At $16 billion, India’s import of electronic products—telecom instruments, computer hardware & peripherals, electronic instruments & components and consumer electronics—in the first five months of this fiscal exceeded every other item barring crude oil ($33.6 billion). Total electronic imports have exceeded gold import ($15.4 billion) for the first time and the biggest gainer is China which accounted for $8.75 billion worth of electronic goods. The key import item is telecom instruments (largely mobile handsets) that, at $6.4 billion, made up 40% of the electronics import bill. Electronic goods import has risen from $28 billion in FY11 and is expected to exceed $40 billion this fiscal. In 2020, India’s total electronic goods demand at $400 billion would be met largely by $300 billion in imports, making it India’s largest import item, beating even crude oil.
It is in this context that the government has initiated a “net zero import” of electronics under the Digital India and Make in India initiatives. Some progress has been made with Taiwan-based original equipment manufacturer (OEM) Foxconn talking of investing billions of dollars in manufacturing facilities for cellular phones. But while there is a huge demand for electronics goods in the country, the ecosystem for electronics manufacturing has yet to be developed. For genuine manufacturing, as opposed to mere assembling of mobile phones, India would need a semiconductor fabrication plant. Apart from $5 billion needed to set up a fab, the government would need to ensure a regular supply of power and gallons of water—as FE pointed out some months ago, it took Toshiba five years to get past just the litigation to set up a 15-20 MW power plant to provide reliable power to Japanese manufacturers in Manesar, the kind that is required for all electronics manufacturing; the Hitachi desalination plant at the Dahej SEZ, to provide clean water to industry, also remains stuck on the take-or-pay clause that is critical if it is to be set up. If the government wants to develop a robust electronics manufacturing sector, it needs to address these issue at the earliest; and given Foxconn’s premier status in the field, and the multiplier impact of Foxconn’s suppliers also setting up base here, the government needs to do everything to ensure the company remains committed to operating out of India.