Confederation of Indian Industry (CII) has welcomed the Cabinet's approval of financial support for setting up of Electronics Manufacturing Clusters (EMCs) and strengthening existing clusters. This will give a real boost to the Indian Information, Communication Technology and Electronics (ICTE) manufacturing industry, estimated at US $30 billion.

According to Mr Vinod Sharma, Co-Chairman, CII National Committee on ICTE Manufacturing, "This approval, together with the proposed fiscal incentives envisaged in the draft National Policy on Electronics across the value chain through a Modified Special Incentive Package Scheme (M-SIPS), would go a long way in mitigating the disability costs in ICTE manufacturing. It would make the industry competitive, attract investments, generate employment, create additional revenue and lead to lesser dependence on imports."

CII has been campaigning for support to EMCs to make ICTE manufacturing competitive. The cluster concept imparts certain inherent natural manufacturing advantages of agglomeration and scale, bringing together required infrastructure, skills, and supporting institutions.

"The EMCs have potential advantages like increased productivity of the companies in the cluster, driving innovation, cutting down unproductive costs and reduction of costs through shared resources," added Mr Chandrajit Banerjee, Director General, CII.

As per the CII press release, though this sector has registered a compound annual growth rate (CAGR) of about 15% in the last decade, India accounts for only about 1.5% of the global electronics production.

According to CII, the ICTE manufacturing sector faces several challenges due to inadequate supporting infrastructure in terms of availability and costs of power, time consuming logistics and logistics cost. In addition, the industry suffers from high transaction costs, and costs on account of high inventory levels due to dependence of supply chain on imports. It is estimated that adding value of 50% entails extra costs of about 8%.

The ICTE industry would significantly contribute in meeting the national objective of increasing the share of manufacturing sector in the GDP from the present level of 16% to 25% by 2022, said CII.

The share of ICTE production, which presently accounts for about 10% of the manufacturing GDP, can grow to 33% by 2022 and become the key driver for employment and manufacturing growth.

Countries with robust ICTE manufacturing bases such as China, Korea, Taiwan, etc., have systematically built excellent physical infrastructure and user friendly and simple policy framework and approval mechanisms. Low cost of funds, reasonable tax rates and a supportive government have encouraged its growth overseas.