Make-in-India: Is optimism meeting realism?

India's economic growth relies on the manufacturing activity. Sadly this has been one of the weakest points in India's economic history. In addition to political and diplomatic factors, flawed policies around manufacturing have doubled roadblocks over the years. In strong contrast at the same time Asia was emerging as a global manufacturing hub where most Indian counterparts like China, South Korea, Tiwan and Thailand, etc. were flexing their manufacturing muscle.

It is only until recently when India realized the power of factories and becoming a manufacturing powerhouse. The realization that it can not achieve its economic goals without increasing the manufacturing capability is a delayed yet positive step. Prime Minister Narendra Modi's 'Make In India' initiative comes as a wake up call and emphasizes on the domestic manufacturing so that at least a part of domestic demand could be supplemented with products made-in-India. Despite the delays, it comes as a welcome move since it is not an opportunity entirely lost. Interestingly India owns a huge market-base to support a large manufacturing build up in the country.

Banking on Make-in-India

The “Make in India” initiative under the current regime provides impetus to the dormant electronics manufacturing sector in India. In today's scenario, the problem is much more than just policy. It has moved beyond. To develop a complete ecosystem for electronics manufacturing in India needs willingness from investors and companies alike. As envisioned jointly by the industry and the government, the demand for electronics hardware in the country is projected to increase to $400 billion by 2020. “We have seen a significant hike in the demand for electronic products and all this demand cannot be addressed through imports as this will have large-scale adverse consequences on Indian economy and its balance of payments. Hence the country does not have a choice but to build a solid domestic electronics eco-system,” opines MN Vidyashankar, President of IESA.

Vidyashankar further outlines that domestic production of electronics has been a major focus of the new government and it recognizes the need to reduce India's electronics import bill. “Based on the various proposals that have been submitted during the last couple of years we expect to see increased manufacturing activity. We will see 2016 to be the major wrap up,” adds Vidyashankar.

“The commitment to providing defined timelines for all clearances, and calling for investment proposals and incentives for manufacturing are steps in the right direction and will open up business opportunities for designing products in India for both domestic and global markets,” says Jaswinder Ahuja, Corporate Vice President and Managing Director, Cadence Design Systems India.

There are various product categories where there is a sure business case for making in India. Particularly in the defence electronics where the departments in defence are showing lot of interest. “IESA is playing a key role with regards to transforming those competencies and experiences to the private sector and also to contribute and support the department of defence. There is a considerable interest in the ministry of defence. Automotive electronics is another key sector where there is a high value addition,” says Vidyashankar.

Manufacturing mobile devices in India

Most of us know that if the mobile phones are manufactured in India. Mobile phones constitute almost 35-40% of the electronics product market in the country today. “Mobile manufacturing can bring a big impact on the ecosystem creation and should be the priority of the government. Mobile phone makers should start manufacturing mobile phones in India and leverage on the various policies, schemes and incentives proposed by the Government of India and various state governments,” outlines IESA in its estimate.

Most of the companies, which sell handsets, have begun to realise this. Today global smartphone manufacturers are seriously thinking of setting up their plants in India. Some of them have recently claimed to set up them. Foxconn has already announced its factories in India as it aims to have factory in each major city in India to boost its presence in India and become a major manufacturer of handhelds in the country. Similarly companies such as Micromax, Gionee, Xiomi and others have announced their plans to set up factories in India.

From designing to manufacturing

India has proved its strength in product design which can complement India's plan to become a manufacturing hub at least for the domestic demand.

“IESA has been advocating that ‘Make in India’ will be successful only if we do design led manufacturing. The availability of high quality skilled labour coupled with conducive Government policies makes India an attractive destination for high end design led manufacturing in ESDM sector,” further adds Vidyashankar.

Most of the experts and industry people believe that India has all the right ingredients to build a fabulous manufacturing ecosystem. “‘Make in India’ initiative will act as a catalyst to translate the great Indian dream into a reality.  ‘Make in India’ initiative is already attracting a number of international investors to India,” predicts IESA.

India has developed solid expertise in design and project management. “Given this advantage, along with the fact that the Indian engineers are able to understand the local challenges and unique needs, design skills can be used to the country’s advantage to build products customized for the Indian market,” suggests Ahuja of Cadence, which is a design company.

He further says that while the government has taken steps to nurture talent in VLSI and embedded design, one area that needs focus is developing technical skills in manufacturing. “Building and running a foundry requires expertise in the latest manufacturing technologies, as well as knowledge of factory optimization techniques, advanced process controls, material sciences, and yield enhancement, to name a few. In addition, technicians are needed for board assembly, test and packaging,” says Ahuja.

Opportunity yet not lost

The past is history which can not be redone. India needs to rewrite the rules of electronics manufacturing. While the government has set the things rolling with the easy policy framework and a number of incentives, it is industry's duty to tap the opportunities and take advantage of the incentives. Indian manufacturing is expected to further take off if GST is rolled out in time. “The Government’s continued action to push the GST bill through has reignited the hopes of the country that the GST may see the light of the day some time during the next fiscal year, if not from April 1 itself. Recommendation towards wider coverage of sectors within GST is much desirable in the interest of a cleaner indirect tax regime,” says Rajeev Dimri, Leader, Indirect Tax, BMR & Associates.

IESA believes that the conducive policy environment which was set by the government in 2014 will take India’s ESDM sector a long way. “2015 and 2016 will be the time to translate those policy frameworks to real actions and investments. We are highly optimistic about the bright future of India’s ESDM sector in the years to come,” concludes IESA.