Hi-Tech Manufacturing: India’s unfinished business March 2018 issue

Hi-Tech Manufacturing: India’s unfinished business

India’s share in global hi-tech manufacturing value added has remained where it was 15 years ago. Reason – lacklustre policies and lack of incentives. If India really wants to boost its exports of “high-tech” products, value-added manufacturing needs to be an integral part of its new Foreign Trade Policy. The Dollar Business identifies five industries that bear the potential to uplift India’s manufacturing sector, with of course, the right catalysts put in place by the policymakers



The new government, from day one, has been searching for ways to revive India’s manufacturing sector. Well, the reason is simple. India has been and remains a non-existent player in global markets when it comes to technology-intensive products. Although, today, India manufactures most of the products – from low innovation products like earphones and speakers to high technology products like missile and satellites, it still lags behind China, Thailand, and the rest of Asia as a manufacturing hub. That’s what is now turning out to be a real concern!

Technology intensive manufacturing has the ability to not only enhance revenue generation (through exports), but also the potential to have a multiplier effect on the overall economic growth. India has been talking about it for years. But nothing much has happened on the ground. The share of manufacturing in India’s GDP has stagnated at 15-16% since 1980 (Department of Industrial Policy & Promotion, GoI). On the other hand, other Asian economies like China and Singapore, with a clear focus on manufacturing, have shown the world what value added exports can do for an economy. Currently, India’s share in world manufacturing is just 1.6%. This is in stark contrast to China, where manufacturing contributes about 35% to the GDP and is about 14% of world manufacturing, up from 2.9% in 1991. In fact, contribution of manufacturing to GDP is much higher for countries like Malaysia (25%), Indonesia (25%) and Thailand (36%) as compared to India.

Changing Share of Hi-Tech Exports-TheDollarBusiness


Behind the times

Although exports of hi-tech products from India grew at a CAGR of 26.7% during the five year period between 2007 and 2011 (with exports having touched $20.9 billion in 2011 as compared to $8.1 billion in 2007; source: Exim Bank), the country stands nowhere when compared with other developing and emerging nations in Asia like China, Indonesia, Malaysia and Singapore in terms of manufacturing value added.

Global value added of hi-tech manufacturing was $1.5 trillion in 2012, making up 14% of the manufacturing sector. While China, with a 23.92% global share, was the second largest producer of hi-tech products, India with a 0.93% global share was a distant laggard. If we consider the 15-year period from 1997 to 2012, the share of China’s hi-tech manufacturing industries in global value added in the high technology sectors has swelled from 3.29% in 1997 to 23.92% by 2012. Though United States, with a 27.28% global share, is the largest global producer of hi-tech products, it’s China that rules the segment when it comes to exports with a surplus of over $200 billion, followed by EU and US. On the other hand, India’s share in global hi-tech manufacturing value added has remained where it was 15 years ago – from 0.41% in 1997 to a still insignificant 0.93% (Data source: 2014 edition of Science and Engineering Indicators by US National Science Foundation).


"India’s R&D spend, as a percentage of GDP, is just 0.76%. This is way below global benchmarks"


Even when it comes to the share of manufacturing value added (MVA) in gross domestic products (GDP), India stands nowhere close to its Asian peers. While countries like China and Thailand can boast of over 30% MVA share in GDP, India’s share of MVA in GDP is just 14.9%. In fact, India ranks 52nd globally in terms of MVA as a percentage of GDP, lower than even Bangladesh!

Interestingly, the industries that dominate the hi-tech sector in China are the same as those in the developed nations, reflecting the country’s ability to displace local producers in those markets. However, that’s not the case with India, which focuses on just a few sectors.

Hi-tech exports from India


Get the basics right

Economic theories associate hi-tech sector with the economic growth of a nation. As an economy grows, a shift from a natural resource based and low technology intensive manufacturing and exports to high technology intensive manufacturing and exports is bound to happen. Thus, it becomes an imperative for a developing country like India, to shift its focus from traditional export items, which are largely low in technology intensiveness, to medium and high technology intensive exports. Although improvement has been marked in medium-high technology intensive exports, dominance of low technology intensive exports still persists. This becomes a real concern when seen in conjunction with the rising manufacturing prowess of other comparable Asian economies.

No doubt, National Manufacturing Competitiveness Council (NMCC) has set a target that manufacturing will contribute 25% to the GDP by 2025. But for that to happen, manufacturing will have to grow at a rate that is 2.4% higher that the current GDP growth rate. To accomplish this task, proactive response is required from all stakeholders, including private players and public sector. The Dollar Business Intelligence Unit outlines three issues, which if addressed immediately, can help both the government and the industry achieve this target.

In the aerospace manufacturing industry, India is only looked upon as a sub-contract-hungry, tier III supplier of components. Infrastructure and policies need to be worked on if this perception has to change


Waiting for that ‘Eureka’ moment

Lack of depth in technology is one of the biggest factors affecting the growth manufacturing in India. Most Indian manufacturers get stuck at the basic or intermediate level of technological capabilities, which places them way below their global counterparts in the manufacturing value chain. Hence, policymakers need to bridge the technology divide that exists between Indian manufacturers and their global peers. Overcoming this challenge would require greater incentives for research and development (R&D), investments in building technology infrastructure and promoting strategic joint ventures and overseas acquisitions by Indian manufacturers.

The current level of investment in R&D infrastructure in India is still way below global benchmarks. India’s R&D spend, as a percentage of GDP, is just 0.76% as compared to countries that have proven hi-tech manufacturing capabilities (Japan – 3.39%; Singapore – 2.23%; Germany – 2.88%; China – 1.84; and US – 2.85%; data source: US National Science Foundation). Even within the current R&D spend, the share of industry and business R&D for India is a miniscule 36% as against 68.5%, 75.7%, 77%, 67.3% and 76.5% in US, China, Japan, Germany and South Korea respectively. What’s most alarming is that the proportion of government R&D that goes towards industry is a paltry 6% (data source: BCG). This really calls for an immediate action on the part of policymakers. Incentivising innovation and promoting R&D will not only help encourage hi-tech exports but will also boost the economy apart from creating employment. “By investing in skills and widespread technology adoption to harness the technology trend, India can boost its GDP by $90 billion by 2020 – 2.8% above the current trajectory. These moves will also help create 10.8 million jobs by 2020,” says an Accenture report.

Easing the patent registration process, which takes almost twice the amount of time in India than in developed countries (7-8 years versus 3-4 years), rewarding successful commercialisation of innovation (like China where employers are required to pay employee innovators a certain amount of annual profits) and other such measures are bound to boost R&D and innovation in India.

Top ten hi-tech exporters-TheDollarBusiness


Harmony or discord?

Another area that requires much attention is harmonisation of tax, duty structures and rationalisation of free trade agreements (FTAs) to ensure a level-playing field between imports and domestically manufactured products, if not an advantage in terms of factor costs. “The current system of taxation leads to distortions to the detriment of domestic manufacturers. While the difference varies across states, the overall tax and duty structure can cause a 17% cost disadvantage for domestic manufacturers,” states a Boston Consulting Group report.

With several Indian players making great strides in wind energy, the country is slowly becoming a hub for wind turbines manufacturing and export


Also, there are anomalies in the current duty structure for intermediate and finished products, that create advantages for importers over domestic manufacturers. Several cases exists in various sectors where import duty on an intermediate product is more than that on the finished product, which makes domestically-made product costlier than the imported product. For instance, while there is a basic custom duty of 10% on certain components of boilers, it’s just 7.5% on the final product, i.e. boilers. This affects the domestic boiler industry adversely. Another example could be insulin. While insulin injections attract a total import duty of 21.78%, insulin and its salts attract a total import duty of 25.85% discouraging manufacturing of insulin injections domestically. “The issue has become even more pronounced as India is now a part of number of free trade agreements with countries like Japan, ASEAN and South Korea etc.,” says a recent FICCI survey on inverted duty structure in Indian manufacturing sector.

It is high time policymakers review and harmonise such value chains if they really want to promote value added manufacturing in India. Agrees K. Chandrasekhar, Founder & CEO of Forus Health, a Bengaluru-based technology solutions provider, as he tells The Dollar Business, “The duties on imported finished goods should be higher than the components. That’s how you can encourage value added manufacturing.”

Share of MVA in GDP-TheDollarBusiness


One for all. All for...

Developing clusters and special trade zones for hi-tech manufacturing will also help boost its exports from India. The reason is simple. Co-location of several production facilities not only increases supply chain responsiveness, but also decreases the time to market thereby increasing the product’s competitiveness. “Clusters have led to cost savings to the tune of 13% on an average relative to an isolated plant,” states a BCG report.

A good example of how clusters can boost a sector’s competitiveness can be Thailand’s Hard Disc Drive (HDD) clusters. These clusters, which house the entire value chain, have been a boon for Thailand’s HDD industry. In fact, within just five years of inception i.e. between 2001 and 2005, not only did the Thai value add in HDD rise by 30-45%, but Thailand’s share in the global production of HDD was augmented from 10% to 30%, making the country the world’s largest exporter of HDDs. China is another example of how cluster approach can be a boon for the manufacturing sector.

Hi-tech exports-TheDollarBusiness


Time to act

It’s not just the hi-tech sector alone, as Prime Minister Modi has pointed out several times, India should aim at becoming an overall manufacturing hub – from electrical to electronics, from automobiles to pharmaceuticals, to almost everything. If that happens, hi-tech exports is automatically the next frontier. For that to materialise, proactive polices that not only incentivise innovation and hi-tech product development, but also promote hi-tech exports through appropriate incentives and financial enablers (for instance, a line of credit or a favourable duty structure) are required. Other issues such as erratic power supplies, gridlocked seaports and airports, governance etc. also need to be addressed if we want the manufacturing exports to rise from the current levels.

Pharmaceuticals dominate exports of hi-tech products from India


Our policies should also to be geared to take advantage of the growth potential in emerging and developing economies. Not to say, the value added manufacturing needs to be an integral part of India’s new Foreign Trade Policy (FTP). In fact, The Dollar Business Intelligence Unit has identified five industries – aircraft components, pharmaceutical, electric power machinery, electronics and telecom equipment – which if offered proper incentives in the forthcoming FTP besides overall support from policymakers on various fronts, can trigger a turnaround for India’s hi-tech sector.

