We pride ourselves that India is the world’s fifth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP), as per IMF. It is projected to be a $5 trillion economy by ‘26-‘27. However, while ICT and software services have been poster boys of success, we have been laggards in manufacturing, and this needs urgent attention to boost employment and self-sufficiency.
In consonance with the goal of ‘Atmanirbharta’ or self-reliance in the area of manufacturing in the ICT sector, the Government has brought out some excellent production linked incentive schemes for giving boost to manufacturing in the ICT and telecom sector. However, based on global best practices, there are challenges on the ground which, if overcome through suitable policies, can make the manufacturing sector globally competitive and efficient.
One of the key challenges to enable our locally manufactured products to compete in the world market when it comes to exports, is the 5-6% cost differential in manufacturing in India. This cost disparity of goods manufactured in India for exports vis-à-vis existing global manufacturing hubs (e.g. Malaysia, China) needs to be comprehensively addressed for ‘Made in India for Export strategy’ to be successful. There is a need to offset this cost disparity by providing export incentives of about 5% for Electronics/Telecom Products through government schemes such as the PLI /MEIS Schemes.
To become a global manufacturing hub, it is imperative to have a strong R&D base. While the Government has put together a plan for incentivizing design led R&D and is also incentivizing the manufacturing of chips and semiconductor fabs locally, there remains a challenge for R&D companies who are working on new and emerging technologies. Typically, R&D and Product development process takes at least 1-2 years, and it is absolutely imperative to streamline the process of permissions/approvals that would permit R&D companies to use experimental license and experimental spectrum (for development of wireless based products) for longer duration than the current period of one year (for license) and three months (for spectrum), respectively.
Since under the Government’s Atmanirbhar program, we are committed to develop these new technologies in-country, we need to do away with the current regime of uncertain and delayed approval processes in importing Capital Goods for R&D. With deployment of 5G happening, there is a significant amount of new devices and ecosystem that would need to come up, and we can ill-afford to miss out on global opportunities to develop new technologies and products under the flagship programs of Make in India and Design in India.
Another area of challenge happens to be the Ease of import of used R&D Capital equipment required for setting up of R&D labs. Currently, the Ministry of Environment and Forest (MoEF) and MeitY, to prevent old electronics equipment into India under the e-waste policy, have restricted import of old electronics equipment older than one year and with a condition to re-export within 3 years.
Global companies establishing R&D labs in India and R&D projects typically use old capital equipment. R&D activities are carried out on a collaborative approach between different R&D labs of vendors at multiple locations, which requires during testing and project phase, shifting of capital equipment for R&D purpose between different R&D locations globally. Capital goods for R&D purposes with no further sale or commercial transaction value, should be permitted under the ‘free to import’ category. Since R&D equipment has longer life cycle, there should be no need to re-import the same. Such enabling conditions, if permitted, would enable ease of doing business and will help incentivise global companies to continue their ongoing R&D operations in India, as well as new companies to open/relocate their global R&D centres in India. This would benefit the country immensely as it will generate more employment, skilled work force on the latest and cutting edge technologies and help India become a Training hub for LDCs and others, besides helping the country become a ‘Global R&D hub’ besides a ‘Global Manufacturing hub’.
The goal of 10 million PM WANI based Public Wi-Fi Hotspots is another great opportunity to become a global hub for manufacture of competitive Public Wi-Fi components and devices, especially in rural/economically backward areas, thereby helping create huge employment opportunities for the youth in the rural areas of the country.
If India addresses these issues urgently and effectively, it could well become a ‘manufacturing powerhouse’ in Telecom & ICT, and would be on its way to achieving its vision for taking the manufacturing sector’s contribution to GDP to 25% from 14% now, increase India’s share in global trade to 10% and become one of the top three nations in global exports.
With Make in India, the time has come to revive India’s industrial glory. As Shashi Tharoor passionately pointed out, “India’s share of the world economy when Britain arrived on its shores was 23%, by the time the British left it was down to below 4%… In fact, Britain’s industrial revolution was premised on The deindustrialisation of India…” incredibly sad!” But, now, at least in Telecom & IT, the opportunity exists to achieve Indian supremacy. Let us make it happen…
The article is written by T V Ramachandran, President, Broadband India Forum. Views are personal. Research inputs by Debashish Bhattacharya.