A joint study by Assocham and EY states that the Indian electronic products industry is expected to grow at a compound annual growth rate (CAGR) of 10.1 percent to reach $75 billion by 2017. This would be up from $61.8 billion in 2015. The market is dominated by electromechanical components which form 30 percent of the total demand followed by passive components (such as resistors and capacitors) at 27 percent, according to the study titled Turning the Make in India dream into a reality for electronics and hardware industry’. The electronic components industry in India was valued at $13.5 billion in 2015 which is growing from $10.8 billion in 2013 at a CAGR of 11 percent. Also Read - FIR filed against Twitter India again, now over child pornography contentAlso Read - Mi Notebook Pro X to be Xiaomi's most expensive laptop yet, launch tomorrow
Rising manufacturing costs in China and Taiwan are compelling manufacturers to shift their manufacturing base to alternate markets. In 2014, the average manufacturing labor cost per hour in India was $0.92 as compared to $3.52 of China, the study stated. India’s attractiveness for manufacturers is growing due to availability of low-cost labor. The Indian manufacturing ecosystem for electronics and hardware industry is still at a nascent stage and faces various demand side as well as supply side challenges, it said. Component demand in India is muted due to very limited value addition as primarily last-mile assembly takes place here. However, manufacturers in India do not add high electronic content in the products due to limited industry-specific standards.
The current market is dominated by secondary sales and primary sales are limited due to reduced disposable income in semi-urban and rural markets. Due to nascent stage of electronics manufacturing in India, scale of operations is low, resulting in reduced cost competitiveness. India’s taxation system is complex, especially where indirect taxes are concerned. Currently, the base direct tax incidence in India stands at around 30 percent, whereas the corresponding tariff in other Asian countries is between 16 percent and 25 percent, the study said. ALSO READ: India witnessed 350 percent rise in cybercrime from 2011-14: ASSOCHAM-PwC study
Although, the government has proposed the implementation of Goods and Services Tax (GST) for a state-of the-art indirect tax system, there are concerns that the industry faces in terms of the clarity on the revenue-neutral rate, non-creditable tax on inter-state movement of goods, status of existing state incentives granted and transition from existing taxation system to GST regime, it added. ALSO READ: Scientists develop new touchscreen technology for gen-next smartphones, TVs