The Cabinet has approved a National Policy on Electronics (NPE) for the Electronics System Design and Manufacturing (ESDM) sector of India. Vision of the NPE 2019 is to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by creating an enabling environment for the industry.

NPE 2019 is a final version of the draft policy prepared by the Ministry of Information Technology and Telecommunication in 2018. The policy has lot of importance for the country in the context rising electronics imports, higher domestic demand, potential for electronic manufacturing etc.

Main thrust of the policy is to enable the domestic electronic manufacturing to achieve a turnover of US $ 400 Billion by 2025. Cabinet declaration on NPE comes out with several support mechanisms for the electronics sector. The Policy aims to take domestic manufacturing to the next level and is more export-focused.

State of electronic manufacturing in India

As a rising economy, India doesn’t have the edge of a competitive electronic sector. At the same time, despite the higher reliance on imports, India’s electronic sector has shown growth momentum in recent years.

India’s electronics sector: production, growth and trade

According to the draft policy, the global electronics production is estimated to be US $ 1,740 billion in 2017 and has registered a growth rate of 5%.

Indian electronics hardware production has grown to around US $ 59 billion in 2017-18; registering a growth rate of 26.7%. India’s share in the global hardware electronics production is 3.4%. The share of domestic electronics production in India’s GDP is 2.3%. The import of electronic goods was of the order of US $ 53 billion in 2017-18.

The draft policy predicts demand for electronics hardware to rise rapidly to about US$ 400 billion by 2023-24. In that case, India cannot afford to such a big import bill in electronics. Hence, promoting domestic electronics hardware manufacturing becomes very critical.

Some positive developments in recent years gives boost in promoting the EDSM sector. For example, the production of Mobile Handsets, LCD/ LED TVs and Light Emitting Diode (LED) Products in the country has gone up significantly, and over the last few years, the demand of aforesaid electronic products is increasingly being met out of domestic production.

In the years, the Phased Manufacturing Programme (PMP) for mobile handsets and related subassemblies components manufacturing has created robust manufacturing eco-system in the country.

Earlier incentives for the electronics sector

The previous arrangement for the promotion of electronics manufacturing was the National Policy on Electronics in 2012 (NPE 2012), as it provided a road map for the development of electronics sector in the country.

Several schemes were launched since then to promote electronics manufacturing. For example, there were:

  • Modified Special Incentive Package Scheme (M-SIPS) that provided financial incentives across the ESDM value chain to compensate for disability costs in manufacturing;
  • Electronics Manufacturing Clusters (EMC) that created world-class infrastructure and logistics;
  • mandating Safety Standards;
  • rationalization of Tariff structure and
  • providing preference to domestically manufactured electronic products in Government procurement under the Public Procurement Order 2017 etc.

All these initiatives helped the growth the of the sector. As a result, ESDM industry has witnessed upward growth in India and has the potential to become a vehicle of economic growth and development.

Objectives of NPE 2019

Following are the important objectives of the policy as elaborated in the draft report.

  1. Promotion of domestic manufacturing in the entire value-chain of ESDM for economic development to achieve a turnover of US $ 400 Billion by 2025. This shall include targeted production of 1.0 Billion mobile handsets by 2025, valued at US $ 190 billion (approx. Rs.13 lakh crore), including 600 Million mobile handsets valued at US $ 110 billion (approx. Rs.7 lakh crore) for export.
  2. Improve ease-of-doing-business for the ESDM Industry.
  3. Encourage Industry-led R&D and Innovation in all sub-sectors of Electronics.
  4. Support a comprehensive Start-up ecosystem in emerging technology areas such as 5G, IoT, Artificial Intelligence, Machine Learning, etc., and their applications in areas such as Defence, Agriculture, Health, Smart Cities and Automation, with special focus on solving real-life problems.
  5. Provide support for significantly enhancing availability of skilled manpower in the ESDM sector.
  6. Provide support for export led growth, including significantly enhancing economies of scale in electronics manufacturing.
  7. Develop core competencies in all the sub-sectors of Electronics, including Electronic components and Semiconductors, Telecommunication equipment, Medical electronics, Defence Electronics, Automotive electronics, Industrial Electronics, Strategic Electronics, etc., and Fabless Chip Design.
  8. Become a global leader in the Electronics Manufacturing Services (EMS) segment by promoting progressively higher value addition in manufacturing of electronic products.
  9. Facilitate cost effective loans for setting up and expansion of electronics manufacturing units.

Main steps under the NPE 2019

Following are the important support mechanisms proposed in the NPE 2019.

  1. Interest subvention:

First one is the interest subvention scheme that is already provided to sectors like agriculture. Here, the government will provide an interest subsidy of 4 per cent on loans upto Rs 10000 crores. The loan amount should spend on plant and machineries.

  1. Credit Guarantee Fund Scheme

Another incentive under the NPE is the Credit Guarantee Fund Scheme that will provide default guarantee to banks up to RDs 75% of the loan amount on plant and machinery for loans up to Rs 100 crores.

With the Credit Guarantee Fund, small and new investors need not provide any third-party collateral like bank guarantee to secure loans.

  1. Electronics Manufacturing Clusters 2.0

The NPE also upgrades the existing Electronics Manufacturing Clusters scheme into Electronics Manufacturing 2.0. Sovereign Patent Fund will be used to upgrade technology and knowledge in this initiative. The objective is to ensure that the chips and components can be made available to Indian firms at low cost.

Similarly, the policy also proposes to create fresh industrial clusters to promote full value chain generation. According to the Minster of Electronics and IT, latest technologies such as artificial intelligence, medical/defence electronics and consumer electronics will be a focus of this policy.

  1. Sovereign Patent Fund

The NPE 2019 aims to create a Sovereign Patent Fund (SPF) to promote the development and acquisition of IPs (Intellectual Property) in ESDM sector.

Sovereign Patent Fund’s objective is to help the domestic industry to obtain critical IP and thus to reduce the knowledge gap. The policy here will apply special thrust on industries such as fabless chip design industry, medical electronic devices industry, automotive electronics industry and power electronics for mobility and strategic electronics industry.

As part of the upgraded EMC 2.0, the Sovereign Patent Fund will be launched to acquire IPs for chips and to ship components for some commonly used product IPs.

The new National Policy on Electronics thus aims to create an ecosystem for the development of the ESDM sector. The host of m policies announced is expected to reduce import dependence and to develop a growth platform for the sector.

*********