ELECTRONIC SYSTEMS

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SUMMARY
  • The Electronics System Design & Manufacturing (ESDM) industry includes electronic hardware products and components relating to information technology (IT), office automation, telecom, consumer electronics, aviation, aerospace, defence, solar photovoltaic, nano electronics and medical electronics. The industry also includes design-related activities such as product designing, chip designing, Very Large-Scale Integration (VLSI), board designing and embedded systems.
  • India’s digital base is the second largest in the world and is growing at the second-fastest rate among the 17 leading economies.1
  • The Digital India Program has been transforming the Country into a digitally empowered society and knowledge economy since its launch in July 2015.2
  • India is the third biggest start-up hub in the world.3 In 2019 alone, 1300 new tech start-ups were added.4
REASONS TO INVEST
  • India is home to considerable talent for electronic chip design and embedded software.
  • Electronic Manufacturing Services (EMS) industry is expected to be a significant contributor to the entire industry’s development.
  • India has strong design and R&D capabilities in auto electronics and industrial economics.
  • The Government is promoting the development of Electronics Manufacturing Clusters (EMCs) throughout the Country to provide world-class infrastructure and facilities.
  • Major Government initiatives such as ‘Digital India’, ‘Make in India’ and supportive policies including favourable FDI Policy for electronics manufacturing have simplified the process of setting up manufacturing units in India.
  • India is the second fastest digitizing economy amongst the 17 leading economies of the world.5
  • There is a huge demand for electronic goods in the Middle-Eastern countries and in emerging markets such as North Africa and Latin America. This provides an export market for ‘Made in India’ electronic goods.

 

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STATISTICS
  • The FDI inflows in electronics in India for 2018-19 were valued at USD 451.9 Mn compared to USD 196.9 Mn in 2017-18.6
  • India currently has 687.63 mn internet subscribers and 354 mn smartphone devices (February 2019). Smart users are expected to rise by 84% and reach 859 mn by 2022.7
  • The Consumer Electronics and Appliances Industry in India is expected to become the fifth-largest in the world by 2025.8
FDI POLICY
  • 100% Foreign Direct Investment (FDI) is allowed under the Automatic Route in the ESDM industry.9
  • For defence electronics, up to 100% FDI is allowed, subject to industrial license. Under the Automatic Route, up to 49% FDI is allowed. Above 49% is allowed under the Government Route on a case to case basis, wherever it is expected to result in access to modern and ’state-of-the-art’ technology in the country.10
  • The Government allows 100% FDI in the medical devices via the Automatic Route. Investors are no longer required to take the Foreign Investment Promotion Board’s permission to acquire an existing company or set up a new manufacturing unit in the medical devices sector. The investor, however, will need to comply with the reporting requirements of the Reserve Bank of India (RBI) and comply with all other relevant Central and State laws and regulations.11

 

Read more about Foreign Direct Investment Policy in India >

SECTOR POLICY

National Policy on Electronics 

The National Policy on Electronics (NPE) 2019 envisions to position India as a global hub for ESDM by encouraging and driving capabilities in the Country for developing core components, including chipsets and by creating an enabling environment for the industry to compete globally.

The NPE 2019 replaces the NPE 2012, which has successfully built the foundation for a competitive Indian ESDM value chain. The NPE 2019 targets to promote domestic manufacturing and export in the entire value chain of ESDM and achieve a turnover of USD 400 Bn by 2025.12 

For more details on the NPE 2019, please refer to NPE 2019.

 

Explore Government policies/schemes in Electronic Systems sector >

FINANCIAL SUPPORT

Modified Special Incentive Package Scheme (M-SIPS) 

THE M-SIP Scheme, launched in 2012, provides capital subsidy of 25% for electronics industry located outside of Special Economic Zones (SEZs). Electronics industry located inside SEZs are provided 20% subsidy.13 

Under M-SIPS, 419 investment proposals involving investment worth USD 16.2 Bn have been received till 31 December 2018. Out of these, 197 applications with proposed investments of approximately USD 6 Bn have been approved, of which 134 have already started commercial production. These units have reported total sales of USD 10 Bn, of which goods worth USD 2.3 Bn have been exported. The revenue paid by these companies to the Government stands at around USD 1.3 Bn.14 These companies are also generating direct and indirect employment.

19 applications under M-SIPS with proposed investment of around USD 2.1 Bn have been recommended by the Appraisal Committee for approval. 203 applications with proposed investment of around USD 8 Bn are still under appraisal.15

Electronics Development Fund (EDF) 

This Scheme helps promote start-ups and innovation. The EDF is a fund of funds that invests in venture funds, which in turn invest in innovation ventures/ start-ups in electronics, nano-electronics and IT. The EDF will be investing in 13 daughter funds. The total targeted collection of these 13 daughter funds is USD 994.1 Mn, of which USD 122.6 Mn is being provided by the EDF.16

Electronics Manufacturing Clusters (EMC)

The Scheme, launched in 2012, encourages entities including State Government entities to provide good quality infrastructure within a cluster.

