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Indian electronic products industry to touch $75 billion by 2017
Last updated on Sep 20, 2016, 08:00 am
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According to the joint study, government's efforts for infrastructure development, locomotive and energy, pose an important opportunity for rapid-expansion of domestic electronics industry.
It is expected to reach $75 billion by 2017 from $61.8 billion in 2015 with rise in penetration across consumer-products, especially in semi-urban and rural markets.
Indian electronic components industry was valued at $13.5 billion in 2015.
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Report
The 'Make in India' dream for hardware and electronics industry
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The electronic components industry in India grew from $10.8 billion in 2013 to $13.5 billion in 2015 at a CAGR of 11%.
The market is dominated by electro-mechanical components, like PCB and connectors which form 30% of the total-demand, followed by passive components, like resistors and capacitors, at 27%.
India's attractiveness for manufacturers is increasing due to the availability of low-cost labour.
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Information
India- an attractive hub for manufacturers?
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Rising manufacturing costs in China and Taiwan are compelling manufacturers to shift their manufacturing base to alternate markets.
In 2014, the average manufacturing labor cost per hour in India was $0.92 as compared to $3.52 of China.
However, the Indian manufacturing ecosystem for electronics and hardware industry is still at a nascent stage and faces various demand side as well as supply side challenges.
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Details
India's taxation system
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Currently, the base direct tax incidence in India stands at around 30%, whereas the corresponding tariff in other Asian countries is between 16-25%.
Even after the proposed implementation of Goods and Services Tax, there still are clarity concerns regarding revenue-neutral rate, non-creditable tax on inter-state movement of goods, status of existing state incentives granted and transition from existing taxation system to GST regime.
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Limitations
Challenges faced by Indian electronic products industry
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Since Indian manufacturing ecosystem is still in a nascent stage, scale of operations and local component demands are limited, resulting in reduced cost-competitiveness.
Component demand is muted due to limited value-addition as primarily last-mile assembly takes place.
High electronic content is not added in products due to limited industry-specific standards.
Primary sales are limited due to reduced disposable income in semi-urban and rural markets.
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Challenges
Lack of facilities
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In India, there is unavailability of good roads, power, water, telecommunications, ports and logistics, even in established industrial estates.
Lack of proper roads and sales infrastructure results in distribution challenges in semi-urban cities and remote villages.
There is port congestion due to unavailability of containers and long-documentation process.
With changing technology, labor needs constant training as electronics-manufacturing industry has high dependence on skilled manpower.