Import, Export trends signify positive shift Indian electronic industry's dynamics

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Import, Export trends signify positive shift Indian electronic industry's dynamics

Import, Export trends signify positive shift Indian electronic industry's dynamics

Articles
Jul 28,23

An S&P Global company, CRISIL is a global analytics company driven by its mission of making markets function better. Sharing some qualitative insights on Indian electronics market in India Pushan Sharma, Director – Research, CRISIL Market Intelligence and Analytics says that India is experiencing robust growth in electronics. He also shares some current merits and flaws in the industry.

Import, Export trends signify positive shift Indian electronic industry's dynamics

What is the current status of the electronics industry in India?
The electronics industry in India is experiencing robust growth, finding widespread use in various sectors of the economy. Based on estimates, India's global electronics manufacturing share has increased significantly, rising from 1.3 per cent in FY12 to 3.75 per cent in FY22. According to the Ministry of Electronics and Information Technology, Indian electronics consumption reached approximately $140 billion in FY22, showing a consistent CAGR of approximately 11 per cent over the past 5 years.

The Indian electronics industry has witnessed a steady decline in the overall import of electronics goods over the years. Currently, imports in the industry account for approximately 10.5 per cent of the country's total imports compared to approximately 14 per cent in FY21. On the other hand, while the import percentage has been declining, the export of Indian electronic goods remains at around 4 per cent of the country's total exports. These trends signify a positive shift in the Indian electronic industry's dynamics, as efforts are being made to reduce import dependence and increase indigenous production.

Overall Exports/Imports in Indian electronic industry

What are some challenges industry is facing today?
Indian electronic industry is facing the following challenges:

The Electronics market in India currently faces several challenges for manufacturers. The industry still relies meaningfully on imports for electronic components, resulting in increased production costs due to tariffs, taxes, and transportation expenses. This dependency on foreign suppliers hampers the competitiveness of Indian manufacturers in the global market, making it difficult to price products competitively.

India lacks a well-established component ecosystem, leading to inadequate domestic supply chains and logistics.

Manufacturers encounter obstacles like limited design capabilities, insufficient focus on research and development (R&D), and skill development inadequacies.

Additionally, the country imposes higher import tariffs on electronic inputs compared to its Asian counterparts, creating a cost disadvantage of 7-10 per cent compared to Vietnam and 17-19 per cent compared to China. This uncertainty in import tariffs affects manufacturers' decision-making processes and overall competitiveness.

What are some future opportunities for the Indian manufacturers in electronics?
The industry can look forward to the following:

The government has introduced several PLI schemes to boost the electronics manufacturing. Some prominent ones include PLI for Electronics Manufacturing, aimed at mobile phones, IT hardware, and electronic components. Manufacturers can gain a strategic advantage by setting up local component manufacturing, reducing production costs, and decreasing dependency on imports. As an example of the growth potential, India's mobile phone segment has experienced remarkable progress, positioning the country as the second-largest mobile handset manufacturer globally and the second-largest smartphone market in the world, solidifying its status as the fastest-growing smartphone market globally, indicating the immense possibilities for electronics manufacturers in the country.

India's electronics industry has the potential to expand its presence in the global market by focusing on quality production and competitive pricing, thus exploring export opportunities.

Some growth opportunities for Electronics manufacturers in India include leveraging the rising domestic demand driven by increase in disposable incomes, and growth in the affluent segment. By customising products to suit the preferences and price points of the Indian market, manufacturers can tap into the growing consumer base.