standards to curb sub-standard products, and enabling R&D are measures that will attract some of the best brains and enhance product quality. The measures announced by the government convey its seriousness to prioritise boosting electronics manufacturing, which was sadly lacking for many years. The decision to rename the department as the Department of Electronics and Information Technology (DeitY) will help to enhance the role of electronics as a creator of national wealth. —K Srinivasan, secretary, ELCINA
We are happy that a national policy on electronics has been drafted—it is the thrust that is required to nudge the electronics industry forward. The formation of the ESDM clusters, the industry institution linkage and the efforts to build up a base of skilled manpower, are welcome points. However, the policy lacks a special focus on SMEs. The success of this policy would lie in the speedy implementation of the strategies, schemes and programmes within a given timeframe.—Uma Reddy, president, CLIK
The policy is a good start. Its focus on creating IP, an area that’s primarily the reason for many good companies not being able to move ahead, will be beneficial for the industry. Offering funds to procure computers and software is a welcome move. The intent to provide a stable tax regime is also a good move. However, the policy talks about too many things and there is too much to accomplish. It would have been much more effective if the policy focused on a few key areas like infrastructure for EMCs, tax benefits, a stable tax regime and human resource development. —Biju Bruno, managing director, Greenvision Technologies Pvt Ltd
The draft policy represents a significant step for the overall Indian electronics industry and the ESDM industry, in particular. The holistic approach proposed for innovation and product creation will provide the necessary fuel to address the US$ 400 billion demand for electronics products by 2020. We believe that this enhanced focus will usher in a new era for the electronics industry to fuel the future growth of India. We also welcome the vision of the government to transform the ESDM landscape in India, and we are sure that this policy will give a much needed fillip to the domestic electronics and systems design industry. Measures like the electronic product development fund, focus on talent development, and the preferential market access to local products could act as the key catalysts to spurring innovation and the growth of world class companies in this sector. —PVG Menon, president, ISA
This initiative of the government is commendable and could result in increased manufacturing and in the overall growth of the industry. Some of the challenges are how to synergise this initiative with those of the state governments to help the industry. Occasional tinkering to cut down the incentives and facilities has happened in the past. Another challenge is how to bring about an attitudinal change among the various government officials dealing with industry—from acting as if they are doing entrepreneurs, SMEs and manufacturers a favour, to becoming more welcoming and collaborative.
—NK Goyal, president, CMAI
We are happy with the draft policy—manufacturing has found the focus it deserved. Setting up of manufacturing clusters and the fiscal incentives are points we welcome the most. Now, we need to see how it is implemented. There should be a group monitoring and reporting on the implementation of the scheme.
—Anil Bali, vice president, Deki Electronics Ltd
The government’s draft manufacturing policy aimed at creating employment to the tune of 28 million is welcome. The need for a structured plan to grow the local electronics industry is much needed. The government has to play the role of an enabler to encourage the local electronics industry in scaling new heights. Creating the right ambience for growth is the prerogative and duty of the government, as an empowered electronics industry will act as the game changer for GDP growth. Multi-pronged initiatives from the different stakeholders of the electronics industry, with the government taking the lead through this policy announcement, indicate that the coming years will undeniably be the golden decade of the Indian electronics industry.—Deepa Doraiswamy, industry manager, electronics, Frost & Sullivan, South Asia and Middle East
The key points that I appreciate are the plans to set up special institutes for semiconductor design. I think India needs more high-end skilled manpower in the electronics sector. Special emphasis should be given to develop the next generation of technologies related to green energy like solar, bio-fuels, etc. Special emphasis should also be given to manufacturing quality products that can help the industry compete globally.
—Sujay Santra, founder, director, Ikure TechSoft (P) Ltd
This is an excellent step by the government. The need of the day is to execute this fast as we are lagging behind the competition. It should not get delayed or lost due to any differences within the government; it has to be looked upon as an integrated approach to boost the Indian economy.
