PM wants zero balance for electronics' import- export

Ministry reviewing policy; experts call it a tall order

Prime Minister Narendra Modi is said to have directed the department of electronics and information technology to ensure the net import-export balance for the sector be brought down to zero by 2020.

The department is reviewing the relevant policy to meet the directive, said an official.

Experts, however, question the feasibility of such a mandate. Unless radical policies are announced, meeting the target would be a challenge, they argue. India currently imports to meet a majority of its demand for electronics. Estimates suggest the import bill here will exceed that of oil by 2020, unless domestic manufacturing is incentivised.

CHALLENGING SCENE

• $400 bn India's total demand of electronics  in the next six years
• $300 bn Electronics that India will have to import in the same period
• Rs 80,000 crore Amount of proposals Modified Special Incentives Scheme has received as of now

According to industry projections, India will have to import $300 billion of electronics out of the total demand of $400 billion over the next six years.

“We are in the process of working out a strategy to meet the PM's directive,” the official said.  The Union Budget had addressed some demands of the sector, by taking corrective measures on inverted duty structures which made it cheaper to import electronic goods than manufacture these in India, the official added. The department is also in the process of reviewing the Modified Special Incentives Scheme (MSIS), under which manufacturers of electronics get a capital subsidy from the government of 20-25 per cent. The policy's three-year term, which has received proposals close to Rs 80,000 crore so far, is coming to an end and the government is seeking feedback on how to to make it faster and more efficient in the next phase.

Chetan Bijesure, director and team leader of manufacturing at the Federation of Indian Chambers of Commerce and Industry, said the government was trying to attract more investments through various ways. “The minister is going to Germany and a delegation recently went to Japan, but the impression is that the East Asian countries are giving more incentives to electronics manufacturers than what is being given here.” There is scope for more incentives, added Bijesure. “If not zero, the balance can be minimised to a small amount for sure,” he said.

Under the National Electronics Policy unveiled in 2011, the government launched a series of proposals to lure electronic manufacturers to invest in the country. Apart from the MSIS policy, there have been other measures such as setting up of electronic clusters, an innovation fund and a policy to promote domestically manufactured goods in government procurement, called preferential market access, along with setting up chip fabrication units.

These high-end units, supposed to act as anchors for development of a components industry around them, are expected to start operations only by 2017.

Niju V who heads the electronics and security practice for Frost & Sullivan's South Asia & Middle East region, said we don’t export much. “Currently, there is not more than 15-20 per cent of local value addition that goes into a product, with 85 per cent of it being imported, which makes us rely on screwdriver technology,” he said. India has been a laggard in this area and the aim should be to gradually increase the value-add percentage in products to between 30 and 50 per cent, he added.