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Hi-Tech Manufacturing: India’s unfinished business

Aircraft Components - A Mars mission should be convincing enough

Barely three months after India proved to the world that a mission to Mars doesn’t call for a colossal, bailout sum, we are left wondering whether India’s manufacturing community in the aerospace industry needs more reasons to disbelieve that Made-in-India and Rocket Science are expressions separated by time. Perchance the sky between Earth and Mars is far too hollow to bridge India’s trust and potential

Steven Philip Warner, Editor-in-Chief | The Dollar Business

Dec 2, 2011; Ontario, Canada: Boeing’s manufacturing plant with the B777-200ER being assembled. In India, manufacturing for now is only limited to R&D centres. That has to change for ‘Make in India’ to become a reality – either through cluster-creation or by establishing a mega giant so that other Tier I, II and III private companies get the boost


One rainy Bangalorean - afternoon of 2005,  engineer-turned-millionaire G. Raj Narayan, stopped by M. S. Venkatesh’s house. For two friends who had reveled in each other’s shadow since their teenage years, it was easy to find reasons to meet (undecided or otherwise). Only, with age, these reasons moved from imperfect arguments to prolonged discourses on scientific subjects. Sometimes, a subject would be discussed for months – the number of episodes exposing the conspicuously-designed narrow script of a typical drama season on television. “Our discussions on aircraft and choppers would be never-ending,” recalls Narayan while speaking to The Dollar Business.

Then, Narayan’s entrepreneurial dream had already taken shape – his electronic musical instruments business had gone global. On the other hand, Venkatesh had recently retired from Hindustan Aeronautics Limited (HAL) as the GM of its Helicopter Division. The two had worked on turnkey solutions at HAL until 1979, designing avionics and implementing aircraft projects for the Indian Air Force (IAF) for close to a decade. And this trust, Narayan was certain, was enough alchemy to make his abstract, original passion-turned-business idea turn to gold.

Rare. That particular day, the discussion was short. It began with avionics, led to the Jaguar and in less than two hours, the duo had decided to stage a comeback into aero components business. They also decided not to reveal that one of them was an exporter-manufacturer of musical instruments. “The world will laugh at us,” they thought. So, the duo floated a new company – Radel Advanced Technologies.

Aircraft and aircraft components-TheDollarBusiness


Today, Radel manufactures everything from rocket pods for fighter aircraft to airborne electronic modules used in aircraft engines to voice warning systems.

Narayan appears to have struck gold.  But while he confesses that the industry has been kind enough to make him a millionaire, the air of confidence with which he condemns much of what is confabulated in the name of cherished triumphs of private players in India’s aircraft manufacturing industry, is to say the least, convincing. As per him, the positive picture painted...is a fallacy.

Conduct some judgement on the ideals and realities of the industry and you will agree with Narayan that the alleged bumps on our road to manufacturing greatness are actually heights that will need some climbing. Little done, much left to be achieved is how the storyline reads for the Indian aircraft component manufacturing industry. For now.

Jet, set... upset

Until 2001, manufacturing in this industry was limited to the likes of HAL, NAL, DRDO, and other defence public sector undertakings (DPSUs). The big reason was protection. Even post-2001, when the government allowed 100% domestic investment by private firms in the aircraft and aircraft component manufacturing industry, the unclear conditions surrounding industrial licence (for supplying to the defence) and FDI up to 26% with ropes (not strings!) attached made it virtually impossible for private companies to dream of a future in this industry.

The introduction of the Defence Offset Policy in 2005 and its subsequently revised versions did bring some relief to manufacturers, but the backlog of $5 billion in offsets yet to be awarded to private Tier II and III suppliers in India (as of date) is a clear sign of the policy’s inefficiencies. And this situation is further set to worsen, as John Siddharth, Aerospace and Defence Expert, Market & Markets, tells The Dollar Business, “The total offset due is expected to double to $10 billion by next year.”

Even T-O-T (Transfer of Technology) as was originally envisioned through the policy has not occurred, as Aravind Melligeri, CEO, Aequs, tells The Dollar Business, “One of the main objectives of the Offset Policy was to effect T-O-T from global OEMs to indigenous aircraft manufacturers. The actual results of such a transfer have been disappointing.”

Three reasons can be imagined for this failure. One, the current offset policy allows OEMs to discharge their offset obligations without transferring advanced technology. Two, the OEMs lack confidence in indigenous manufacturing capabilities. Three,  the OEMs lack assurance that they will retain control of their intellectual properties. In short, global OEMs were and are still reluctant to transfer advanced technology. How toothless can a policy turn out to be?

Aequs’ SEZ in Belagavi (formerly Belgaum): Such aircraft component manufacturing zones and clusters are the need of the day


A character change?

Besides a compromised policy, technical expertise is an issue. Industry observers maintain that in the name of R&D, design and innovation, the bulk of the work that is outsourced to India centres of leading aircraft manufacturers is plain documentation and CAD work. This problem also stems from the fact that for decades together, private players were disallowed to scale the boundaries of defence and commercial aircraft manufacturing. As a result, the pool of talent ordinarily seen in other indigenised sectors, never became reality in aerospace.

Besides shortage of technical expertise, issues like high investment costs, lack of clarity in certification parameters, minimal export-related incentives (that includes most notably, a pint-sized 1.9% duty drawback, and a 2% incentive under the Focus Product Scheme) are plaguing the industry.

Indeed, much is expected of a Civil Offset Policy in this particular industry, one that could be unveiled some time in FY2015-16. At the same time, it is important that both policymakers and investors understand that ‘Make in India’ becoming a reality in this industry will result from global aerospace companies sourcing from India out of choice and not due to offset mandates.

Unf‘air’ games

Currently, the small and medium-sized enterprises (SMEs) supply up to 25% of the sub-assemblies and components to public sector units like HAL and BEL or to big private Indian companies like M&M, HCL, Tata Advance Systems, etc. This has become a customary practice today as Narayan of Radel Advanced Technology shares his experience with The Dollar Business, “A few years back, Lockheed Martin visited our facility and were satisfied with our standards of manufacturing. But they refused to partner or deal directly with an SME like us. That was expected because a Lockheed will only deal with a Tata or an M&M and expect that these big OEMs will in turn outsource work to tier III suppliers.” SMEs in this industry are looked down upon as forever sub-contractors.

Isn’t this an unreported proof of how unfair the game has become for small to mid-sized firms in this industry in India who hope to have their components kiss the skies? It’s simply a consequence wrought by about two decades of negligence by bureaucrats.

How Radel Advanced Technology, an Indian company is leading the way in the aircraft component industry – (L-R) A solid-state version of the relay based OEM unit used on Practice Bomb carriers used on IAF’s fighter jets; a test jig for testing the Radio Magnetic Indicator used in the ALH Dhruv helicopters; and a fully solid-state version of the distributor of the Matra Rocket Pod used on IAF’s fighter jets


For once, a PSU idol

For lack of scale and ambition, private manufacturers in this industry are mostly stuck between the Tier III and II levels. For the scenario to change, i.e. from foreign buyers’ purchase habit to be altered from compulsive to selective, India’s private players have to start stretching their imaginations beyond hydraulic pumps, actuator subsystems, linkages and pistons. This change in mindset is the prime challenge for both policymakers and private players.

Thankfully, a handful of Indian players – like Dynamatic Technologies, Samtel, Aequs, etc. – are aggressively building capabilities for potential Tier I and Tier II supplier partnerships. Some foreign OEMs – like Racaero, Safran, etc. – have also established their presence in India and are actively participating in Indian government contracts, while signing JVs with Indian companies.

Private players in India are fast trying to move up the value chain to shadow HAL. And that is not quite unexpected. Till date, the PSU has manufactured a dozen types of aircraft with in-house R&D, rolled out close to 3,700 aircraft, 4,000 engines and overhauled over 8,500 aircraft and 30,000 engines. With projects such as Medium Multirole Combat Aircraft, Light Utility Helicopter, Medium Lift Helicopters, the PSU is quite a model to emulate.

In the private zone, besides commonly-known giants there are some mid-sized Tier I and II indigenous suppliers that should serve as motivation for believers of ‘Make in India’. They are unique by themselves.


"Operating margins of 10-15% from export-manufacturing make this industry appear attractive"


Dynamatic Technologies is already known for complex aero structures such as air frame structures, precision components, wing, rear fuselage, ailerons, flaps, fins, slats, stabilisers, canards and air brakes. The company has manufactured the ailerons and wing flaps for the Intermediate Jet Trainer HJT-36 and major airframe structures for the Sukhoi 30 MKI Fighter Bomber. It also works closely with Airbus and Spirit AeroSystems to assemble Flap Track Beams for the Airbus A-320 family on a single source basis. It has become the first to prove that a “fully functional” aero-structure of a major commercial jet can be manufactured by an Indian private sector player.

Aequs is another shining example. The company supports its aerospace customers on global programs related to aero structures, engines, accessories, actuation systems, aircraft interiors and ground support equipment and specialises in complete end-to-end solutions for the aerospace industry right from design and analysis to manufacturing. It is the only private player in India to have established an SEZ for manufacturing of aircraft components (in Belgaum).

Taneja Aerospace & Aviation (TAAL) is another growingly common name in the Indian aeronautical circuits. The only listed company from the private aerospace manufacturing space in India, it is also the only private manufacturer of complete aircraft in the country. [Note: It manufactures small civilian aircraft, aero-structures and aircraft parts.]

There are other private firms that are actively looking to move up the value chain in India. By some standards, they have already made a mark. These include the likes of Magnum Aviation (known for manufacturing aircraft and engine spares), Maini Precision Products, and SEC Industries (precision manufacturing, aerostructure components, parts and accessories of aircraft), Axis Aerospace (life cycle support, engineering and design), Samtel Display systems, Data Patterns, Avantel Avionics (aircraft displays, simulator systems), etc.

JVs signed by foreign manufacturers in India is another encouraging sign, a beacon of hope for India’s manufacturing capabilities. Agreements between Dassault Aviation and Tata Technologies, HAL and Elbit Systems, Lockheed Martin and Tata Advanced Systems, AgustaWestland and Tata Sons, Bharat Forge and Safran, Aequs and Magellan Aerospace, etc., are some examples.

