Why is it in the news?
- The Indian industry have called on the government to reconsider its limitations on investment inflows and the mobility of skilled workers from
- They also suggested reducing steep import duties on electronics components, as these have caused Indian electronic products to be less competitive globally compared to countries like Vietnam and China, instead of promoting the localization of essential inputs.
Key Takeaways
- The Electronics sector in India heavily relies on imported essential components, causing manufacturing costs to surge due to import duties ranging from zero to 27.5%.
- The Confederation of Indian Industry (CII) has cautioned that the current Production Linked Incentive (PLI) scheme might not be sufficient to counterbalance the cost burden imposed by high import tariffs, making Indian electronics products less competitive globally compared to competitors like Vietnam and China.
| About PLI scheme:
· It is a form of performance-linked incentive to give companies incentives on incremental sales from products manufactured in domestic units. · It is aimed at boosting the manufacturing sector and to reduce imports. · These schemes have the potential of significantly boosting production, employment and economic growth over the next five years or so. · In 2021, the Government had announced Rs 1.97 lakh crore (US$ 28 b) worth of PLI schemes for 13 key sectors. These sectors include Auto components, Automobile, Aviation, Chemicals, Electronic systems, Food processing, medical devices, Metals & mining, Pharmaceuticals, Renewable energy, Telecom, Textiles & apparel, White goods |
- In a bid to shift India’s electronics sector from assembly-centric manufacturing to value-added component-level production, the CII emphasized the need to revisit the restrictions on foreign direct investment (FDI) and skilled personnel movement from China.
- The report stressed that the restrictions introduced in 2020 to prevent predatory acquisitions during the pandemic now hinder India’s component ecosystem development and create an unfriendly investment environment.
- The CII report recommended adopting a more inclusive approach towards investments, component imports, technology transfer, and skilled labour mobility. It highlighted the importance of finding a balance between imports and exports for sustainable industrial growth, citing China’s heavy reliance on imports despite being a major electronics manufacturer.
- Urging for a reduction in import tariffs on priority components and sub-assemblies to under 5%, the report suggested aligning India’s tariff rates with competitor economies to boost manufacturing competitiveness.
- With India’s demand for components and sub-assemblies projected to escalate significantly by 2030, the CII proposed a fiscal support scheme of 6%-8% to elevate critical component production. The report advocated for a strategic overhaul in import duty structures to reinforce India’s position in the global electronics manufacturing landscape.