Under the Scheme, 50% of the project cost for greenfield EMC and 75% for brownfield EMC is given as grant. As of February 2019, 20 greenfield and 3 brownfield EMC projects have been sanctioned with the project investment outlay of USD 557.6 Mn. Out of this, the Government of India is providing USD 225.6 Mn as Grant-in-aid.

Electronic Manufacturing Clusters, spread over 1,442.7 ha. of land, are being developed. The likely investment by manufacturers for the Project stands at USD 7.8 Bn.17

Export Incentives

Export incentives of 2-3% are available under the Merchandise Export from India Scheme (MEIS). Products such as air conditioning parts and compressors, refrigerating equipment compressors, fully automatic washing machines, colour televisions, and set top boxes for accessing files are included in the list of products that get export incentives.

State Incentives 

Apart from the incentives mentioned above, India offers additional incentives for industrial projects, while some states offer separate incentives for the industry.

  • ELECTRONICS POLICY FOR THE STATE OF GUJARAT (2016-21)
    • The Government of Gujarat provides assistance of up to 25% of the project cost to greenfield EMCs, subject to a ceiling of USD 1.43 Mn.
    • The Government also offers a special incentive package for two anchor units (with investment of more than USD 14.3 Mn) in each of the greenfield EMCs.
  • ELECTRONICS, IT AND ITES INVESTMENT POLICY OF CHHATTISGARH
    • Electronics, IT and ITES units are entitled to an interest subsidy up to 75% of the total interest paid annually up to the period of 8 years with a maximum limit of USD 158,746.5 per annum. The subsidy is on a reimbursement basis.
    • Units established in the State shall be reimbursed 50% of the fixed capital investment, excluding the cost of the land, with a maximum limit of USD 216,473.6.

SUPPORT FOR INTERNATIONAL PATENT PROTECTION IN E&IT

To encourage filing of international patents, a scheme to Support International Patent Protection in Electronics & IT (SIP-EIT) has been commissioned. The Scheme provides financial support to Small and Medium Enterprises (SMEs) and tech start-ups by supporting international patent protection in electronics and IT.

Reimbursement is limited to a total of around USD 21,650 per invention or 50% of the total expenses incurred in filing and processing of patent application up to Grant, whichever is lesser.18

Key Points in Union Budget 2020-21

  • Ministry of Electronics and Information Technology has been allocated USD 919.87 Mn.19
  • Out of the USD 919.87 Mn budget allocation, the revenue expenditure allocation is USD 869.87 Mn and capital expenditure allocation is USD 50 Mn.20
  • The total budget allocation towards the Digital India Program is USD 527.73 Mn.21
INVESTMENT OPPORTUNITIES
  • Mobile phone manufacturing22
  • Semi-conductor wafer fabrication manufacturing23
  • Light Emitting Diode (LED) manufacturing24
  • Wearable devices manufacturing25
  • Solar cells and modules manufacturing26
  • LED and Liquid Crystal Display (LCD) manufacturing27
  • Research, innovation and skill development support in emerging technology areas such as Augmented Reality (AR), Virtual Reality (VR), drones, robotics, additive manufacturing, etc28
  • Medical electronic devices manufacturing29
  • Research and development of automotive electronics and power electronics for mobility30

 

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FOREIGN INVESTORS
  • Qualcomm (US)
  • Samsung (South Korea)
  • LG (South Korea)
  • GE (USA)
  • Bosch (Germany)
  • Amphenol (US)
  • Motherson Sumi system (Japan)
  • Nidec (Japan)
  • Magneti Marelli (Italy)
  • Continental (Germany)
  • Delphi (USA)
  • Mando Hella (South Korea)
  • Mitsubishi (Japan)
  • Harman (USA)
  • Perto (Brazil)
  • Giesecke and Deverient (Germany)
  • Haier (China)
  • Philips (Netherland)
  • Panasonic (Japan)
  • Huawei (China)
SOURCES
  1. "India’s Trillion-Dollar Digital Opportunity", Ministry of Electronics and Information Technology, https://meity.gov.in/writereaddata/files/india_trillion-dollar_digital_opportunity.pdf
  2. Report on India’s Trillion Dollar Digital Opportunity Released, Ministry of Electronics and Information Technology, http://pib.nic.in/PressReleaseIframePage.aspx?PRID=1565669
  3. Indian Tech Start-up Ecosystem 2018: Approaching Escape VelocityNASSCOM, https://www.nasscom.in/knowledge-center/publications/indian-tech-start-ecosystem-2018-approaching-escape-velocity
  4. Indian Tech Start-up Ecosystem: Leading Tech In The 20sNASSCOM, https://www.nasscom.in/knowledge-center/publications/indian-tech-start-ecosystem-leading-tech-20s
  5. Report on India’s Trillion Dollar Digital Opportunity Released, Ministry of Electronics and Information Technology, http://pib.nic.in/PressReleaseIframePage.aspx?PRID=1565669
  6. FDI Fact Sheet, Department for Promotion of Industry and Internal Trade, https://dipp.gov.in/publications/fdi-statistics
  7. Report on India’s Trillion Dollar Digital Opportunity Released, Ministry of Electronics and Information Technology, http://pib.nic.in/PressReleaseIframePage.aspx?PRID=1565669
  8. "Session 5:- Promoting “Make in India” through Policy guidelines & Communication Broadband Equipment’s by use of hackathon", Ministry of Home Affairs, https://dcpw.gov.in/session5.php
  9. FAQs on Foreign Direct Investment & Electronic System Design & Manufacturing (ESDM), Ministry of Electronics and Information Technology,  https://meity.gov.in/writereaddata/files/FAQ_FDI_ESDM.pdf
  10. FAQs on Foreign Direct Investment & Electronic System Design & Manufacturing (ESDM), Ministry of Electronics and Information Technology,  https://meity.gov.in/writereaddata/files/FAQ_FDI_ESDM.pdf

