Over the last few years, the Indian electronics industry saw a period of high growth with rapid surge in domestic consumption. The country has become one of the world’s largest markets for mobile phones, computer hardware and other consumer appliances in the last five years. However, around 65% of the country’s market demand was met through imports. The government is trying to reduce this high import dependency in the sector by focusing on production of value-added electronic products domestically. It has launched various policies and schemes in recent years, including National Policy on Electronics (NPE-2012), Electronic Manufacturing Cluster (EMC) Scheme and Modified Special Incentive Package Scheme (M-SIPS, to stimulate electronics manufacturing in the country.
Electronics was one of the sectors which hardly got affected by the industrial slowdown that hit the country during the last two years as far as demand is concerned. The credit goes to the consumer electronics segment which has saw double digit growth during this period and has compensated for the decline recorded in other segments. Flat panel display TV, smartphones and tablets are leading the way for the consumer electronics segment. But majority of the demand for these products are being met through imports which puts a strain on the country’s trade balance. Global players like Samsung, LG, Sony, HP, Dell and Nokia dominate the Indian electronics market, while domestic companies have not been able to reap the benefits of the huge demand growth. Most of the domestic companies reported losses even amidst a growing market in the last two years. Few domestic players like Bharat Electronics Ltd, Data-Link India Ltd and Sterlite Technologies Ltd registered profits but saw a fall in revenue during 9MFY14.
Going forward, we expect further growth and development in the Indian electronics manufacturing sector and a reduction in excessive dependence on imports. The demand however is not expected to fall anytime soon. The ever growing love of Indian consumers for devices like smartphones, tablets and LED TVs and their rising incomes bode well for this sector.
India’s total electronic hardware production grew at a CAGR of 17.8% during the last six years. The domestic production of electronics hardware was around USD 33bn as of FY13.
Around 25% of total production was exported to other countries. In FY13, products worth USD 8,058mn were exported from India. The exports grew by 3.2% y/y in rupee terms but declined by 9% y/y in dollar terms owing to rupee depreciation.
The largest contribution to the electronics production in FY13 came from communication and broadcast equipment, accounting for 31% of the total, followed by consumer electronics with 23.2%. Together these two segments accounted for more than half of the entire production turnover in the industry.
During 2003-13, the trade deficit in the electronics sector grew at a CAGR of 18.3%. However, the recent government initiatives have started to show some effects as Indian brands saw better sales in 2013, especially in the smartphones and tablets segment. The global players are also ramping up their Indian manufacturing operations. As a result, trade deficit declined marginally by 2% y/y in 2013.