Operating margins of 10-15% and 6-7% net margins from export-manufacturing are attracting bigwigs to invest in this industry. [Due to low volumes, without exports, players in this industry with only a sell-in-India focus will find living unsustainable.] Popular companies in the non-aeronautical manufacturing businesses such as TVS-Sundaram Clayton, RICO, HCL, Bharat Forge, etc., are thereby looking to make bigger inroads into this industry in the field of manufacturing mechanical, electrical, electronics and composites. What makes India special as an export-manufacturing cluster of clusters is, however, the major driver from an export perspective is – easy guess that – the advantage of low cost labor. The average manpower rate in an Indian MRO is approximately $35 per hour which is less than 50% when compared to Europe or US, where the cost to company varies between $75 and $80 per hour. “The cost advantage means margins from Indian MROs will be higher than the average global margins. Most of the global aerospace companies are setting up their R&D centers in India due to the cost advantage mantra,” says Siddharth of Markets & Markets.

Which brings us to the next question – the last mile. All R&D and little manufacturing makes the Indian aircraft manufacturing industry worth giving a pass. Now that’s an elephant in the room!

A typical aerospace value chain-TheDollarBusiness


Elephant in the room

Experts complain that despite many claims, India has been rendered to a manufacturing zone meant for either low value-add sub-contracts or captive R&D work. Precisely why, despite years of existence in India and supplying billions of dollars worth of aircraft and components to both commercial buyers and the government in India, foreign players have not gone beyond “speaking” of a manufacturing facility and SEZ in the distant future, and “establishing” structures in the name of innovation centres.

Since 2006, Boeing has been promising a full-fledged MRO facility in MIHAN SEZ at Nagpur. For some trouble related to the Nagpur International Airport, the facility is yet to see the light of the day. Honeywell Aerospace, despite being a global provider of integrated avionics, engines, systems and service solutions for aerospace industry, currently maintains only a captive design and development center in India. It is of course, “looking to expand its presence in this area in India” as per a PwC report titled, ‘Changing dynamics in the Indian aerospace industry’. Like Boeing, Airbus too has been analysing ways to use India for component manufacturing since 2006. It had even announced that India will be one of the key centers for design and development of the A350 family. Today, it has a captive unit in Bangalore for everything from modeling and simulation to flight management systems and computational fluid dynamics (CFD). Everything except manufacturing! [For that, it has contracts signed with companies like Dynamatic Technologies, Spirit AeroSystems, TATA, Aequs, HCL, and even HAL.] Snecma, another supplier of aircraft also engages only in research, documentation, and availing of low-cost services offered in the MRO sphere.

With the Civil Offset Policy being talked about, it is important the foreign aerospace players are not only asked to source 30% (or x%) from India, but also made to invest a finite sum into developing manufacturing facilities in this industry. R&D centres are a good starting point. But the last mile – manufacturing plants – is still a question.

Cost of savings in India-TheDollarBusiness

Emulate to prosper

If you can’t innovate, copy the leaders – you are bound to cover some ground. The growth of aerospace manufacturing industries in both China and Brazil were initially driven forward by huge investments by the respective state governments that established R&D and manufacturing clusters (unlike in India, where the only hopeless hope for the private players seems to be offsets).

In Brazil, the government helped establish a manufacturing giant in the aeronautical business called Embraer. This entity’s birth in 1969 gave rise to about 35-plus local aircraft assembly and manufacturing firms that started supplying both commercial and military aircraft, and helped Brazil become a net exporter in the aerospace sector. Today, Embraer has over 140 customers across 30 countries and is Brazil’s second-largest export-manufacturing entity. This close partnership with a Tier I supplier created magic for the country’s aircraft manufacturing industry.

In China, the government established aircraft manufacturing clusters and consolidated a much-fragmented industry. China established a conglomerate of aviation industries (AVIC) in the first half of the 1990s that was made up of about 210 firms. The group included engine and component manufacturers, and aero-structure designers and assemblers. Subsequently, AVIC was divided into two parts AVIC I (for commercial aircraft) and AVIC II (for helicopters and general aviation aircraft). What is a big lesson for India’s manufacturing industry is the fact that in China, the move up the value chain was gradual and steady – its industry started with manufacturing aircraft parts and assembling aircraft for the military (between 1960-1975) before moving to utility aircraft (in 1977), and finally to regional and commercial aircraft (starting 1998).

A combination of the Brazilian and Chinese models will allow the much-fragmented and disoriented Indian aircraft manufacturing industry to get streamlined and work in an orderly fashion to become popular globally.

The take off

No doubt, there is potential in India’s expertise in the process of aircraft manufacturing. Talking purely of capabilities, HAL supplies forward passenger doors (A320s), Over Wing Exit Doors (B757s), Uplock Box Assembly (B777s), Bulk Cargo Door (B767s), Freighter Conversion Kit (B737s), Gun Bay Door (F/A 18), Weapon door and tail cone (B P-8 I) in the aero structures market. In the avionics segment, Inertia Navigation Systems and Flight Data Recorders are its core strengths. Another example can be of the cabins of Sikorsky S-92 that are manufactured at Aerospace Special Economic Zone, Hyderabad in collaboration with Tata Advanced Systems (TASL) which are 100% indigenous. Sikorsky has even won a $1.24 billion deal for six US Presidential helicopters and the cabins for these helicopters will also be exported from India.

Given these, with the right talent pool in place and transparency and efficiency in policy implementation with single window clearance systems, everything from initial design to the final aircraft can be had. But a hurried approach won’t do. Indian private companies have shown the intent, but coordination of efforts and birth of manufacturing hubs like Bangalore, Chennai, Hyderabad and Belgaum will help unearth India’s real, sustainable advantage in this industry.

That day is not far. But not too near as we can see it.


“Our aerospace strategy is not reliant on the defence offset policy” - Aravind Melligeri, CEO, Aequs Pvt. Ltd

Aravind Melligeri, CEO, Aequs Pvt. Ltd


TDB: During the mid-2000s, you diversified into manufacturing. What got you excited about the business of aerospace components?

Aravind Melligeri (AM): We saw an opportunity to create an innovative supply-chain model in the aerospace sector that would deliver superior quality, delivery and value to customers. Our approach to manufacturing was based on collaborating with partners to build efficient global ecosystems. We were excited about building our vision into reality in the Aequs SEZ. We are just excited today about the future growth of Aequs as a major player in the aerospace manufacturing sector.

TDB: Where does India stand as a hub for “back-end manufacturing work” in this industry?

AM: India’s aerospace manufacturers currently compete primarily as tier II suppliers of commodity engineering, software development, manufacturing of low-to-medium complexity, labour-intensive, build-to-print components and sub-assemblies for wing structures, fuselages, landing gear and doors. India is likely to stagnate at this level in the aerospace market unless the private and public sectors in India work together and take decisive action to develop an indigenous aerospace industry that can compete with China, Brazil and Russia and move up the value chain to become significant tier I suppliers to the OEMs.

If private and public sectors do work together, then Indian aerospace manufacturers would move up the value chain to become leading tier I suppliers of advanced technologies, assemblers and engineers of Western OEM designed aircraft, and full-scale developers of indigenous commercial aircraft for both domestic and export markets.

TDB: Who are your leading OEM customers in the aerospace industry?

AM: Airbus, SABCA, UTC Aerospace Systems, Magellan Aerospace, SAAB, and EATON.

TDB: The 2005 ‘Defence Offsets Policy’ – how has it boosted the Indian aircraft manufacturing industry?

AM: The offset provisions have boosted indigenous aerospace manufacturing, but have the potential for boosting it much more. State controlled purchasing is a powerful mechanism for reducing risk for manufacturers by ensuring a captive market for their products. It is a widely employed mechanism used in multiple nations to develop their nascent indigenous industries. The current Medium Multi-role Combat Aircraft (MMRCA) project – providing 126 new aircraft for the IAF – that stipulates a 50% offset is an example of the economic boost such offsets can provide indigenous aerospace manufacturers. However, offset provisions produce benefits only upon the execution of procurement contracts. So when contracts negotiations are stalled, as has occurred with the MMRCA project, then the offset benefits are correspondingly stalled. Also, the offset policy must not lull manufacturers into complacency. Indian aerospace manufacturers must not use this policy to shield them from the brutal competition in the global commercial aerospace marketplace.

TDB: What are the prime India-specific infrastructural and policy challenges that your company faces as an aircraft component exporter?

AM: We look forward to PM Modi’s administration reinstating and even enhancing the SEZ incentives which had been rolled back by the preceding administration. These incentives are powerful levers for encouraging foreign investment and promoting the export industry, particularly manufacturing, and thus directly support ‘Make in India’.

The success of Indian aerospace manufacturers is also jeopardized by high interest rates. India’s current repo rate of 8% is one of the highest in industrialized economies and hinders the ability of Indian manufacturers to compete globally. The government should ease monetary policy and cut interest rates to reduce the cost of capital for Indian manufacturers.

India’s government also needs to harmonize taxation of aerospace players. Although the Ministry of Defence has tried to respond to repeated pleas from Indian private industry for progressive reform of the Defence Procurement Policy, the private sector still faces disadvantageous taxes and duties vis-à-vis defence public sector undertakings (DPSUs) and foreign OEMs. This situation frustrates private industry’s efforts to strengthen the indigenous national defence industrial base.

India’s government should also remove regulatory barriers for the private and public sectors to engage in PPPs.

TDB: What’s special about the Aequs’ Belgaum SEZ ecosystem?

AM: Aequs offers unique manufacturing capabilities made possible by its 10,000 ton capacity aerospace hydraulic forging press located at the Aequs SEZ at Belgaum. This closed die hydraulically operated hot forging press is the largest of its kind in India and will be used to forge large airplane components and parts such as landing gears and various actuation and structural parts. It has the capability for forging aluminum, steel and titanium parts up to 400 kg. Prior to the installation of this 10,000 ton press, aerospace customers needed to source such parts from Europe and USA since no Indian company offered the capability.

In addition to the above example of a specific manufacturing capability, the SEZ offers an integrated precision aerospace manufacturing solution that significantly reduces lead times, logistical costs, and engagement complexity for customers.


“I still don’t know if I require a licence to manufacture a defence aircraft!” - G. Raj Narayan, Managing Director, Radel Advanced Technology

G. Raj Narayan, Managing Director, Radel Advanced Technology


TDB: You’ve spent more than five decades handling, designing and manufacturing aircraft parts. How specialized is this work area?

