India’s electronic products industry slated to grow at 10.1%: Study

The Dollar Business Bureau 

The Indian electronic products industry is slated to increase at a compound annual growth rate (CAGR) of 10.1% to reach $75 billion by 2017 from $61.8 billion in 2015, predicted a joint study undertaken by Assocham-EY.

“Rising manufacturing costs in China and Taiwan are compelling manufacturers to shift their manufacturing base to alternate markets. In 2014, the average manufacturing labour cost per hour in India was $0.92 as compared to $3.52 of China,” the study stated.

The joint study titled ‘Turning the Make in India dream into a reality for electronics and hardware industry’ underscored that the electronic products market is currently dominated by electromechanical components, which forms 30% of the total demand, followed by components such as resistors and capacitors at 27%.

The country’s electronic components industry was valued at $13.5 billion in 2015. It grew from $10.8 billion since 2013 at a CAGR of 11%.

India’s manufacturing segment is growing at a considerable pace due to availability of low-cost labour. With constantly-growing penetration across consumer products, particularly in rural and semi-urban markets, the manufacturing sector is expected to get the much-needed boost in the future.  

The study, however, noted that the country’s manufacturing environment for electronics and hardware industry is still at a rudimentary stage and faces several demand - supply challenges.

Component demand in India is muted due to very limited value addition as primarily last-mile assembly takes place here.

The present electronic product market is dominated by secondary sales. The primary sales are limited because of reduced disposable income in rural and semi-urban.

“India’s taxation system is complex, especially where indirect taxes are concerned. Currently, the base direct tax incidence in India stands at around 30%, whereas the corresponding tariff in other Asian countries is between 16% and 25%,” the study said.

“Although, the government has proposed the implementation of Goods and Services Tax (GST) for a state-of the-art indirect tax system, there are concerns that the industry faces in terms of the clarity on the revenue-neutral rate, non-creditable tax on inter-state movement of goods, status of existing state incentives granted and transition from existing taxation system to GST regime,” it said.