How India Plans to Cut China’s Dominance in Electronics Industry with New Policies

A new policy document from India shows that the country is planning to take China head on in the electronics industry. The former, with its ambitious ‘Make in India’ campaign, wants to capture a greater share of the world’s electronics market, especially as some businesses are moving out of China to more profitable locations. To this end, the NITI Aayog, the country’s key policy formulation body, has recommended reforms to give electronics manufacturing in India a shot in the arm. Some of these reforms include a special coastal zone for production and tax breaks for investors bringing in bid sums.

According to a report in the Economic Times, in a new policy paper, the NITI Aayog has said that a policy shift could likely help India eat into some of China’s share in the electronics sector. The opportunity seems ripe for India with input costs soaring in China. But the policy formulator also warns that if India doesn’t act now, it could lose out on what could perhaps be its last opportunity to make a real mark in the electronics industry.

As and when these policies come into effect, India is expected to adopt a more export-oriented approach and substitute imports so as to scale up electronics production in the country in the next few years. Here are the key policies changes that have been suggested:

Policies to help boost exports:

• Establish a coastal economic zone (CEZ) sprawling across 2,000 to 3,000 sq km. This has been proposed to be developed under the Sagarmala project.
• Allow a 10-year tax holiday for companies that are bringing in investments worth more than US$1 bn and providing employment to at least 20,000 people.
• The new policy also proposes that all domestic taxes and tariffs that are paid by companies should be refunded at exit points.

Policies to promote import substitution for electronics

• The policy has proposed that defense procurement should preferably happen via domestic sources rather than from foreign companies
• Companies that are creating more than 15,000 jobs or investing more than US$1 bn will receive a 10-year tax holiday
• A suggestion to allow preferential market access for government procurement has been included in the proposed policy changes

The changes have been suggested based on a detailed study of the steps China has taken in the past to promote its electronics industry. If accepted and implemented, it could mark the beginning of a new era for the Indian electronics industry.