GRN: Let me begin by saying that today, Radel Advanced Technology, our company does everything from system design to development of airborne and ground support equipment, aerospace and defence test equipment, aircraft electrical wire harness, etc. We design the equipment. We actually manufacture equipment that fits in the place of an imported equipment, or which the OEMs are not able to supply, or where the aircraft is old and parts are not available. We sometimes have to do a lot of reverse engineering. The point I am trying to make here is that while the defence and PSU in India are going on an indigenization drive, as the whole ‘Make in India’ movement is about making in India, aerospace is so specialized a sector, that if you don’t know the domain, you won’t be able to replicate the equipment that you are trying to buy from abroad. You might be able to design a software, but when you try to integrate it into the platform, there are unique challenges that arise. That’s where a lot of failures are happening. And these are expensive failures.

TDB: Has the government’s defence offset policy come as good news for your company?

GRN: The offsets policy sounds better than it actually is. Let me tell you, way back in 2006, we had gone to the government saying that we have developed certain technologies, products and have the technical competencies and background required to participate in the offsets. The government at that time had absolutely no machinery or process to help identify competent aggregation or entities that fell in the MSME category. They would do something for large organisations like L&T, Tata, Mahindra, but not for MSMEs. We wrote letters to officers in an understaffed agency called the Defence Offsets Facilitation Agency (DOFA) under the Ministry of Defence, but they didn’t help us and advised us to write to the Ministry of Planning and Procurement. This way, we went round and round and finally gave up. It’s only now under the new government that people have got the positive energy to say that something can happen now. Truth is, besides all the talk, the policy hasn’t really taken off.

TDB: How difficult was it for you to convince foreign companies to produce Radel-made products because until prior to last year, you didn’t have a single in-house designed test equipment certified for airborne use?

GRN: True. Foreign buyers would ask us – “what have you done for your local industry?”, or “which certified products have you sold to domestic buyers?” We didn’t have an answer. No proof. Now we do. So now with the certifications, we are trying to position ourselves better in the global market. One such equipment that we have received a certification for was made for the Jaguar fighter jet, the only aircraft with the IAF capable of carrying nuclear weapons other than the Mirage-2000s. The equipment that was indigenized to replace a completely imported one was the electronic controller of the rocket pod that fires rockets based on the input from the pilot. This was completely designed in-house. From rocket pods used on fighter aircraft to pairs of airborne electronic modules used in aircraft engines to voice warning systems, we are pretty bullish about avionics.

TDB: Is avionics the next big bet for “Indian export-manufacturers”?

GRN: Even in avionics we have missed opportunities. Any electronic component today has processors built in it. Any electronic device also has, if not multiple, then at least one micro controller. And when you have a micro controller, there is a software to be developed. Ever since 2000, we are known for software, design and technology base. We have the talent but we have not capitalized on that.

TDB: In the business of manufacturing of aero structures and aero systems, strategically, is transfer of technology a must for ‘Make in India’ to become a reality?

GRN: Everybody talks about transfer of technology (T-O-T), especially in the aerospace manufacturing. We don’t need T-O-T. We have all the technology that we need. This is not rocket science.

TDB: Should the Indian government provide greater incentives to aircraft component export-manufacturers?

GRN: There is nothing under either FMS or MLFPS. Duty Drawbacks of 1.9% do exist but they are not meaningful. EPCG schemes also do exist in both the pre-and-post formats, but the troubles involved are umpteen. So much that most export-manufacturers don’t even want to think along those lines. Direct tax benefits and clear cut information on sector-wise incentives on exports is required in addition to chapter-wise elaboration in our foreign trade policy. Also, some laws have to be made transparent. I still don’t know whether I need a licence to manufacture defence aircraft equipment.


“India has more of tier II and III suppliers” - John Siddharth, Aerospace and Defence expert, Markets & Markets

John Siddharth, Aerospace and Defence expert, Markets & Markets


TDB: Private participation in the Indian aerospace industry is still low on enthusiasm. Do you agree?

John Siddharth (JS): Aircraft assembly is in a very nascent stage in India. PSUs like HAL are the only enterprises with a strong foothold in this space. The presence of PSUs is predominantly driven by a defense procurement policy. A good example is the deal to replace the transport aircraft used by Indian Air Force. The plan is to procure 56 AVIO aircrafts, out of which 16 will be bought at fly away condition and the rest 40 will be manufactured by the PSUs through a special agreement. The key point to be noted is that the major players in this market are not investing in a full-fledged facility for manufacturing 40 aircrafts. These deals will first fuel the growth of aircraft component providers and could lead to aircraft assembly units in the long run.

TDB: How about export-related opportunities that remain untapped or partly tapped – product-wise and market-wise?

JS: The market for complete aircraft are from developing or under-developed economies. The same trend has been witnessed in case of Dhruv (helicopter made at HAL). Tejas (light combat aircraft at HAL) is also expected to follow the same trend. Another commercial program by the National laboratories Limited (NAL) is also underway for development of Regional Transport Aircrafts. Aero structure components also present some big export opportunities for Indian exporters. High tech electronic components are currently being manufactured without any experimental suppliers which could be predominantly due to certification issues. But having said that we are more of tier II and III suppliers, it is important that the energy continues as the more sub components are manufactured, the closer we will get to building a full aircraft.

TDB: Is there a need to encourage birth and participation of private firms in this industry across non-Tier I locations in India?

JS: The state governments have been pushy to establish a good aerospace hub. A few examples could be the Aerospace SEZ at Devanahalli, Bangalore and the Aerospace SEZ at Sriperambatur, Chennai. The non-Tier I locations such as Hyderabad and Pune are upcoming aerospace hubs in India. Bangalore is already a traditional aerospace hub. Any new establishment should focus on grabbing the outsourced work from the established hubs. This will however require a setup in any of the above mentioned non-Tier I cities. The existing automotive component manufacturers in the Chennai belt are considering to venture into the aerospace component manufacturing due to the growing competition in the automotive industry. That would mean more investments flowing into this particular manufacturing industry.

TDB: From the viewpoint of an entrepreneur, how difficult is it to make a mark as an exporting manufacturer in this industry?

JS: The major OEMs have a set standard for partnership programs. The key criteria would revolve around expertise, turnover, capacity, etc.. It is therefore for an entrepreneur to directly transact with any major OEMs for the first few years. The entry strategy must be to take up work that is outsourced by the existing component manufacturers in India and then move up the supply chain. So, you begin as a sub-contractor and move up the value chain as fast as you can.

TDB: Your last word: ‘Aircraft component as an export business in India’. How challenging and lucrative is that?

JS: Aerospace companies such as Airbus and Boeing are sourcing from India not out of choice but offset mandates. This scenario must change. The total offset due to be awarded to domestic manufacturers is valued at about $5 billion and is expected to double by FY2016. The actual success of Indian aerospace sector will come by when sourcing of components by foreign companies from India exceeds $10 billion. And the reason should be a mix of low cost and high quality. Not just cheap labour.

Hi-Tech Manufacturing: India’s unfinished business

Pharmaceutical - It’s still a long march to discovering glory

Indian pharma players have been capitalising on generics opportunities in India and abroad for long now. It’s about time they look beyond generics and focus on therapies and technologies that have the potential to take India up the global pharma value chain. But for that to happen the policymakers will have do more than just pay lip service to the needs of the industry, and real soon

Satyapal Menon | The Dollar Business

With few R&D initiatives in India, new drugs are either coming out in a trickle from the pipeline or getting choked on the way


Going by the global buzz Pharma is big business in India. It is not just the export figures, presently valued at around $12 billion, which lends credence to the evaluation of Pharma being India’s forte, but also forecasts about the sector gaining momentum and consolidating on its stature year after year. The fact that a large chunk of exports are to United States and European countries – countries which emphasise on the highest quality standards and technologies – reflects the esteem that India enjoys in the developed world. A significant number of over-the-counter drugs sold in the United States is made in India, which also is a global leader in generics’ export.

But before you get overwhelmed with euphoria, there is a catch to it! India’s domination has always been in export of generics, active pharmaceutical ingredients (APIs) and drug intermediaries, which means that the product specifications or the formulae are there on the platter for the manufacturer to translate it into required forms and formulations. Moreover, generics get a head start in terms of consumer base because they are similar to the off patent or expired patent products which have already established their presence and efficacy in the market.  Generics, of course, have proved to be a boon to domestic consumers, emerging economies and low-income countries, because of their lower costs compared to patented products. So, while according all credits to the manufacturers for producing affordable medicine, their inevitable inclination to cater to the market demands should also be appreciated. But such propensity towards generics had also in many ways resulted in dearth of initiatives for innovations.Very little intellectual and financial capital is pumped into research & development (R&D), and new drug discoveries are very few and far between, except for significant endeavours in biotechnology segment.

No takers

Many off patent and expired patents have few or no takers and development of new chemical entities (NCEs) have no place or little space on the agenda of even many Indian Pharma majors. An industry source very succinctly explains the production process in the generic sector: “The recipe is the brainchild of the chef who provides detailed information about the ingredients to be added and the cooking procedure to prepare a cuisine. All we, as cooks, have to be do is to follow the instructions to a T, and mix the salt, spice and whatever else is prescribed, in exact proportions and process the ingredients to precision. Of course, you need to have the required kitchen appliances in place, and a good kitchen at that – read it lab or technological infrastructure.”

Even the government seems to have been affected by the inherent preoccupation with generics, as indicated by the list of drugs selected for focus product scheme (FPS) and incentives under the category of hi-tech products. There is no scope for promoting innovations. The 52-product list comprise a spread of ant-sera/antigens, vaccines, and antibiotics and cardio-vasculars, a significant number of which are generics, APIs and drug intermediaries. The list reflects little clarity on parameters applied for the selection of the products for incentivisation. It is open to a host of questions. First and foremost, what are the parameters applied for the selection of the products? Is it intended to promote discovery activities for new drugs, molecules or more efficacious and multi-potent variations of the original drug for a similar disease? Is it to enable the manufacturers equip themselves with the latest technologies for production? The big question is, in what context is the term ‘hi-tech’ being applied in pharmaceutical segment. Is it research technologies? Is it manufacturing technologies? Is it intellectual investment? Or, is it all three?  In case of generics, many players are already equipped with required hi-end technologies. Are incentives applicable to them? Does it apply to drugs under patent litigations that are presently being produced in the country?

