Manufacturing: A dream no more

India is all set to become a considerable manufacturing hub for the country and the region, provided it overcomes the key challenges related to lousy infrastructure and complex regulations

A robust electronic or IT hardware manufacturing ecosystem has always been India’s dream. But by the time Indian government seriously began efforts to breath life into the pigmy manufacturing ecosystem, the world had gone miles ahead. In particular China, Tiwan, South Korea and Indonesia, among others had become the manufacturing bases as they supplied everything the world needed at much lower prices and at much faster speed. In vanilla words, India had missed the bus.

However, India suddenly woke up from its age old slumber when it realized that by 2020 India’s electronic import bill was going to surpass its oil import bill. It was an unaffordable proposition for a country always starved of foreign cash reserves. The previous government swung into action, made changes in the policy and wooed companies to set up their factories in India. It was not suffice as India did not seem to offer any value to the manufacturers. Plus, the infrastructure required to set up manufacturing bases was in a lousy state. However, things changed a little when the Narendra Modi government, after assuming power, launched a full-fledged programme called ‘Make in India’ on September 25, 2014. A lot of eyeballs were set on it. The IT hardware industry cheered the initiatives and the incentives given to the manufacturers. The move to encourage global and local companies to make in India did not go unnoticed.

As a result of the new program, India witnessed the entry of several global players to manufacture in India. Foxconn, the company which manufactures iPhones for Apple, invested in India to set up factories in India. Besides, a number of smartphone and electronic companies set up their assembly lines under the ‘Make In India’ plan. Most of the experts are of the opinion that India may perhaps not become China but it might become a strategic destination for the Middle East and African region.

Business Opportunity

If India succeeds in its drive to build manufacturing ecosystem in the country, it will help the country grow in many ways. There would be more jobs. Plus, the income of the country will grow significantly helping the country to move further. India’s dependence on agriculture would come down. However, it is important to outline how big is the business opportunity in the IT hardware manufacturing. If ASSOCHAM-EY study titled ‘Turning the Make in India dream into a reality for electronics and hardware industry’ is to be believed, the Indian electronics and hardware industry is expected to grow at a CAGR of 13%–16% during 2013–18 to reach US$112–130 billion by 2018 from current level of $75 billion. The growth is expected on the back of rising consumer demand, growing disposable incomes, declining prices of electronics, and numerous government initiatives such as wider broadband connectivity, e-governance programs and others, notes the study.

The study also highlights the key demand-side and supply-side challenges faced by companies in this sector. The study presents some of the policy recommendations to strengthen electronics manufacturing in the country. Growing reliance on imports for electronic components and rapidly increasing demand for electronic products makes it crucial to enhance as well as strengthen India’s electronics manufacturing capabilities. Around 50%–60% of the demand for electronic products and the demand for nearly 70%–80% of the electronic components market is fulfilled through imports.

India has the best opportunity to make most of the problems in the Chinese market. Milan Sheth, Partner and Leader – Technology, EY, earlier was quoted saying, “The Make in India initiative, combined with global manufacturers looking to relocate their manufacturing base from China to alternate locations such as India, Vietnam and Indonesia due to mounting labour costs provides a strong impetus to the Indian electronics and hardware industry. It presents an opportunity to become a manufacturing-led sector in India from being predominantly consumption-driven.”

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