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Make India a Global Hub of Electronics

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Industrial Spectrum​ August 2012 

India is one of the fastest growing markets of electronics in the world. There is potential to develop the Electronics System Design & Manufacturing (ESDM) sector to meet our domestic demand as well as to use the capabilities so created to successfully export ESDM products from the country. 

These views were exchanged by experts during a daylong national workshop on ESDM organised by Indian Institution of Information Technology, Allahabad with the support of Department of IT (DIT), Ministry of Communications and IT, New Delhi, Government of India at Allahabad recently. 

According to the academicians present at the workshop, India is recognised as a global player in software and software services sector. The vision is to transform India into a global hub for electronics system design and manufacturing (ESDM) so as to meet the growing domestic and global demand. 

The increasing role of electronics especially in the field of information technology was stressed upon. India has now started working on design and manufacturing of electronics system but the experts warned of the Chinese domination in the area in recent years. 

The team of experts and IIIT-A faculty also laid stress on creation of capacities within academic institutions to enhance the production of adequate number of PhDs and post-graduates for supporting the growth of chip design and embedded software and board/hardware design industry in the country. 

The need to develop a center of excellence for innovation in industrial electronics with focus on making affordable standardized products which help India to maintain its growth in industrial segments was also brought to fore.

posted Sep 16, 2016 by Lub Electronics (message)

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Industrial Spectrum • August 2012 

The Path Taken 

India embarked on its Electronics journey around 1965 with an orientation towards space and defence technologies. This was rigidly controlled and initiated by the government. This was followed by developments in consumer electronics mainly with transistor radios, Black & White TV, Calculators and other audio products. Colour Televisions soon followed. In 1982, a significant year in the history of television in India, the government allowed thousands of colour TV sets to be imported into the country to coincide with the broadcast of Asian Games in New Delhi. 1985 saw the advent of Computers and Telephone exchanges, which were succeeded by Digital Exchanges in 1988. The period between 1984 and 1990 was the golden period for electronics during which the industry witnessed continuous and rapid growth. 

After the software boom in mid 1990s India's focus shifted to software. Moreover the steep fall in custom tariffs made the hardware sector suddenly vulnerable to international competition. In 1997 the ITA agreement was signed at the WTO where India committed itself to total elimination of all customs duties on IT hardware by 2005. 

In recent years the electronic industry is growing rapidly. It is currently worth $75 Billion but according to estimates, has the potential to reach $ 400 billion by 2020. The largest segment is the consumer electronics segment and the largest export segment is of components. 

Industrial Spectrum brings an overview of the industry, which is dominated by MSMEs. 

The Road Ahead

The Indian Electronics industry constitutes less than 1% of the global market. The industry is however poised to grow. In December 2011, The Economic Times had projected that the electronics market in India will cross $400 billion (Rs 20.41 lakh crore) by 2020 and industry experts and observers seem to agree with the seemingly exaggerated forecast.

With the new National Electronics Policy that aims to provide a competitive and low cost environment to the electronics industry, the industry expects to see rapid growth and value addition. “This will result in the industry achieving the target of $400 billion. It requires a growth of 22-25% per annum till 2020 to reach a production level of $400 billion from about $75 billion at present,” according to Mr T Vasu, President of Electronic Industries Association of India (ELCINA). Currently, the largest segment of the Indian electronics industry is the consumer electronics segment while the largest export segment is components.

Key Growth Drivers 

Policy and regulations: The Indian electronics industry is believed to be on the threshold of a revolution as the concept of electronics clusters is becoming a reality

Electronics clusters are believed to give this key sector the desired growth direction and also lead to the creation of millions of jobs. 

The new Electronics Policy is expected to bring a significant amount of investment in to this sector as well along with other industries. The policy is also expected to bring respite for SMEs, which form a large chunk of the industry. 

According to estimates, India’s electronics import bill has the potential to cross that of oil by 2020, which mandates an ecosystem that pushes domestic manufacturing. As a fillip to this comes the Union Cabinet’s green signal to the Modified Special Incentive Package Scheme (MSIPS) under which the Central government will be offering up to Rs 10,000 crore in benefits to the electronics sector in the next five years. The funding will be used for the promotion of production of electronics products and components in India. 

