Wednesday, 11 January 2017

ICTE Innovation & Manufacturing in India - Key Regulatory & Policy Challenges

India’s electronics sector is one of the priority sectors for the present government as announced during the ‘Make in India’ initiative where it was realised that this sector will become a $400 billion strong by 2020, from the present $80 billion. It is also true that India’s electronics sector will surpass oil to become the second most import-intensive sector after gold. Hence, the ‘Digital India’ initiative recognises the electronics sector as one of the key sectors to increase technology adoption in the country and has ‘Net Zero Imports by 2020’ as one of the key missions as part of the initiative so that India becomes a self-reliant and powerful ICTE nation, where a healthy innovation and manufacturing climate will prevail for the entire globe.

With so much positivity and initiatives taking shape since 2014, there still remains a glaring gap between an ideal and realistic climate due to various regulatory and policy challenges that have been plaguing the electronics sector since the 1980s.


When was the last time an Indian scientist won a Nobel Prize for science and innovation? After loads of brain-scratching and googling, we come across the great Dr. C.V. Raman who was recognized through this prestigious award for his achievements in Physics way back in 1930. Has India not done any innovations since then? While this may be true, let us look at some statistics to prove this point.

As per the ‘Global Innovation Index 2016’ report, India stands at 66 out of 128 economies, ahead only of Brazil (69) among the BRICS nations. Russia (43), China (25) and South Africa (54) are performing much better than India, which ironically is the world’s fastest growing economy with ~7.4% GDP growth.

As per the recent figures released by World Intellectual Property Organization (WIPO), India filed 1,423 patents in 2015, as compared to Japan’s 44,235, China’s 29,846 and South Korea’s 14,626 during the same period.

The root-cause of India’s poor show on Innovation lies in its school education system, which has not adapted to fast changing global business environment. India’s education system is also not mapped to the present industry requirements, resulting in huge skill gaps. Another major reason for failure of various educational institutions in the country is due to lack of accountability of academicians. Performance of students and quality of PhD thesis must be mapped to the performance of academicians. School and college projects on science and technology themes must be encouraged and showcased on larger platforms to encourage students to think and innovate.


While the ‘Make in India’ initiative has been able to kick-start major changes to improve the ‘Ease of Doing Business’ environment as well as drive foreign direct investments for the electronics sector, it has lacked the intent to support the domestic ICT industry that once were a powerhouse in India’s development during the 1980s. Wipro Infotech and HCL were two home-grown ICT hardware organizations that had to close down their respective PC manufacturing facilities in 2013 as there was heavy competition from major MNC brands like HP, Dell, Lenovo, Acer, etc. who had economies of scale in operations and manufacturing processes due to a steady component supply chain in China and Taiwan. Had the Central government focused more on reviving the domestic ICT and electronics sector, the ‘Make in India’ would have proven to be more sensible for India’s ICT growth. It is not surprising to mention that as per ITU’s 2016 global study, India ranks at dismal 138 on the ICT Development Index.

Lack of Component Manufacturing is another critical area that needs immediate attention. India needs a sustainable, conducive and dedicated supply chain of components to push electronics manufacturing in the country. It is a known fact that majority of India’s current ICTE manufacturing activities consist of assembling Semi Knocked Down and Complete Knocked Down kits, which are directly imported from China and Taiwan.

The Preferential Market Access Policy of 2013 and the Public Procurement Bill of 2012, which were formulated to provide assured government business to domestic ICTE companies, are currently not implemented in the right spirit. Various government tenders still put in absurd clauses that make Indian organizations ineligible to bid for contracts. Various developed and developing countries have proven time and again that that government projects provide major impetus to indigenous ICTE solutions in the interest of national security and growth of domestic markets.

For the present government to prove Make in India, Digital India, Startup India, Stand Up India, Skill India, Smart Cities initiatives as catalysts for its growth would need to also ensure that there is sustained ICT and technology adoption in the country. There is a dire need for local content development and affordable computing devices to make India a tech-savvy nation. 

Domestic manufacturing of mobile devices and tablets were given a major boost in the past budget by providing duty differential benefit of 10.5% as against direct import of such ICT products, which has resulted in more than 40 mobile manufacturing units churning out ~20 million devices every month since September 2015. This duty benefit must be extended to the entire value chain of computing devices so that the entire range of ICT hardware products are made in India for the world.

The complex taxation regime of India has been one of the major hurdles for the development of manufacturing ecosystem in the country. Under the VAT regime, similar ICTE products are charged differently by different states, excise and customs officials due to lack of technical knowledge charge penalties for a certain category of ICTE product range, which otherwise was notified to be duty-free. India was a combination of 28 different markets, causing huge inconvenience to ICTE manufacturing companies. With speedy implementation of Goods and Services Tax (GST) in 2017, we hope to see a streamlined taxation regime that removes the cascading effect of multiple taxes and converts India into a cost-efficient global hub for ICTE manufacturing in the coming years.

India is on the brink of achieving a global status for ICTE manufacturing and innovation. The above 'man-made' challenges may be easily eradicated with a strong political will.

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