In keeping with PM Narendra Modi’s ‘Make in India’ theme, finance minister Arun Jaitley has doled out a bunch of initiatives to help both Indian and foreign electronic equipment and durable makers establish manufacturing outfits here.
These will help companies tap a $400-import opportunity in India, said experts. “Though this is just the stepping stone, we are moving in the right direction,” said an official of a Japanese consumer durable company, who didn’t want to be named.
Electronic imports that have crossed $100 billion are expected to quadruple by 2020. In September, Ravi Shankar Prasad, Union minister of communications and IT, said manufacturing in India was more expensive than importing — largely due to high import and custom duties. Assembly line manufacturing has taken off in India, for which raw material and components are imported.
The government is looking at a two-pronged approach to boost manufacturing — skilling more individuals for manufacturing and a reduction in custom and excise duties. “Two-thirds of our population is below 35. To ensure that our young get proper jobs, we have to make India the manufacturing hub,” said Jaitley. India is being seen as the next best alternative as manufacturing gets costlier in China. According to estimates, about a 100 million jobs will move outside China over the next few years, especially in labour-intensive areas — including electronics.
Some companies that have already moved parts of manufacturing out of China to India are Godrej, Micromax, Bosch, ITC and Havells. “It makes sense to manufacture in India,” said Vineet Taneja, CEO of Micromax. He added: “Electronic imports will be a big drain on the government, but for manufacturing to happen, one needs much bigger moves. This is not a magic wand. If all the other elements fall in place, we will see people coming to India.”
Jaitley has proposed reduction in custom duty on 22 items, including raw materials, intermediates and components, to minimise the impact of duty inversion. There were duty cuts on metal parts used in electrical insulators, magnetron used in manufacturing microwave ovens, compressors used in refrigerators and components used in digital cameras. There has also been a reduction in the basic custom duty on components used in washing machines. The 10% duty on organic LED panels has been scrapped.
Another area expected to benefit is rural manufacturing. A large global retailer, which procures from India, said setting up of the Micro Units Development Refinance Agency Bank (MUDRA)— with a corpus of R20,000 crore and a credit guarantee corpus of R3,000 crore — will play a key role in boosting manufacturing in rural India. The money that entrepreneurs raise from the fund will help improve infrastructure.
“If manufacturing has to grow in rural India, the most important piece will be setting up the right infrastructure,” said the official of the retail company.
But there are a bunch of issues that the government needs to address. “The cost of money is very high in India vis-à-vis China where there is state support,” said Poornima Shenoy, CEO, Latitude Edutech and former president of Indian Semiconductor Association.