An official statement from the Centre says, “The policy is expected to create an indigenous manufacturing eco-system for electronics in the country. It will foster the manufacturing of indigenously designed and manufactured chips creating a more cyber-secure ecosystem in the country. The projects with incentives of Rs 10,000 crore have the potential to create employment for nearly 0.5 million people.”

The Centre’s approval for the development of electronics manufacturing clusters to support the establishment of both greenfield and brownfield clusters is slated to enhance the growth of the hardware sector. The production of computers and mobile handsets has the potential to benefit from this scheme. Booming domestic demand: As India is the world’s second-most populous nation, it will continue to rule as one of the largest consumers of electronic products internationally. A burgeoning middle class with higher dispensable incomes augurs well for the industry as it ensures a booming demand for consumer electronics. 

R&D: Analysts opine that strengthening of the core areas of design and application development will prove beneficial for the Indian electronics and manufacturing industry. Moreover, it will also lead to improvement in innovation both in the domestic and international markets. 

Quality manpower at lower costs has made India an attractive destination for global companies to make the country their R&D hub. It is hoped that once the required policies and regulatory environment are in place, these same companies would see the benefits of establishing their manufacturing hubs in India and grow the country’s competence and capability in this regard.

MSMEs in Electronics Industry 

The industry is dominated by the SMEs who manufacture electronic components, parts and also engage in EMS activity in niche markets. However, this sector has been unable to compete with other Asian suppliers where manufacturing costs are lower. “Being a zero duty sector, our SME manufacturers face unfair disadvantage and are heavily losing the market share,” according to Mr T Vasu of ELCINA. 

Exports of electronics from India are about $3 billion but growth is not encouraging due to lack of competitive ecosystem for manufacturers in India. A few MSME companies, which are in niche markets, have succeeded in retaining or growing their exports. Alternatively, selected large global branded equipment manufacturers are able to export with limited value addition. 

Challenges 

MSMEs in electronics industry face the same challenges which are typically similar to those in other industries across sectors. These challenges are largely related to lack of resources and absence of a supportive ecosystem. They need low cost finance, high quality human resources and the most crucial are funding and technology for R&D and growth. 

What is specific and throws a bigger challenge for MSMEs in electronics sector is the rapid rate of technological change and obsolescence in this industry which requires continuous R&D as well as investments in new technology, product design to keep up with the market. 

Manpower is another issue wherein the core of the problem is lack of trained manpower. As manufacturing and demand grows, manpower crunch will only become severe. The industry is hoping for a respite from the Electronics Sector Skill Council (ESSC) which is being established now. ESSC is expected to assist in formally training people from across the country. 

Advantage India 

The electronics industry in India is small, but growing rapidly. India offers several advantages that can be leveraged to achieve higher growth: 

1. Availability of manpower: India produces over 500 PhDs, 200,000 engineers, 300,000 non-engineering postgraduates and 2,100,000 other graduates each year. It is home to world-class educational institutions like IITs and IIMs that produce graduates with best-in-class skills and capabilities in technical and management fields. 

2. Market demand: India has a huge domestic market. The market is characterized by booming businesses across consumer electronics, computer industry, control, instrumentation and industrial sector, communication and broadcasting sector, strategic electronics, and electronic components. 

3. Policy and regulatory support: India has taken positive measures to ensure growth of Internet, Communication and Entertainment sector. Its foreign investment and trade policies are being fine-tuned to enable the industry to grow. Businesses can exploit the opportunities under Special Economic Zone scheme while special schemes are also available for setting up Export-Oriented Units for the Electronics /IT sector.

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Mr. Anand Mahindra’s recorded speech delivered at the IMS 2012 Curtain Raiser.​

The timing of the India Manufacturing Show 2012 is very fortuitous because I truly believe that we might be on the threshold of a new era for manufacturing in India. Manufacturing in India has always reminded me of those fairy tales where the quiet, diligent, honest heroine is constantly pushed aside and overshadowed by her more high profile and glamorous sister. In India we have leapfrogged from the age of agriculture to the age of Information Technology without really going through an Industrial Revolution between the two. And as a result manufacturing for the last couple of decades has consistently been eclipsed by its more glamorous sibling, Information Technology. Happily, I think that situation is about to be rectified. With the adoption of the National Manufacturing Policy last October I am hopeful that manufacturing will finally get the focus that it deserves. It is after all the missing piece in India's growth story.

