Opinion

Union Budget 2023-24: Consumer Electronics sector expects proposals to bolster its growth

It would also be very helpful to the sector if the government provides incentives for the domestic design and manufacture of electronics

Kishan Jain Last Updated:February 01, 2023 06:07:43 IST

The consumer electronics sector needs a boost. Image courtesy Wikimedia Commons

Around 62 per cent of industry leaders were optimistic about India’s growth prospects in 2023, according to a recent survey by Deloitte. Despite global headwinds – including an economic slowdown, geopolitical instability, and supply chain disruptions – the India growth story remains resilient across sectors. In this context, all eyes are on the upcoming Union Budget and announcements that will, it is hoped, empower firms to deliver tremendous growth in the year ahead and beyond.

Outlook for electronics sector

In recent years, there has been a lot of discussion around India becoming the next big global manufacturing hub, and potentially surpassing China as the ‘world’s factory.’ The Indian ESDM (Electronics System Design & Manufacturing) sector will be a key contributor to this effort, as one of the fastest-growing sectors in the country. There are several measures that this Budget can take to put more wind in electronics manufacturers’ sails.

Electronics exports low due to high tariffs

A key impediment to the ESDM sectors’ growth is high tariff rates. According to an ICEA (Indian Cellular and Electronics Association) report, India has significantly higher tariff rates (9.7 per cent) as compared to countries like China (3.2 per cent), Mexico (3.5 per cent), Thailand (5 per cent), and Vietnam (5.6 per cent). Consequently, India’s electronics exports are much lower in comparison to these competing nations. Re-examining the tariff rate would thus provide a strong impetus to electronics manufacturers, enabling them to be far more competitive in the global marketplace.

Incentives for domestic design, manufacture needed

It would also be very helpful to the sector if the government provides incentives for the domestic design and manufacture of electronics. An import duty of, say, 10 percent, on imported electronics and assembled PCBs will go a long way toward giving primacy to local manufacturing.

Electronics is a skill-intensive sector, and much like in other such sectors, there is a concern about a mismatch between the demand and supply of skilled labour. In a Deloitte survey, 53 percent of respondents from electronics manufacturing said that this ‘labour-skill’ mismatch is a serious barrier to growth. It is hoped that the Budget will include some measures to address this concern.

Expanding PLI scheme

During the previous year’s Budget speech, the finance minister mentioned the PLI (Production Linked Incentive) scheme, and its potential to create 60 lakh new jobs and additional production of 30 lakh crore over the next 5 years. The 2022 Union Budget also included an outlay of Rs 1.97 lakh crores ($26 billion) for PLI schemes across 13 sectors, including electronics, telecom, food processing, and pharma, among others.

At a time when leading global manufacturers have been looking for cost-effective and competitive geographies to set up production facilities, the PLI schemes enable India to throw its hat in the ring. These schemes will make Indian manufacturing globally competitive, attract investment in key areas of high technology and core competency, boost imports, and make India a vital part of global supply chains.

The PLI initiative has already paid rich dividends to the manufacturing sector. For instance, as of September 2022, the PLI scheme for Large-Scale Electronics Manufacturing had already attracted investment worth Rs 4,784 crores, leading to production worth Rs 2,03,952. Expanding the scope of the PLI scheme to more sectors showing high employment or growth potential would be a very welcome move, and bolster the government’s ongoing ‘Make in India’ push.

Looking ahead

The previous Budget laid a special emphasis on infrastructure, and this trend is expected to continue. Additional investments in renewables and reforms to stimulate consumption in the consumer electronics and durables space would also be welcome. Developing strong supply chains is expected to be another key priority.

These measures will go a long way towards building India into a global manufacturing hub and achieving the Atmanirbhar Bharat dream.

The writer is the Director, Goldmedal Electricals. He tweets @goldmedalindia. Views expressed are personal.

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