If the products have been selected keeping the Chinese competition in perspective, then in many of the instances it beats logic. We lag behind China in having certain technologies in place – like the fermentation technology. But, more than that it is cost-effective production capabilities that has positioned China as an attractive destination. Elucidating on the strengths that gives China the edge over India, Dr. Ahmed Kamal, Outstanding Scientist, CSIR-Indian Institute of Chemical Technology pointed out to The Dollar Business, “China has developed pharma clusters where all common facilities are available and shared among companies, enabling them to produce cost-effective products. In fact, today, most of the bulk drugs are exported to the world by China because of the lower cost factor. Even India is importing from China.” No doubt India too does have cluster development schemes and proposals, but most of them have yet to see the light of day.

Low potential

An analysis of the products mentioned in the current hi-tech products list indicates low export potential for many of the products, except for vaccines and to some extent antibiotics which have a reasonable presence in overseas markets. According to the International Trade Centre (ITC) figures, India’s total exports under HS code 2937 (hormones, prostaglandines, thromboxanes and leukotrienes, natural or reproduced by synthesis; derivatives and structural) was a little over $132 million in CY2013 with United States being the biggest market valued at over $93 million, followed by Iran with $24 million exports. USA’s total imports was at $1.5 billion and the total world imports was over $17 billion. China’s exports to the world under the same HS code was valued at around $900 million with India being the biggest importer valued at a little over $173 million.

India also does not have significant presence in products under HS codes (mentioned in that order in Hi-tech products list) 30021011-20 in terms of exports. However, vaccines exports (HS codes 30022011 – 300220124) have been reflecting a positive trend with cumulative exports valued at nearly $600 million during CY2013, and to add to that a trade plus a trade surplus of a little over $91 million with imports valued at a little over $508 million. China’s exports under 3002 HS code is a little over 300 million, and it also a trade deficit valued at over $3 billion to boot. The figures prove that prophylactics, i.e., vaccines segment to be more specific, has been indicating its potential to scale up to a level of consolidation in India.

Biotechnology segment is witnessing prolific activity in India


Slow but steady

In fact, there are a few areas which hold big potential. For instance, the biotech segment in India has proved its capability and capacity, time and again, to rise to the occasion for creating preventive solutions to existing and even new diseases. Biotechnology majors like Serum Institute of India (SII), Biocon, Bharat Biotech and Sanofi-Shanta have established their R&D credentials by launching efficacious and multi-potent vaccines, apart from having many more in the pipeline.

A case in point is SII which has developed the world’s first adsorbed liquid HDC (human diploid cell) rabies vaccine, while Sanofi-Shanta recently developed and launched Shan5 – a pentavalent vaccine (five individual vaccines conjugated in one intended to protect infants from Haemophilus Influenza type B, Whooping Cough, Tetanus, Hepatitis B and Diphtheria). The prequalification by the WHO helps Shan5 secure the supply of pentavalent combination vaccines in over 50 emerging and low-income countries.

Another landmark achievement, which also came as a shot in the arm for drug discovery in India, was when Ahmedabad based Zydus Cadila, in 2013, launched India’s first indigenously developed drug for treatment of diabetic dyslipidemia or hypertriglyceridemia in Type II diabetes, not controlled by statins alone – Lipaglyn or Saroglitazar. Commenting on the launch Pankaj R. Patel, CMD, Zydus Cadila, said, “It has always been our dream to take a molecule right from the concept stage up to its launch.” Considering that 80% of all diabetic patients are estimated to be suffering from diabetic dyslipidemia, such drug holds big potential.


"A recent Exim bank study suggests the government and RBI should set up credit facilities to provide low cost funding to R&D initiatives"


Stem cell

Another fastest emerging area in medical palliatives is stem cell therapy or regenerative medicine. Unfortunately, due to inexplicable reasons, this area has not been given a status of prominence by policymakers, despite the curative solutions it offers for a comprehensive range of diseases and chronic conditions from cancer to wellness. The early phase of research on stem cells had triggered furore about ethical issues involved in extracting foetal stem cells for treatment of various diseases. But, the discovery of alternatives like stem cell extracts from the cord blood, bone marrow and various other sources in the body, with proven properties to replace the damaged cells and regenerate new cells, had the world keyed into this incredible therapy.

India has also developed capability in regenerative medicine, with many qualified medical professionals trained at premier institutions across the world involved in stem cell treatment for various diseases. One of the off-shoots of stem-cell is the proliferation of storage banks for cord blood stem cell extracts, which could be used anytime for treatment during the lifetime. Cancer, hip replacement, spinal cord injuries are among the innumerable conditions and major diseases where stem cell with its potential to regenerate the affected cells, can prove to be effective.  Regenerative medicine in India continue to be confined in an area of darkness, and the way this therapy is treated, reflects lack of knowledgeable policymakers to acknowledge the amazing power and potency of stem cells. According to a GBI report, the stem cell market in India is estimated to touch $ 600 million by 2017. This certainly calls for policymaker’s attention.

Market share of India pharmaceutical sub-segments-TheDollarBusiness


Waiting for next step

The last few years have witnessed a flurry of activity among the pharma players – both Indian and MNCs – in the country with companies entering into collaborative cross-linkages among themselves. Interestingly, there was less focus on new drug discovery and more on licenses available on the shelf. The objective was to capitalise on market opportunities in India and abroad. The outcome of this tendency was a series of patent violation litigations and disputes between the generic producers and companies manufacturing patented drugs. Critics point out that this fixation to generics and lack of innovations has its genesis in ease with which formulated drugs can be produced without going through research and development pipeline. The very mention of drug discovery is bound to provoke the oft-parroted and common refrain from the many pharma majors that they had tried their hands in discovering new chemical entities and molecules and in the process burnt their fingers. They point out that the investment is too risky and not worth the long wait for development and discoveries. Result: Discoveries have been just trickling out of pipeline with many getting dried up inside.

Hence, the pharma sector’s objective should now be to consolidate on the expertise, credibility, credentials and generics’ footprints it has embossed in the global markets. Be it bulk drugs or formulations, India has positioned itself as a lead player, which explains the global focus on India as a pharma hub. Factoring in the practice of foreign pharma companies outsourcing and offshoring different stages of process as well as drug discovery research, India has been gaining in research expertise and evolving as a knowledge and skill-centric hub for hi-tech products and innovations. From here it just requires a little leap forward to enter the drug discovery domain.

For that to happen policymakers need to erase their cloistered mindset focused on generics and think in terms of supporting and encouraging the development and discovery endeavours by new entrants and entrepreneurs who think out of the box. There are huge unmet medical needs, many among them comprising ever arising new requirements. The government should also create a policy framework for the creation of common Patent Pool in PPP mode. It is high time India take a leaf out of Israel’s pharma industry. According to the Israel Advanced Technologies Industries Association, the majority of Israel’s 85 pharmaceutical companies are small and medium enterprises. Of these 85 companies, 25% are involved in drug discovery, 19% are involved in the development of “New Chemical Entities,” and 18% are involved in drug delivery.

Policymakers should realise that ‘hi-tech’ is not just about process technologies and increasing the market size. It’s more about exploring new avenues, creating innovative solutions for existing & evolving diseases. Need we say more?


“Cluster development would enable cost-effective production” - Dr. Ahmed Kamal, Outstanding Scientist, CSIR-Indian Institute of   Chemical Technology (IICT)

Dr. Ahmed Kamal-TDB
Dr. Ahmed Kamal, Outstanding Scientist, CSIR-Indian Institute of Chemical Technology (IICT)


TDB: There is no clarity on selection parameters when it comes to the government’s hi-tech pharma product list. What is your take on this?

Dr. Ahmed Kamal (AK): I am not sure whether there could be any definitive definition related to hi-tech pharma products. It is probably based on the complexities of preparing such products and also their usage. It is perhaps based mostly on complexity. From my reading of the list there are a large number of products that have some sort of a link to fermentation based technology and also some bio-processes. Both the technology and the process are quite complex. So, I feel the complexity of the technology is the basis of selection. There are a lot of other molecules or several other drugs, like Chloroquin or the typical Paracetamol, which are much easier to produce and hence these products are not included in the hi-tech product list. This also perhaps explains a majority of antibiotics and vaccines finding a place in this category.

TDB: The list also does not provide proper scope for promoting discovery and development of new molecules and drugs. Why is there so much emphasis on generics and less on new drug discovery?

AK: India has a very strong generic segment and we should not forget that it is not only producing low-cost and affordable medicines, but also contributing significantly to forex reserves. In my opinion generics definitely has had no direct impact on drug discovery initiatives. We need to consider that costs involved in drug development and discovery process is very high. So, basically, the investment or expenditure in drug discovery process is manifold compared to generics. This and many other factors, like the number of years it takes for discovering and developing a drug coupled with the unpredictability of results, could be reasons for less or little initiatives in this direction. There is no certainty of getting the desired outcome, and there is a possibility of the process getting stopped during different stages including the clinical trial stage. Since the process sometimes may not prove to be fruitful and the investments made could go waste, pharma players may consider it risky to venture into discovery and development.

TDB: A recent EXIM Bank study on hi-tech exports from India emphasizes on promoting R&D through low-cost funding. What are your suggestions?

AK: As I mentioned earlier it is the huge investment involved that has proved to be an impediment to discovery and development programmes. My suggestion is that we formulate a ‘national policy’ to establish some centres specifically focused on drug discovery and development. This could be set up be on a PPP mode involving investors, industry and government. We have technical manpower, experience, expertise and exposure to ensure that such initiatives materialise. I think that certain programmes which have come through government funding agencies have been quite encouraging during the last few years, where the risk has been reduced to a great extent. Department of Biotechnology (DBT) and Department of Science and Technology (DST), pharma companies and academic institutions have already joined hands for discovering new molecules and developing them. The government provides soft loans, and, some grant-in-aid to these institutions and as a result the risk has been reduced to a great extent.

TDB: Cluster development proposals have been doing the rounds  for quite some time now but they still remain on paper. How would such clusters enable India match China?

AK: I think they will be helpful in manufacturing cost-effective products like China does. The availability of all utilities in a cluster will make things more economical and more practical for companies working in that cluster. For instance, there is an advantage of common effluent treatment systems. Certain pharma parks and pharma cities are implementing this approach. Individually, for a company, going for the entire package is very expensive and inevitably it cannot match the cost at which China is supplying the products. The only aspect is that we have to make it more practical and it should be really taken up on the ground.

TDB: What, according to you are, are the new areas that could be envisioned?