The preface to the new Policy recognizes the stagnant state of the manufacturing sector, and the need to accelerate its development. And here's a very good reason for doing this: For the first time there is a real pull for giving manufacturing the support it deserves. If India is to reap the benefits of its much-wanted demographic dividend, 220 million jobs will have to be created by the year 2025. And this is going to be impossible without a major contribution from the manufacturing sector. The Policy envisages that 100 million out of these 220 million jobs - a full 45% - will have to come from the manufacturing sector. And if this doesn't happen, we will have an angry and unemployed population of young people whose disenchantment will turn the demographic dividend into a demographic disaster. So almost overnight manufacturing has moved from playing a side role to being the lead actor on the economic stage. And this is an opportunity that we must seize with both hands.

The two large national goals of increasing the contribution of manufacturing to 25% of GDP and creating 100 million jobs have now to become our goals. The Government is displaying an appreciation of the potential that manufacturing holds and an intention to support it fully. I must particularly mention the efforts of the Government of Karnataka and express my thanks for its vision and its constant proactive support.

Government support is welcome and is necessary and I know that all my fellow manufacturers will leverage it to the fullest. But I would like to emphasize that the responsibility to achieve and outperform on the goals is really ours. I would even say that the goal of contributing 25% of GDP is not ambitious enough for a large sector like manufacturing. Why not 35%? Why not 50%? I believe the Government policies set out the baseline goals. But it is for us manufacturers to embrace the goals and indeed to enhance and to outstrip them. Government policy is but the supportive framework, the actions and the efforts have to be ours.

That's why I think the timing of the India Manufacturing Show is so perfect. At just the right moment, it offers a platform for the entire manufacturing fraternity across the spectrum to meet, to learn and collaborate with each other and with global players. It offers knowledge through technical seminars & inputs and networking through vendor development programes. Whether your industry is large, medium or small it offers a forum where you can add value to your business. It is a platform to dream, to act and to achieve.

The IMS Foundation supported by the Reliance Broadcast Network and Bloomberg TV has worked relentlessly to give a thrust to the manufacturing sector. This Show has set itself the ambitious goal of becoming the best B2B platform for Indian manufacturers globally. With supportive Government policies also falling into place it seems to me that this is the right time and the right place to make a concerted thrust to take the manufacturing sector to the next level of performance.

All the planets seem to be in alignment so to speak, for a very great leap forward. I would urge all of you in the manufacturing sector to make full use of this opportunity and to use this platform to grow your business and at the same time to grow the nation. 

I am always inspired by the story of the Chairman of Sony Corporation who in 1946, amidst the ashes of Japan's defeat in World War II articulated a seemingly impossible vision. In 1946, when Japan was on her knees, he said that Sony would see to it that in 50 years, the words 'Made in Japan' would stand for the best quality in the world. And he achieved that goal in far less than 50 years. I too dream of a time in the not too distant future when the words "Made by India" which is the tagline of the India Manufacturing Show, will stand for outstanding global quality. I believe that the India Manufacturing Show is the first step to facilitate and kick-start this ambition. With your help and your participation I have no doubt that we will move manufacturing from playing just a side role to being the hero of India's economic story

+1 vote

Industrial Spectrum September 2014

Columnist and Chartered Accountant S Gurumurthy today made a strong pitch for a separate financial architecture for small and medium enterprises (SMEs) in India. 

“A separate financial architecture for SMEs is necessary for the country. The government has said that it will create a separate financial architecture, we must ensure it is created,” Gurumurthy said on the sidelines of an event here. Noting that there are at least 20 million small financial institutions in India, which finances small businesses, he stresses need for banks lending to them at cheaper rate. “...they (small financial institutions) are lending to SMEs at 36-45 per cent because they are borrowing at that rate. If banks lend to them at 10-12 per cent then they will lend at 14-15 per cent,” Gurumurthy said. Finance Minister Arun Jaitley in his Budget speech 2014-15, had said, “SMEs form the backbone of our Economy... Financing to this sector is of critical importance, especially as it benefits the weakest sections.

