India has USD 2.7 trillion untapped export potential in electronics: UNCTAD Data

India’s share in world exports of key electronic products stands at hardly 0.3%, while the corresponding figure for Malaysia and Vietnam is estimated at 3%, and that for Thailand is 2%, shows the latest data from UNCTAD. According to the data, China is the largest exporter of electronic goods, with a global share of 26% and it is followed by Hong Kong with a share of 13%. Other major exporters are South Korea, USA, Germany and Japan, with respective shares of 6.8%, 6.6%, 4.8% and 3.2%.

The share of Hong Kong more than doubled from 5.4% to 13% since 1995, while the share of South Korea grew marginally from 4.9% to 6.8%. Vietnam’s contribution to electronic exports grew to 2.9% from virtually nil in 1995.  Share of Japan and USA in world electronic exports declined sharply during this period, while that of Germany contracted marginally. India’s share during this period remained steady around 0.1-0.3% during this period, data from UNCTAD shows.

The size of the world export market for electronic goods is pegged at USD 2.74 trillion, of which India’s exports is hardly 7.79 billion (0.3%). The marginal share of India in world market implies that there is still untapped potential for India to mass produce and export these electronic goods to the world market. Speaking on the export prospect for electronic goods, Ms. Rupa Naik, Senior Director, MVIRDC World Trade Center Mumbai remarked, “India has the opportunity to capture the huge world market for electronic products because of the shifting global supply chain after the outbreak of pandemic and progressive policy measures such as production linked incentives and SPECS.”

In the last few months, global and Indian electronic companies have committed USD 100 billion worth electronic goods production, 80% of which is for exports, under the production linked incentive scheme of the Ministry of Electronics and Information Technology (MEITY), Government of India. In the last two months, India received 44 applications under another scheme, known as SPECS, which provides capital subsidy for investors, said Mr. Saurabh Gaur, IAS, Joint Secretary, MEITY, Government of India. The government expects at least Rs. 50,000 crore investment in electronic component manufacturing under this scheme in the next few years, the joint secretary said at a recent webinar conducted to release MVIRDC Research Study on ‘Promoting Electronic Manufacturing in India’.

The study found that India has made rapid progress in export of mobile phones in recent years and this success can be replicated in other segments such as computing devices, components for electric vehicles, printed circuit boards, wearable devices etc. Share of line telephone sets and mobile phones in overall electronic goods exports of India grew from 4% in 2015-16 to 35% in 2019-20 because of the phased manufacturing programme adopted by Government of India in recent years. However, India largely depends on Vietnam for import of digital cameras, LCD television sets and to some extent mobile phones.

The study proposed at least 10 policy suggestions to transform India into a global hub for Electronic System Design Manufacturing. Some of the recommendations are: 1) Government should reduce the investment limit under the Production Linked Incentive Scheme (PLI) for select electronic components announced in April 2020 to Rs. 20 crore from Rs. 100 crore. Reduction in investment limit will allow MSMEs to participate in this scheme. 2) Government should extend Production Linked Incentive Scheme (PLI) scheme to IT and datacom products (computers, laptops, tablets, servers) to offset domestic manufacturing disability. 3) Department of Telecom should establish a government-industry working group on scaling up telecom network product manufacturing in the country. 4) Government should set up testing and certification labs for locally designed products. 5) Government should encourage downstream manufacturing by providing maximum incentives at the raw material stage i.e. at the level of manufacturing laminates, thin films, ingots, wafer etc. The size of incentive should be progressively lower as we move up the value chain from raw materials to components to PCBs and the final equipment. 6) There has to be uniform policy across all states for electronics sector.

Ms. Naik raised hope that electronic sector can be the engine of manufacturing growth in India in the post-pandemic period with appropriate policy interventions, including handholding of MSMEs, cluster development and discouraging cheap imports under free trade agreements (FTAs).

The study found that the share of ASEAN countries in India’s imports of electronic goods grew from 14% in 2009-10 to 21% in 2019-20 largely because of rising concessional imports under the India-ASEAN FTA. The industry alleges that some non-ASEAN countries are taking advantage of this FTA by diverting their exports into India through the ASEAN countries.          

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