A deeper product analysis of India’s presence in the electronics value chain reveals that while India has made strides in final assembly and sub-assembly, particularly in the mobile and consumer electronics segments, it remains heavily reliant on imports for component manufacturing and design capabilities across all sector, said a Niti Aayog report.
The report titled ‘Electronics: Powering India’s Participation in Global Value Chains (GVCs)’ highlighted that India’s participation in GVC is low at less than one per cent (around $24 billion) share in around $3 trillion electronics trade flow globally, while countries like Vietnam exports around 6X of India. Also, it noted adding that India’s import bill for electronics stood at $78 billion.
It said that India could target to five-six per cent of $4 trillion electronics GVC ($200-250 billion exports) by 2030.
It also said that India, supported by favourable demographics such as a young population, an expanding middle class and government investments under phased manufacturing programme (PMP), production-linked incentive scheme (PLI), scheme for promotion of manufacturing of electronic components and semiconductor (SPECS), etc, is poised to benefit from this opportunity.
Tough competition
However, countries like Vietnam, Mexico and Malaysia pose tough competition, as they have successfully managed to attract sizeable shares of electronics manufacturing to their soils. For instance, mobile and hearable/ wearable manufacturing is shifting to Vietnam and there has been an increase in the manufacturing of IT hardware and TVs in Mexico, among others.
“If countries like Vietnam and Mexico solidify their positions, it would become a significant more challenging for India to displace them to become a key player in electronics GVC. Therefore, there is an urgent need to capitalise on this opportunity. India must act swiftly and target four-five per cent share in global electronics exports by 2030,” the report said.
It noted that the global manufacturing landscape has undergone significant transformation over the past 24 years, with value addition in manufacturing increasing by more than 2.5 times since the 2000s.
In 2022, the global value addition in manufacturing stood at $16.19 trillion and is largely occupied by China, which accounts for 28.4 per cent of the share in global manufacturing output. It is followed by the US (16.6 per cent), Japan (7.2 per cent), Germany (5.8 per cent), India (3.3 per cent), South Korea (3 per cent), Italy (2.3 per cent), UK (1.8 per cent) and France (1.9 per cent).
Domestic production
India’s manufacturing capabilities span a wide range of industries, including textiles, chemicals, electronics, automotive, and machinery. Among these, the electronics sector is one of the world’s largest and fastest growing industries and has also emerged as having growing significance for India. The sector has a market size of $155 billion in India.
Domestic production of electronics doubled from 2017 to 2022 and the sector has had a high CAGR of 13 per cent over the past five years. This growth can be attributed to several factors, including increased domestic consumption, advancements in technology and supportive government policies, it said.
“The electronics sector has demonstrated exceptional performance among India’s top 10 export sectors in recent years, rising from rank 9 in 2018 to rank 6 in 2022. in FY23, the electronics sector recorded significant value of exports, contributing considerable share to India’s total merchandise exports clocking $23.5 billion,” the Niti Aayog report noted.
The sector’s export performance underscores its competitiveness in the global market and its ability to meet international demand. This success in exports not only brings in foreign exchange but also enhances India’s reputation as a key player in the global electronics landscape, it added.