CARGOCONNECT-OCTOBER2024 - Flipbook - Page 12
CATAPULT
Recalibrating Supply
Chains and Capabilities
to better position India’s
booming ESDM Sector
A
ccording to a study
by the Observer
Research Foundation,
digital transactions
are projected to
account for 56.9% of nominal
GDP by 2025–26. This rapid
expansion of the digital economy
is driving strong local demand
for electronics in India, making it an attractive destination
for electronics manufacturing
organisations. India’s domestic
demand for consumer electronics
is anticipated to reach US$21.18
billion by 2025, aligning with the
Government of India’s ambitious
goal of achieving US$300 billion
in domestic electronic manufacturing by the same period.
This growth is expected to draw
component manufacturers to
establish production facilities
in India, thereby enhancing the
country’s supply chain resilience.
By reducing dependence on
foreign suppliers and localis-
ing additional segments of the
electronics value chain, India
can significantly strengthen
its domestic manufacturing
capabilities.
India’s Electronics System
Design and Manufacturing
(ESDM) sector has demonstrated considerable growth and
diversi昀椀cation across four key
areas: mobile phones, consumer
electronics, IT hardware, and
electronic components. These
sectors collectively contribute
to over 70% of the country’s
domestic manufacturing. The
sector’s evolution from a high
import dependency of 78%
in 2014 to a phase of import
substitution during 2017–19
under the Atmanirbhar Bharat
Abhiyaan, and now to an exportled growth model supported by
the Production Linked Incentive
(PLI) scheme, marks a signi昀椀cant
transformation. This progress
12 | CARGOCONNECT OCTOBER 2024
has attracted international 昀椀rms
seeking to leverage local capabilities, diversify supply chains,
and establish manufacturing
operations in India.
India’s rise as the secondlargest global manufacturer
of mobile phones and its rapid
expansion in the smartphone
market highlight its growing
influence. Mobile phone production surged from 60 million
units in 2015 to 310 million units
in 2022, reflecting a robust
compound annual growth rate
(CAGR) of 26%. The Make in
India initiative’s emphasis on
mobile phone manufacturing,
including sub-assemblies and
components, has accelerated
growth in the sector. Over 200
new manufacturing units have
been set up in recent years, creating approximately 700,000
jobs. With projections indicating
that India will surpass 1 billion
smartphone users by next year,
its advanced manufacturing
capabilities are set to continue
attracting global manufacturers.
The effectiveness of clear
policy objectives is evident in the
growth of India’s smartphone
production and associated value
chain. The PLI scheme and other
export policies have elevated
the Indian electronics industry,
which is now valued at US$101
billion, with US$23.6 billion in
electronics exports and US$11.1
billion in smartphone exports.
This expansion not only meets
domestic demand but also
positions India as a signi昀椀cant
global player in smartphone
manufacturing, contributing to
the creation of over 2.5 million
jobs since 2014. Reports indicate
that India’s smartphone exports
grew 35-fold between FY2017
and FY2021. Additionally, global
firms and new entrants have
created over 250,000 indirect and
120,000 direct jobs, with 70%
held by women aged 19–24 years.
State-level initiatives are
crucial in advancing India’s
electronics manufacturing and
the ESDM value chain. States
like Gujarat, Maharashtra, Tamil
Nadu, and Karnataka, which were
early movers, have developed
their own federal policies to
become competitive destinations for ESDM investment. These
policies serve as benchmarks,
addressing niche challenges and
providing models for other states
to emulate. In contrast, states like
Uttarakhand have introduced
customised incentives to boost
their electronics and consumer
appliance manufacturing sectors.
For instance, Gujarat’s Semiconductor Policy 2022–27 o昀昀ers
capital subsidies, land and stamp
duty exemptions, and incentives for water and electricity,
enhancing its attractiveness for
semiconductor manufacturing.
Karnataka’s Special Incentive
Scheme for the ESDM Sector
2020–25 complements the central
PLI scheme, supporting further
sectoral growth.
These regional e昀昀orts align
with the Indian Government’s
ambitious goal to increase the
electronics manufacturing
capacity to `24 lakh crore by
