Electronic Industry to grow at 10% by 2015.

BANGALORE: The Indian Electronic System Design and Manufacturing industry is expected to grow at a CAGR of 9.9% to reach US$94.2 billion by 2015, said a study released by India Electronics and Semiconductor Association.

According to the study, products like mobile phones, TV and computing device alone account for 60% of the overall electronics consumption.

The report highlighted that currently a majority of the electronic products (65%) are imported in the country, and the remaining 35% of the products that are manufactured in India belong to "Low Value Added Manufacturing". Out of the 25 product categories, mobile phones lead the demand with 38.85% share, followed by FPD TV (7.91%), notebooks (5.54%) and desktops (4.39%).

"As per the government's National Policy on Electronics we have a $100 billion investment target to meet by 2020. To put an entire ecosystem on track, certain fundamentals have to be set right. With the clear recommendations in this report, it's time to adopt necessary changes to boost domestic product development and manufacturing, said," Sanjeev Keskar, chairman, IESA.

Highlighting the financial challenges faced by the local and global players the report said

- Tax related disabilities and long procedures for availing concessional duty on import of components that was impacting about 3% - 6% of revenue, for Indian manufacturers.

- Higher cost of finance impacts 2% - 14 % of revenue; this includes higher interest rates, greater cost of working capital financing, capital and design expenses.

- Poor domestic availability of components constitutes to about 3% - 5% of revenue, taking into account higher inventory carrying costs and additional freight cost due to import of components.

- Higher manufacturing cost due to poor infrastructure forms 0.5% - 1.5% of revenue due to unreliable power supply and higher cost of real estate.

- Higher cost of international marketing impacts less than 1% of the revenue.

The study came up with a few recommendations for the sector from creating the ecosystems, of partners, skill development, providing more incentives in terms of subsidies or low interest loans and more. "By 2018, the sector should look at meeting half of the demand from local manufacturing.

It should give a boost to innovation and creation of Intellectual Property (IP) assets within India; aggressively pursue anti-dumping cases to protect domestic manufacturers and look at establishment of a Free Trade and Warehousing Zone (FTWZ) near a major port or manufacturing cluster.

Source : economictimes.indiatimes.com