Welcome NPE 2011

Texas Instruments, which is often credited with kickstarting the Bengaluru offshore R&D phenomenon, had apparently approached the Indian government way back in the 70s to set up a manufacturing and research unit in India for ICs, with conditions that it would be 100% owned by the company and without formal export obligations, though almost 100% of its productions would actually be exported. The then prime minister Mrs Indira Gandhi had hailed the idea but had rejected it saying she would not be able to get it through the political system.

After four decades of that, and close to two decades of India proving itself as an IT services superpower, finally the country has managed to build a political will for creating a vibrant local electronics manufacturing industry.

The document that encapsulates that will with a well-articulated vision and some fine strategic stepsthe much-awaited draft of National Policy on Electronics 2011is finally out.

Dataquest joins the industry in welcoming the big step by the government.

This is probably the first time in the hi-tech sector that the government has come out with a strong vision that unequivocally articulates the intent and steps to create a globally competitive industry. Most of the previous policies such as the National Telecom Policies in 1994 and 1999 did certainly give a push to the industry but the intent was always social or socio-economic. In contrast, the stated reason for NPE 2011 is economic: to close the demand-supply gap in electronics by manufacturing locally. Conversely, the social impact that this policy will have, if it succeeds would be huge. Just look at the direct employment that the policy talks about: 28 mn by 2020. And you can work out the forward and backward linkages.

The policy is complete and well-rounded addressing all the areas that need to be addressed such as creating the right ecosystem, fiscal incentives for exports, human resources development, standardization, addressing security concerns, special focus on strategic electronics, promoting the use of electronics in other sectors, creating funds that would be professionally managed, handling e-waste, and building an overall effective governance structure by creating an electrionics mission. Why, it even proposes to change the name of DIT to Department of Electronics and Information Technology (DEITy)!

The good thing about the policy is that it has taken the more difficult but effective-in-the-long-run path of addressing issues at the fundamental level so that it does not get derailed after the initial euphoria. Remember the National Telecom Policy 1994 which envisaged opening competition in the telecom sector without creating a regulator?

While many would find faults with the approach of providing preferential market access for domestically manufactured products with special emphasis on those whose IPR is within India, it is a global practice. There is no reason why a country like India whose design capability is second to none, should not focus on locally created, rather than just locally manufactured.

Interestingly, that brings us to the most important differentiator for India: its design capability. India has already proved itself in that area. A manufacturing plans in India that does not take into account this important differentiator and tries to imitate the older models would not be an optimal approach. Take for example, the intent of promoting exports to emerging markets like Africa, Asia, and Latin America. In an older model, one would try to lower the cost of manufacturing and add some subsidies to gain market access but the products would be the same as those meant for the developed market. An India model should create products for them from scratch and then manufacture. The design capability makes that possible.

Going forward, the Indian differentiation should be more clearly articulated and promoted. We certainly do not want to be another China.

In the coming months, we will focus on this area a lot more. Suggestions are more than welcome.