Fiscal incentives across the value chain of the ESDM sector, to facilitate setting up of semiconductor wafer fab facilities, and to provide preferential market access for domestically manufactured electronic products—these are the most significant points in the policy. —BN Shukla, head-quality & lean six sigma, Jabil Circuit India Pvt Ltd
For a start, the draft policy identifies the key concerns of the ESDM ecosystem. We need to see what kind of strategies are in place to ensure the actual benefits reach the industry. Today, we are unable to compete with Chinese ODMs due to the high cost of material components, which need to be imported. This disparity needs to come down tremendously with government support, if we want to build a significant local manufacturing ecosystem.
However, the policy’s aim to increase the fund flow for R&D and enable venture capital for startups should not make us over-dependent on VC funding. It would be a good idea to create an umbrella organisation that is as active as NASSCOM, but specifically for this industry.—Vishal Borker, CEO and technical director, NextBiT Computing Pvt Ltd
The document makes a good impression as it talks about a stable tax regime, human resource development, and setting up standards to prevent the entry of sub-standard products into the country. However, the most important thing will be the time-bound, single-window clearance for these projects.
—Dr Ajith Kumar BP, scientist SG, Inter-University Accelerator Centre
Overall, the draft policy has been well conceived, and a lot of study has gone into framing it. It is good that the fastest moving consumer products like set top box and mobile phone manufacturing has been considered. However, the real numbers are not in place. In particular, the inverted duty structure has not been mentioned, besides which, how and by when the policy will be implemented, is not clear. —N Chandramohan, country head, (SMT division) Juki India Pvt Ltd
The special focus on promoting innovation, ESDM, IPR, and partnership with the defence and other sectors is commendable. However, the policy does not consider independent innovators. The need of the hour is to give special attention to innovators, particularly from the grassroots level. Only giving attention to PhDs and higher education is not enough. For a sincere implementation of this policy, parallel implementation programmes with yearly targets are needed.—Mandar Thite, inventor of photo clipping machine
While the policy is good, I have strong doubts on the implementation strategies.The emphasis on funds for R&D, IP development, and chip design centres is significant. But the policy has too many thrust areas. There has to be focus on an yearly basis with definite time lines. The policy also does not cover optical technologies, and the setting up of testing and certification labs for electronics as well as fibre optic components. The policy has also not touched upon the time limit by which the government needs to respond to an application for a project.—Dr Suresh Nair, CTO, SFO Technologies
The objective and intentions of the draft policy are very impressive. I am happy that we have finally come together as a country and are ready to take this industry to the next level. This is the first time that an attempt has been made to establish clear targets for the growth of the electronics industry in India. This is very important, as otherwise we would be running without a plan. The clear targets, the idea of electronics manufacturing clusters, and identifying sectors for developing core competencies are appreciable points. Success would depend on implementation and defining the time lines to achieve these aggressive milestones. —Gautam Awasthi, general manager, marketing, electronic measurement group, Agilent Technologies India Pvt Ltd
We are extremely disappointed—this is too little, too late. Moreover, this is not a comprehensive policy. It largely addresses the EDSM with a thrust on domestic R&D and IP. However, it has not suggested any measures to boost the electronics components manufacturing sector.
Some of the issues need immediate attention from the government—dumping of low cost components by Chinese suppliers must be checked, and a duty must be levied on imports to compensate the injury caused to Indian manufacturers. This will enable local manufacturers to improve their ROI. It should be mandatory that 50 per cent of the components used by domestic electronics products manufacturers be made in India.
—Mukund Shah, president, IPCA
I’m happy with this initiative. But, definitely actions speak louder than words. I’d appreciate if it is implemented fast. It’s good that the government has highlighted on creating ecosystem for globally competitive ESDM sector and to curb inflow of sub-standard and unsafe electronic products by mandating technical and safety standards. However, LED, solar PV and medical electronics have to be considered separately as they are the future of electronics industry. Every big and small company in the country should be aware of all the schemes and programmes and about implementation updates from time to time. —Phani Varanasi, director, Suvana Techno-Solutions Pvt Ltd