AK: Nano technology would be of great value. This technology facilitates drug to be delivered to the site of the disease. It would help bring down the toxicity of the drug by delivering it at the right place and in the right dosage. Once the toxicity is reduced automatically the side effects will be also reduced. There is an immense opportunity in this delivery system. The other important need is affordable medicines for major ailments. Cancer is one such ailment where drugs are very expensive. This is the reason why a few companies have come out with drugs, even if it meant violating the patents, with the government allowing this to happen for the sake of helping the people.


“Procedures in India are not only complicated, but also lack clarity” - Dr. Ch. Mohan Rao, Director, Centre for Cellular and Molecular Biology (CCMB)

Dr. Ch. Mohan Rao-TheDollarBusiness
Dr. Ch. Mohan Rao, Director, Centre for Cellular and Molecular Biology (CCMB)


TDB: The current hi-tech products list for incentivisation does not provide any scope for innovations. What are your views on this lack of foresight on the part of the government?

Dr. Ch. Mohan Rao (CMR): To be very frank the products seem to have been suggested or recommended by people who probably have no knowledge of this area. It is not professionally done, with people giving names of whatever products they have heard of. They do not know what we have at hand at the moment. For instance, if we are going to make a new drug, that does not reflect here in the list. They should have given a provision for any new drug or molecule.

I would also like to point out that procedures in India are not only complicated, but also lack clarity. There is confusion about where to go to and who to approach for certain tasks. For instance, if some scientist is collaborating with the outside world and has to send some biological samples for work, there is no clarity whether he can send or not send such samples. And if yes, with whose permission.

TDB: There is lack of innovation in India? What’s your take?

CMR: I think the industry is overdependent on the government for support and funding. While in United States the industry spend to government support ratio on R&D is 80:20, here in India it is opposite. To promote and encourage R&D the government had come out with tax exemption on such initiatives, but even this provision has either been misused or used for purposes other than research.

TDB: What is the current status of the drug research and development activities initiated by CCMB?

CMR: CCMB has come out with many solutions for various conditions. One among them is the development of DNA based eye diagnostic chip to detect and identify pathogens that cause eye infections. During the process of development of the diagnostic chip, CCMB sought information from hospitals on pathogens that cause various infections. We received a list of 227 infecting agents. We probed the DNA of all these organisms and identified their signatures, based on which we developed DNA diagnostic chip. The chip was translated into a product by a Bangalore based company and launched in the market. The chip was selected as the product of the year in India and also as a solution for the most unmet need in Asia-Pacific. Apart from this we are also into the development of a solution for Cardiomyopathy in young children. The process involves probing mutations in different populations. We identified the cause as the mutation RAF1 and also the pathway leading to this condition. We have successfully carried out tests on animal subjects.

TDB: CCMB is also developing drug delivery systems based on nano technology? Could you explain the features of this technology?

CMR: We are developing nano particles for drug delivery. We call them magic bullets. They have a clever way of delivering drugs to the exact location of the problem. The particles move all across the body but release the drug only at the infected area. Further, nano particles can identify cancer cells, bind to them and release the drug to destroy them. We are looking into this possibility as well. We put a postal address of the destined location. This is what is called as directed release. This drug delivery platform has proved to be effective in treating ophthalmic applications, specifically Fungal Keratitis – an inflammation of the eye’s cornea.

TDB: India does not seem to have made any significant forays into stem cell research and therapies. What are CCMB’s endeavours in direction?

CMR: CCMB has been working on stem cells for several years. We are taking it as a major future activity. CCMB’s present focus is on the possibilities of creating large number of stem cells, which like in the case of blood banks can be stored in stem cells bank. Embryonic stem cells would not be the answer to the growing requirement or demands, so we need to think of alternatives. The solution is in Induced Pluripotent Stem Cells (IPSCs). These cells can be created from normal adult cells. IPSCs are becoming popular in treatment of ischemic heart disease.

TDB: Cord blood banks are proliferating across the country? How do you view this development?

CMR: In my opinion what is happening is not good. There are limitations to storing cord blood stem cells. For instance, the stem cells have to be preserved at a certain temperature and also require uninterrupted power supply. The child may require stem cell therapy much later, say 45 years later, which means we are thinking of saving cells for this many years, then revive and use them. The question is: what is the percentage of success in such situations? Another question is, under Indian conditions do we really have the capability of not only storing stem cells but also revitalising them?


“Stem cell is still a grey area from policy point of view” - Dr. V. K. Srinagesh, Consultant Plastic Surgeon, Apollo Hospitals & Stem-cell therapist

Dr. V. K. Srinagesh-TheDollarBusiness
Dr. V. K. Srinagesh, Consultant Plastic Surgeon, Apollo hospitals & Stem-cell therapist


TDB: What are the advantages of stem cell therapy vis-à-vis other therapies? Why is it that there are no attempts to promote and popularise it?

Dr. V. K. Srinagesh (VKS): There are reports which show that stem cell is showing some promise and results in the treatment of oncological, cardiovascular and orthopedic problems. For instance, if the therapy works effectively, the number of joint replacements will come down by 80%. The therapy’s capability in providing effective solutions to these problems could result in cancer and cardiovascular drugs going out of the market and perhaps closure of some pharma and implant companies. As such the reasons for lack of initiatives to encourage and promote stem cell therapy are quite obvious.

TDB: Stem cell therapy or regenerative medicine does not seem to get the recognition it deserves from the policymakers?  Your views.

VKS: From policy point of view stem cell therapy is still a grey area in India. The laws related to stem cell therapies are confusing and incomprehensive. For instance, in the past I have submitted my protocol to independent committees. I was asked to revise the process and the nitty-gritty of procedures, patient protection aspects, and, cost factors involved in stem cell therapy several times. Further, for establishing the efficacy of the therapy we need to do a double-blind study. However, we are not given permissions to carry out such studies, which makes it difficult for us to evaluate and extrapolate the benefits of the stem cell therapy.

TDB: In what way has this impacted the growth of stem cell therapy?

VKS: Patients coming for stem cell treatment seek guarantees on the efficacy of the treatment. How can we give guarantees about 20% or 80% chance of success when there are no double-blind studies to establish such possibilities?  Patients get disillusioned and lose confidence in the stem cell therapy because we have no records to convince them about its effectiveness. In the case of drugs, the success rate can be evaluated because they go through tests and trials before being marketed.

TDB: Stem cell therapy is viewed with both skepticism and optimism? Is there any regulatory framework in place to monitor stem cell practice and research in India?

VKS: Such monitoring, if there is any, is conspicuous by its absence. For instance, there are a few companies that are trying to market plant stem cells as anti-ageing therapy and also as a curative for various diseases. The stem cells cells should be extracted from humans and not plants. How can plant stem cells or animal stem cells be given to humans?  Today, many non-medical practitioners, quacks and even beauticians are promoting stem cell therapies. Where are the monitoring agencies which are supposed to stem such false claims, misconceptions and practices? Stem cell comes under Indian Council of Medical Research (ICMR) and DST. These departments are involved in giving licenses for stem cell therapy and research. But the problem is that licenses are given only to institutions and hospitals and not individuals. The government should make things simpler, more transparent and more accessible, which is certainly not the case now.

TDB: Can you give us an idea about investment and infrastructure required for stem cell therapy?

VKS: We need infrastructure to harvest and store stem cells. We need proper facilities for transporting stem cells from one place to another with great speed and convenience, without destroying their potency. The cells also need to be preserved at a temperature of about -70 degree centigrade. The costs involved in harvesting, culturing and activation is quite huge. To start in a very small way, the investment could be to the tune of 60 lakh to one crore. In fact, to just harvest stem cells without expansion but with activation it would cost the patients around Rs.3 lakh to 3.5 lakh for the first session, while the subsequent treatment will cost Rs.25,000 to Rs.30,000 per session.

Hi-Tech Manufacturing: India’s unfinished business

Electronics - Can it continue its winning streak?

Electronic goods have emerged as major hi-tech export items from India, growing at a double-digit rate over the last few years. However, despite an impressive growth, the gross manufacturing value addition has remained at abysmal levels. If the industry wants to continue riding the high tide, its focus should now be on design-led growth instead of demand-led growth

Neha Dewan | The Dollar Business

Video wall is a special multi-monitor setup that consists of multiple computer monitors and video projectors tiled together. If incentivised, the product category has the potential to become a growth driver for India’s hi-tech electronics exports


It was a simple exercise, but one that revealed some interesting insights. When The Dollar Business asked a group of college students in the national capital region (NCR) to name some of the top electronic brands, predictably the brands that got maximum recall value were primarily either Japanese or Korean. When quizzed specifically to name any Indian hi-tech electronic brand, the responses just drew a blank look in return. And it is really not difficult to understand why these dazed expressions came through.

An overview of the Indian electronics industry can put things in better perspective. As per a report by India Brand Equity Foundation (IBEF), the electronics market is the largest in the world and is anticipated to reach $400 billion in 2022 from $69.6 billion in 2012. In essence, the market is projected to grow at a CAGR of 24.4% during 2012-2020. Broadly, the sector is divided into six main sub-segments – consumer electronics, industrial electronics, computers, communication and broadcasting (C&B) equipment, strategic electronics and electronic components.

When it comes to India, the electronics production in India has also been growing at a fast pace. As per the same report, the total production of electronics hardware goods in India is estimated to reach $104 billion by 2020. In FY2013, the C&B equipment segment constituted 31% of the total production of electronic goods in India. The consumer electronics segment was next in line at 23%.

Still a laggard

However, all is not hunky-dory. India still lags behind in certain integral capabilities such as electronics systems design and manufacturing (ESDM), an area which can give the much-needed fillip to the sector. A project report on ‘Electronics Development Fund’ by the Department of Information Technology (Ministry of Communications and Information Technology), highlights how, despite the growth, the gross manufacturing value addition has been at abysmal levels. This can effectively imply that if this situation isn’t addressed, it won’t be an exaggeration to say that a time may come when the electronics imports might be at par with oil imports!

The domestic production in ESDM is projected to reach $100 billion by 2020. This can be expanded to $400 billion, with its contribution to the GDP reaching almost 20%. Sounds good! But what’s alarming is that without the necessary systems in place, and to meet the ever increasing demand, the import of electronics is also expected to increase to as much as 16% of India’s GDP and the trade imbalance is projected to reach $323 billion by 2020.

Compare this with the electronics sector in countries such as China and Singapore. In the last two decades, China, for instance, has become the second largest manufacturer of electronic goods in the world with sales revenues scaling $840 billion in 2013. In 1995, this figure stood at only $48 billion in China – yet the growth in less than 20 years in the country’s electronics manufacturing industry has been nothing short of phenomenal.