  11. FAQs on Foreign Direct Investment & Electronic System Design & Manufacturing (ESDM), Ministry of Electronics and Information Technology,   https://meity.gov.in/writereaddata/files/FAQ_FDI_ESDM.pdf

  12. Cabinet approves the proposal of National Policy on Electronics 2019, PIB, http://pib.nic.in/PressReleaseIframePage.aspx?PRID=1565285

  13. National Policy on Electronics 2019, Ministry of Electronics and Information Technology, https://www.meity.gov.in/writereaddata/files/eGazette_Notification_NPE%202019_dated%2025022019.pdf

  14. National Policy on Electronics 2019, Ministry of Electronics and Information Technology, https://www.meity.gov.in/writereaddata/files/eGazette_Notification_NPE%202019_dated%2025022019.pdf

  15. National Policy on Electronics 2019, Ministry of Electronics and Information Technology, https://www.meity.gov.in/writereaddata/files/eGazette_Notification_NPE%202019_dated%2025022019.pdf

  16. National Policy on Electronics 2019, Ministry of Electronics and Information Technology, https://www.meity.gov.in/writereaddata/files/eGazette_Notification_NPE%202019_dated%2025022019.pdf

  17. National Policy on Electronics 2019, Ministry of Electronics and Information Technology, https://www.meity.gov.in/writereaddata/files/eGazette_Notification_NPE%202019_dated%2025022019.pdf

  18. Support for International Patent Protection in Electronics and Information Technology, Ministry of Electronics and Information Technology, http://www.ict-ipr.in/sipeit/SIPEITForm

  19. “India Budget”, Ministry of Electronics and Information Technology, https://www.indiabudget.gov.in/doc/eb/sbe24.pdf

  20. “India Budget”, Ministry of Electronics and Information Technology, https://www.indiabudget.gov.in/doc/eb/sbe24.pdf

  21. “India Budget”, Ministry of Electronics and Information Technology, https://www.indiabudget.gov.in/doc/eb/sbe24.pdf

  22. Electronic System Design & Manufacturing (ESDM) – Sector Profile", Government of Gujarat, http://vibrantgujarat.com/writereaddata/images/pdf/electronic-sytem-design-and-manufacturing-sector.pdf

  23. Electronic System Design & Manufacturing (ESDM) – Sector Profile", Government of Gujarat, http://vibrantgujarat.com/writereaddata/images/pdf/electronic-sytem-design-and-manufacturing-sector.pdf

  24. Electronic System Design & Manufacturing (ESDM) – Sector Profile", Government of Gujarat, http://vibrantgujarat.com/writereaddata/images/pdf/electronic-sytem-design-and-manufacturing-sector.pdf

  25. Electronic System Design & Manufacturing (ESDM) – Sector Profile", Government of Gujarat, http://vibrantgujarat.com/writereaddata/images/pdf/electronic-sytem-design-and-manufacturing-sector.pdf

  26. Electronic System Design & Manufacturing (ESDM) – Sector Profile", Government of Gujarat, http://vibrantgujarat.com/writereaddata/images/pdf/electronic-sytem-design-and-manufacturing-sector.pdf

  27. National Policy on Electronics 2019, Ministry of Electronics and Information Technology, https://www.meity.gov.in/writereaddata/files/eGazette_Notification_NPE%202019_dated%2025022019.pdf

  28. National Policy on Electronics 2019, Ministry of Electronics and Information Technology, https://www.meity.gov.in/writereaddata/files/eGazette_Notification_NPE%202019_dated%2025022019.pdf

  29. National Policy on Electronics 2019, Ministry of Electronics and Information Technology, https://www.meity.gov.in/writereaddata/files/eGazette_Notification_NPE%202019_dated%2025022019.pdf

  30. National Policy on Electronics 2019, Ministry of Electronics and Information Technology, https://www.meity.gov.in/writereaddata/files/eGazette_Notification_NPE%202019_dated%2025022019.pdf

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