“There is need to examine the financial architecture for this sector. I propose to appoint a committee with representatives from the Finance Ministry, Ministry of MSME, RBI to give concrete suggestions in three month.” 

Gurumurthy, who is also an Rashtriya Swayamsevak Sevak (RSS) ideologue, said that “we must actually ensure that the government provide wholesale financing and retail financing is done by a small business finance corporation, which the government should register separately”

Speaking on the occasion, National Coordinator of the Action Committee for formal finance for non corporate small business Praveen Khandelwal said, “the non corporate sector is providing employment to nearly 49 crore people in the Country which is 90 per cent of total employment in India and is also contributing 45 per cent to national GDP which is three times higher than corporate sector. “Astonishingly only about 4 per cent people in non corporate sector are getting finance from banks and other banking institutions which is very low.”

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 May 2013 | Industrial Spectrum​

If reports are anything to go by, Indian SMEs are going green and this is not just about green technology. SMEs across the board are adopting greener technology. Increased exposure to environment-friendly solutions is prompting small companies to adopt green technologies and resort to non-polluting modes of production. 

Earlier the main deterrent was the high cost, according an official of the Confederation of the Indian Industry (CII). High cost of clean and energy efficient technologies acted as a deterrent for these small units to go green. A near total lack of indigenous development of green technologies was cited as the main culprit. However, the scenario is changing as SMEs are now collaborating globally to adopt cleaner, greener practices. 

Many Indian SMEs are entering into tie-ups with firms across the world to develop green manufacturing technologies and eco-friendly production processes, according to a report recently published in the Economic Times. In an important development SMEs, which have been in quest of environment friendly technologies, signed an agreement with the European Association of Chambers of Commerce and Industry. The agreement was signed with Federation of Indian Micro and Small & Medium Enterprises (FISME) in this regard. According to a FISME official, formalising cooperation with Europeans would positively impact the efforts of SMEs’ access to green technologies. Indian SMEs are continuously under pressure of supply chains to improve and upgrade technologies which are environment-friendly and sustainable. 

The European Union needs “more robust” SME policies in order to create jobs and economic growth and to face up to globalisation and energy and environmental challenges, EU competitiveness ministers concluded at an informal meeting in Lisbon recently. Besides, as part of their social responsibility and support to environmental concerns of the country, SMEs are adopting energy efficient, zero emission technologies. The Gujarat example seems to have inspired companies across the country to adopt these technologies as SMEs in Vapi, Ankleswar and other industrial areas of Gujarat have proved that greener technologies are cost-effective in the long run. 

Through the FISME programme, co-funded by the European Union and implemented by Euro Chambers, the Indian SMEs will connect to an association of more than 1,200 European industry bodies and which voices the interests of over 19 million member enterprises in 45 European countries.

However, it’s not smooth going. Particular focus should be given to developing new methods of financing for start-ups and reducing the “disproportional regulatory and administrative burden” placed on small companies in comparison with larger ones, said industry sources, citing a study showing that, on average, where a big company spends `62 per employee because of a regulatory duty, a small business might have to spend up to 700. “That’s clearly a big difference,” says the CII official.

It has been estimated that manufacturers and assemblers of electronic equipment in India alone generate about 1,200 tonnes of electronic waste per year. India’s burgeoning scrap business also attracts substantial amount of degraded components from the developed countries, which adds to the alarming volume of e-waste is a critical issue. However, this problem has been addressed to a certain extent through the initiation of environmental protection and pollution control measures across the globe. 

This also sends a message to buyers out there, especially in the western markets. Companies are opting for environment management systems (EMS) to send a strong message to their environmentally conscious buyers in the world market. Some big IT companies like Wipro and Infosys have already begun sharing their internal green computing practices with their clients. Increasing awareness about such technologies is enabling SMEs to tread the green path in the face of growing environmental concerns. Green practices by SMEs will pave the way for a cleaner and greener environment for future entrepreneurs ability in adopting the right cleaner production concepts in production process, know-how in eco-product design, identifying a cost-effective pollution control technology, understanding the local and global legal requirements in environmental protection, proper ways in responding global environmental supply chain pressures, strategic planning for long-term environmental improvement and obvious constraints from capital and human resources. 

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