Similarly, if one looks at the Singaporean economy, the electronics industry is the backbone of the manufacturing sector with over 5% contribution to the country’s GDP and about 25% to the total manufacturing value-add. And it all started in the 1960s when Singapore became the first country in Southeast Asia to have a TV assembly plant, the only in the region at that time. Since then, Singapore’s electronics industry has grown to become a vital node in the global electronics market.

India certainly can take a cue from these economies to build the right environment for manufacturing of electronic goods. Needless to say then, the objective is and should be to make India a global hub for electronic goods to cater to the increasing demand locally and abroad. Delving further within the electronics’ domain, The Dollar Business identified three products which have immense export potential waiting to be tapped.

Top Hi-tech electrinics exports from India-TheDollarBusiness

Potential earners

One product that has immense potential, both in India and abroad, is Fundus Camera. Fundus photography, used by ophthalmologists and medical professionals, shows the images of the interior of the eye. The fundus camera is used for this function and consists of a special low power microscope with an attached camera. It is primarily helpful in detecting and assessing retinal detachment as well as other eye diseases.

India's exports of electronic goods-TheDollarBusiness


This complexity in design makes it a rather niche product, with only a few players manufacturing the product globally. Japanese Topcon, Canon and German Zeiss are some of the known international names in the domain. Players in India include Bangalore-based Forus Health, which has developed an affordable pre-screening device – 3nethra. The non-invasive imaging device can detect major issues such as diabetic retinopathy, cataract, glaucoma, cornea problems and refractive errors. And herein lies an export opportunity – one that combines cost and innovation – thereby auguring well for the Indian electronics sector.

Another product that holds a lot of promise is display wall or video wall. Although exports of display walls from India have started showing some movement only since FY2009, they have the potential to become a big forex earner going forward. However, it’s still early days as far as manufacturing of display walls in India is concerned, with little movement on that front at present. Hitesh Bhardwaj, Group Business Head – Power Electronics, Radio Frequency, Visual & Imaging Division, Mitsubishi Electric India feels that the right environment is still missing in India to encourage manufacturers.

Photoelectric sensor is yet another product that offers big money going forward. Also known as photo eye, this device helps to detect a change in light intensity. Used mainly in industrial manufacturing, these sensors offer some obvious advantages. Their compact size versus the sensing range makes them a great fit for almost any application.

Fundus photography is the creation of a photograph of the interior surface of the eye, including the retina, optic disc, macula, and posterior pole (i.e. the fundus)


Way forward

Although the government has already set up electronic hardware technology parks (EHTPs), special economic zones (SEZs) and allowed 100% FDI in the electronics hardware manufacturing under the automatic route, there is a lot more that still needs to be done. In fact, the focus should now be on design-led growth instead of demand-led growth. This imply that investments in R&D centres, technology incubation centres needs to be increased. Building a world class infrastructure, restructuring duty tariffs, increasing relevant marketing spends and positioning the ‘Made in India’ tag at par with international brands are all efforts that can pace up growth for this sector.

Moreover, as Bhardwaj of Mitsubishi Electric puts it, “Let’s do ‘Make for India’ first... only then can we look at ‘Make in India’. That’s a more realistic way forward.” Do you agree? Well, we do!


“The issue of inverted duty structure should be addressed real soon” - K. Chandrasekhar, Founder & CEO, Forus Health Pvt. Ltd.

K. Chandrasekhar-TheDollarBusiness
K. Chandrasekhar, Founder & CEO, Forus Health Pvt. Ltd.


TDB: When it comes to fundus cameras, Indian exports are next to nothing. Why hasn’t the Indian ophthalmology devices industry managed to achieve what the generics industry has?

K. Chandrasekhar (KC): The medical devices industry in India has just started to grow. Even the pharma industry took some time before it actually started playing a bigger role in the country’s exports. In fact, 25 years ago there was no IT industry in India. Today, India is the leading player in this segment globally. Similar is the case with medical devices industry. It’s still evolving and is in the initial growth stage. Recently, there was an article in a paper which said that the government is allowing 100% FDI into medical devices. All these schemes will certainly bolster the industry and more entrepreneurs will start manufacturing medical devices. I think most of these industries always follow a trend. They start off with distribution, then they go for low hanging fruits and then get into complex dynamics. So, it’s all time based. Today, we are at a  stage where we are making products that we never made before. Moreover, one should also have a strong domestic market. Thankfully, in India the domestic market is improving for everything. And there are entrepreneurs who are looking at this market very seriously. So, if they are making products for India, they obviously will start exporting it outside the country in the next growth phase. Hence, we are in an industry phase where entrepreneurs are first satisfying the domestic demand. Hopefully, the next decade will see the exports going up.

TDB: So, what is the plan going forward – both for domestic as well as international markets?

KC: We plan to introduce two or three new products shortly and double our revenues during the process. It will be our endeavour to continue to work on innovative products that are also affordable. Export will become our focus as we go. If all goes well, 20% of our revenue would be coming from exports this year, as against 10% last year.

TDB: Is there something specific that you would want for the industry in the upcoming foreign trade policy (FTP)?

KC: Duties on imported finished goods should be higher than that on components. That’s how you can encourage Indian manufacturers. For instance, let’s say a fundus camera attracts 5% duty and the components of a fundus camera attract 7% or a 10% duty, then obviously it will not be competitive when you make it in India. Whereas if components attract 5% or 0% duty and the finished goods attract 10% duty, then it encourages a lot of Indian companies to try it out. Further, it would also benefit the end user and motivate him to look at Indian companies far more seriously.

TDB: Other than fundus cameras, which other devices should Indian manufacturers concentrate on, in order to scale up exports?

KC: We should not say fundus cameras at all. We should talk about medical devices in general. I think that is more appropriate. In fact, Indian manufacturers should focus on every area that has the potential to make a bigger impact – it could be problems like malaria, malnutrition or osteoporosis. All these are huge opportunities and can make big impact on the society as a lot of people are still financially burdened in India. In fact, if we can come up with a technology that is more affordable and accessible, both in the screening space as well as intraventional space. That will certainly be an opportunity. Our focus should be on solving a problem via technology.


“The manufacturing environment in India needs to be made more conducive” - Hitesh Bhardwaj, Group Business Head – Power Electronics, Radio Frequency, Visual & Imaging Division, Mitsubishi Electric India

Hitesh Bhardwaj, Group Business Head – Power Electronics, Radio Frequency, Visual & Imaging Division, Mitsubishi Electric India


TDB: When one thinks of hi-tech electronics, Japanese, Korean and western brands come to mind. Do you think Indian hi-tech electronic goods suffer from low brand equity?

Hitesh Bhardwaj (HB): While Japanese and Korean brands excel in quality, China remains unrivalled when it comes to volume. Yes, Indian hi-tech electronic goods still suffers from a low brand equity. The reason is simple – there is no adequate infrastructure to start hi-tech electronics manufacturing in the country. A manufacturing-friendly environment is extremely necessary to give a boost to this sector.

TDB: In what way do you feel the ‘Make in India’ campaign help give the hi-tech electronics sector a leg up?

HB: The buzz is very strong, definitely. However, how we go from slogan to action remains to be seen. I think one should look at ‘Make for India’ first. It’s important to first address that. ‘Make in India’ should simultaneously be ‘Make for India.’ Only then will the growth curve scale up further.

TDB: What is the current market size of display walls in India? Is almost everything catered to by imports?

HB: The market for display walls currently stands at around Rs.450-Rs.500 crore in India, and is growing at about 20% every year. Mitsubishi Electric India is currently operating in two segments – super narrow bezel (SNB) display walls and back projection cubes. While SNB is 100% imported in India, some manufacturers claim that they produce locally as far as back projection cubes are concerned.

TDB: What stops display wall manufacturers from manufacturing in India? Will a higher import duty on display walls and related products force them to manufacture locally?

HB: Volumes are not there to encourage manufacturing in India. Capabilities can still be acquired. China has the potential locally so they can export. Also this is a capital product, not a consumer one. In fact, India’s audio-visual knowledge is still very limited. Even if you see projectors – it’s a much bigger business in India, but still there is no manufacturing in India. The manufacturing environment in India needs to be made more conducive first. The electronics manufacturing industry should be such that all components are also manufactured in India. The growth should be design led and not demand led. The thrust on ESDM (Electronic System Design & Manufacturing) is good as it justifies design led manufacturing.

TDB: Do you think Indian companies really have the technological know-how to manufacture display walls?

HB: We do have engineers, technocrats – it’s all inherited – but their exact capabilities are still not being utilised to optimum levels. As of now, we also don’t have any short-term plan to manufacture display walls in India.

TDB: Do you think if the government decides to include a special chapter on hi-tech electronics goods in the upcoming foreign trade policy (FTP), it will help in enhancing exports of electronic items form India?

HB: Yes, it most definitely will help. The only stumbling block is the ‘Made in India’ tag which needs to find acceptability outside. Then, if we talk of incentives, government has given a lot of incentives to ensure growth of the renewable energy sector. Such incentives should be given to the electronics manufacturing sector as well. Tax holidays, accelerated depreciations to the manufacturers on the capital and skill development are some aspects that should be looked at. Duty tariffs also need to be revisited. Further, there should be a uniform tax structure applicable across all ports, which isn’t the case at present. Proper and clear notification for each and every product rather than a general classification will be of help too.

 Hi-Tech Manufacturing: India’s unfinished business

Telecommunication & Power – Telling tale of Indian Power & Telecom

With close to $20 billion per annum trade deficit under HS Code 85, which covers bulk of the electrical, electronic and telecom equipment, the Modi government has its work cut out. And while ‘Make in India’ might be a good initiative and recent ITA talks collapsing a bit of a boon, what the country needs is nothing short of a ‘shock and awe’ to bring things under control

Shakti Shankar Patra | The Dollar Business

Despite a booming telecom industry, India’s telecom equipment manufacturing is in doldrums due to a lack of foresight in policy making


One bit of news that for some strange reason never made headlines last month was the Information Technology Agreement (ITA) talks ending without any resolution on the 12th of December. The objective of the agreement being bringing down tariffs on IT items in stages to zero, opinions are divided on whether the talks collapsing was a good thing or a not so good thing for India. While those who think the talks collapsing was the best thing that could have happened, point at the fact that signing ITA - I in 1997 had a devastating impact on India’s domestic electronic and telecom equipment industry, those in favour of the agreement feel India can never become a manufacturing powerhouse if its IT hardware products are charged higher duties by importing countries – a likely outcome if India doesn’t become a signatory to ITA - II.

