Tax sops fail to cut electronics reliance on imports: report

Written by Neha Pal | New Delhi | Updated: Sep 3 2009, 05:21am hrs
Despite the government providing income tax exemption of 150% for infusing technologies in electronics and appliances industry through R&D, the Indian industry spends only $0.1 billion on the same and meets 70% of its electronics demands through imports, especially from China, US and Asian countries, says a report by E&Y and Assocham.

It is interesting to observe that more than 35% of electronics appliances imports in India are sourced from China, the report says. In a paper on electronics industry jointly brought out by the two organisations, has highlighted that until March 2009, the country imported worth $19.77 billion of electronics goods as against its exports of $3.17 billion. More than 70% of electronics demand is met through imports of which imports of finished electronics goods were around $13.90 billion and those of electronics components $5.87 billion by March 2009.

Assocham President Sajjan Jindal told FE, Meagre spending on R&D by electronics industry has increased the countrys dependence on electronics imports despite of the fact that 150% income-tax exemption is awarded by the government to electronics industry under Income-Tax Act Section 35 (2AB).

In the E&Y and Assocham paper, 89 companies with total revenue of $21.32 billion in electronics sector have been analysed. These companies had imports of raw materials and finished goods worth $3.37 billion in the year 2008-09. The remaining import of $16.4 billion is imported by other companies.

According to its findings, manufacturing activity in electronics sector is confined to domestic value addition, estimated at 40% of market size in India for year 2008-09 with primary employment potential of 5,500 to 6,000 for every $1billion of revenue.

The electronics and appliances market is estimated to have a market share of less than 2% of the global market, a production share of less than 1% of the global market and negligible exports from India. The FDI in electronics industry has been $0.75 billion during the nine-year period from April 2000 to March 2009.