Absolute shocker

But do we even have the capability to manufacture such hardware? If not, is it because of ITA? Let’s look at some figures. Most would agree that for most of the 1990s and early 2000s, cordless phones were in high demand in India. And before signing ITA - I in 1997, India had a basic duty of 42% on the import of cordless phones. Till that year, and even for a few of years following 1997, India’s cordless phones trade was fairly balanced. Yes, India was actually a pretty big exporter of cordless handsets! But then because of signing ITA - I, India had to gradually bring down the duty on handset imports – from 42% to 35% in 1999, then to 25% in 2000, followed by a reduction to 15% in 2004, followed by a move to zero in 2005. A look at how Indian exports and imports fared in these eight years – between 1997 and 2005 – is simply put, stunning. For, while in response to every successive cut in duty, imports surged, exports barely took off. And this is the root of all fears of ITA - II.

India's top power equipment imports


Bigger picture

Having seen what kind of impact ITA - I had on India’s telecom equipment and IT hardware trade, it’s but natural for people to be skeptical of ITA - II. No doubt, ITA - II has its benefits, but almost all of these benefits are for those countries that have strong manufacturing capabilities. At the same time, signing ITA - II would be directly in conflict with Prime Minister Narendra Modi’s ‘Make in India’ campaign. But even those who are opposing India signing ITA - II, deep down know it’s not a question of if but when. For, it’s been 17 years since ITA - I was signed and in the meantime, a lot of technological changes have occurred, which makes an amendment/extension only logical. So, even if the need of the hour might be opposing ITA - II, in the long run, India badly needs to get its manufacturing house in order – be it that for telecom, electronic or electrical equipment. Having discussed some interesting electronic equipment earlier, let’s now focus on some telecom and electrical equipment.

Source of India's telecom equipment imports-TheDollarBusiness


Little stars

At the core of most telecom equipment are digital multiplexers that allow multiple inputs to be independently switched to a single output. But while India’s imports under HS Code 85219090 (under which digital multiplexers are traded) were worth $59.7 million in FY2014, exports were worth just $1.6 million – proof of how far behind India is in the manufacturing of telecom equipment. The same is the case when it comes to protocol analyzers that are installed in computers and networks to enhance protection against malicious activity, as a supplement to anti-virus software and firewalls. For, while total imports under HS Code 90308990 (under which protocol analyzers are traded) were worth $77.1 million in FY2014, exports were worth just $8.6 million. If you thought this was bleak, so is the case with most other telecom equipment.

Even when it comes to power equipment, the picture is the same – anaemic growth in exports, if at all, and rising dependence on imports. Let’s take the example of something as basic as a static converter, which is traded under HS Code 850440. While India’s exports of static converters were down 15.9% in FY2014 to $318.7 million, imports were up 6.2% to $742.7 million. And to get a sense of just how far behind we are, shouldn’t we figure out what was China’s exports of the same? Well, the answer is just 52x more!

ITA-II talks collapsing last month might turn out to be a short term respite for India


Mission possible

Looking at the state of Indian telecom equipment manufacturing, it’s ironic that one of the missions of Department of Telecommunications, which comes under Ministry of Communications and Information Technology, is “to make India a global hub for telecom equipment manufacturing and a centre for converged communication services.” While becoming a manufacturing hub looks very difficult in the foreseeable future, the least we can do is start the process by encouraging higher education, encouraging FDI and last but not the least, not signing ITA-II until we are reasonably capable of competing with the Chinas of the world.


“We are so far behind that minor polcy tinkering won’t make a difference” - Rajesh Tuli, Managing Director, Coral Telecom

Rajesh Tuli-TheDollarBusiness
Rajesh Tuli, Managing Director, Coral Telecom


TDB: India’s telecom equipment trade is massively skewed in favour of imports. What do you think are the main reasons for this?

Rajesh Tuli (RT): When we signed ITA-I, we opened our doors to foreign companies, but didn’t support our domestic manufacturers. It was not our state policy. Having opened the floodgates, in the last 15-20 years, we have not even taken cognizance of the fact that we have started importing anything and everything in the telecom and IT sector. We have also forgotten that India is a signatory to only ITA-I, which covers only products and technology available in 1991, and not products and technology that came up after that. For example, Long Term Evolution is a technology that didn’t exist then. Similarly, although some might debate this, even Voice over Internet Protocol is a technology that didn’t exist then. So, products based on these technologies don’t come under ITA-I. But while one arm of the country is taking this stance (the official stance), another arm of the country is classifying all IT and telecom products under ITA-I, for which import duty has been waived off.

TDB: Do you think there’s a lack of understanding in Ministry of Commerce as to which products should be classified under ITA-I and which under ITA-II?

RT: It will be foolish to say that Ministry of Commerce doesn’t understand the difference. Our bureaucrats are sharp people and we do have participants from the industry constantly interacting with them. It is not a problem at the level of bureaucracy. The problem lies in a lack of political will.

TDB: Why do you think there was/is a lack of political will?

RT: The real nuisance are lobbies and associations. They will impress upon the Prime Minister that if you do this (strictly implement duty-free imports for only ITA-I products and technology), FDI will not come. So, you start looking at this as a trade-off. But then what you are essentially doing is sacrificing long term national interest for FDI.

TDB: Would you say we are so far behind in telecom equipment manufacturing that the government doesn’t even think it’s something worth sacrificing FDI for?

RT: Yes, we are very far behind. We require very strong political will to change the scenario…someone who can put the foot down and get things implemented. As I said, the lobbies are a nuisance. The moment there’s even a small case of Anti-dumping, you will find dozens of people coming from the Chinese embassy…it’s their sheer size as compared to domestic manufacturers that makes a difference. Sometime what happens is that even if I successfully impress upon the bureaucrats that tariff should be hiked in case of a particular product, the other side will try to convince them that the moment we hike rates, telecom services will get affected and come up with theories on how it will affect GDP. Another step I would ask the government to implement if it wants to promote exports is remove the interest rate differential that exists between Indian companies and their global peers.

TDB: Let’s assume Prime Minister Narendra Modi and Minister of Commerce Nirmala Sitharaman are going to read this interview. Tell us what they should incorporate in the upcoming FTP to help increase telecom equipment exports from India.

RT: There has to be a state policy for promoting IT and telecom exports. For example, China had a state policy vis-à-vis Ethiopia. If you went to Addis Ababa a few years back, you would have seen huge buildings with Ericsson and Siemens written on them. You go there today, you will not find Ericsson or Siemens. Huawei has an office at the Ministry of Telecom there! Let’s face it. We can’t sell our telecom products in the US and Europe today. We have to target poor and technologically not-so-advanced nations. But unlike China, our diplomats won’t even accompany a private sector company over there.

The point I want to make is that while measures like lower interest rates and higher duty drawbacks will help, what we need is a long-term, strategic policy. My personal opinion is that at today’s juncture, minor tinkering won’t make any difference because we are so far behind.

We don’t have the technology. The government needs to very aggressively support Indian companies to acquire and develop technologies, which can only be done in the private sector. We need to spend money on developing what is needed by the market. So, if there is a market for 3G products, we need to spend on that. But if you want to hijack India’s agenda, like what happens in a lot of the forums, you will try to sell the idea that we shouldn’t be bogged down by 3G or 4G, but should invest in 7G! And trust me, if you are good orator, you will successfully hijack the agenda.


“We need to encourage students to take up research” - Dr. D. Rama Krishna, Assistant Prof., University College of Engineering, Osmania University

Dr. D. Rama Krishna-TheDollarBusiness
Dr. D. Rama Krishna, Assistant Prof., University College of Engineering, Osmania University


At present, there are very few RF & Wireless Research and Development centres in India, which are not enough to meet current requirements. Considering this, the government, with the support of certain private telecom operators, has established Telecom Centres of Excellence (TCoEs) in premier academic institutions, such as the IITs. The proposed TCoEs are expected to fill the gap that has been created due to rapid pace of evolution and growth of the telecom sector. Broadly, these TCoEs will be working on enhancing the talent pool, leading technological innovation, securing information infrastructure and bridging the digital divide. In addition to this, Government of India has also constituted Telecom Sector Innovation Council (TSIC) in 2011 to cater to the ‘Decade of Innovation’ that is aimed at inclusive growth in India between 2010 and 2020. Thanks to these initiatives, India has managed about 10% of the IPRs in 4G wireless technology.

Wrong number

There is a severe shortage of well-trained engineers with a good background in RF and wireless technology although now, India has a vast network of engineering colleges that produce tens of thousands of well-trained electronic engineers. With additional coaching, some of these electronic engineers can become excellent RF engineers. Moreover, many engineers, with experience of working on advanced projects, are looking for career advancement and challenges – another group that needs to be tapped. At the same time, in order to accelerate research in RF and wireless sector, the government should provide initial tax waivers to establish R&D-focussed companies in India. The government should also encourage entrepreneurs and start-ups by providing low-interest loans.

Cross connection

To meet the targeted goals within a stipulated time, the government should provide a supporting environment in reputed universities/academic institutes. Involving faculty in active research, providing the necessary financial assistance to them, which equals industry standards, will attract good people to research. Subsequently, we can also stop the migration of efficient, young and dynamic people to other countries. Due to the lack of scope in India, a lot many talented researchers are immigrating to developed countries, just so that they can continue their research.

At the same time, due to the lack of fab facilities, we are dependent on other countries such as South Korea and Taiwan for hardware realisation. This is also leading to massive expenditure. So, the government should make polices to encourage fabrication in India, after acquiring necessary human resources.

No call drop

Even existing MNCs in this sector are not developing core design and development ideas in India. All they do is develop sub-systems and assemble components. Another peculiar aspect of this sector is that engineering graduates are not immediately ready for jobs. So, starting salaries in RF and wireless sector are much lower as compared to those in sectors like IT. This can be overcome by motivating students to take up research in academic institutions, and facilitating it by designing a new curriculum, which targets continuous student-industry interactions.

Establishing such an environment will go a long way in solving the crisis in India’s telecom equipment manufacturing, particularly since India is probably one of the very few countries, where major projects for RF and wireless technology, requiring hundreds of high-quality engineers and scientists, can be undertaken. New policies, an upgraded environment and facilities will help in using this vast potential effectively.